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Janus Henderson (JHG): FY22 results preview

Review of forecasts ahead of FY results

The company are due to report full year results for the year to 31 Dec 2022 on 2 Feb. Ahead of this we have reviewed our forecasts. We have marked the model to market for positive (US$) returns in equities in Q4 (8.0% assumed compared to our previous assumption of under 2%) and assuming that JHG’s bond returns are slightly positive. Redemptions in the quarter are expected to include US$2.6bn outflow from a Sterling Buy & Maintain Credit Strategy and a US$4.0bn from a European institutional client. Having spoken to the company we understand that October and November saw retail outflows of around $2.0bn (available from publicly available platforms such as Morningstar and Simfund). Allowing for December and other institutional outflows, we estimate JHG will have seen over $10bn of outflows during the quarter.

The net result of higher market levels and higher outflows is a slight upgrade to our FY22 FUM forecast to $279.0bn from $263.5bn previously. As a result, our EPS is 0.6% higher for FY22, 5.5% higher for FY23 and 5.6% higher for FY24.

Investment view: Target Price A$43.81 per share, BUY

The new CEO, Ali Dibadj, gave an update on the business at the Q3 presentation, with one of the key messages being to reduce operating costs by $40-45m to allow reinvestment elsewhere in the business, and we hope to see further progress with this update. Despite this, the company remains at the whim of market levels and customer flows. We believe the company is proactively managing its product mix to offer attractive products to its clients, however the underlying rate of outflows is currently above 8%, a level which we regard as too high in the medium term. Despite this, cash generation remains good and we continue to find the shares attractively valued. The higher FUM and operating revenue gives a revised value of US$30.61 per share. This is 4.6% higher than our previous valuation of US$29.26 per share. Using the current AUD:USD exchange rate of 0.70 gives a valuation of A$43.81 per share. This is 3.0% lower than our previous valuation of A$45.37 per share, due to the strength of the A$ the exchange rate has moved from AUD:USD of 0.64 to 0.70 since we last reviewed our valuation).

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Authored by Marcus Barnard – Analyst – at Bell Potter Securities, 16 January 2023
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