Sell-off provides a buying opportunity
WHEN fund managers sell off shares in the firm they work for, it hardly inspires confidence. So it is unsurprising that shares in Jupiter tumbled two per cent yesterday, after Edward Bonham Carter et al sold stock representing 5.7 per cent of Jupiter’s issued capital.
However, Bonham Carter sold just 550,000 shares – only 12 per cent of the 4.6m he was allowed to divest under the rules of the lock-up put in place when the firm floated last year. That suggests he thinks the shares could go higher still, and we’re inclined to agree.
Assets under management of £24.8bn were broadly in-line with analyst estimates, as was first-half revenue guidance of £126.5m-£129m and an adjusted Ebitda range of £69.5-£71.5m. Performance fees surpassed expectations, however, coming in at £4.5m against consensus of £1m or so.
Most analysts trimmed their forecasts yesterday on the back of softer markets. But Jupiter still has much to recommend. Its margins are higher than the sector average; it is well exposed to the structural growth in the UK defined contribution pensions market; it has demonstrated good organic growth; and is not as reliant on performance as some.
For that reason, it likely deserves an enterprise value of 11.4 times net operating profit after tax – a five per cent premium to the sector.
Investors mightn’t like the signal that is sent when directors and employees cash in – but we think yesterday’s sell-off is a buying opportunity.
david.crow@cityam.com