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FTSE falls again on China concerns but Hargreaves Lansdown shines

Discussion in 'Market News' started by Lily, Oct 14, 2015.

  1. Lily

    Lily Forum Member

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    Fund management group positive despite recent stock market volatility

    Continuing worries about the Chinese economy - this time weak inflation and producer price figures - have sent stock markets lower once more.

    The FTSE 100 is currently down 38.18 points at 6304.10, but fund management group Hargreaves Lansdown is bucking the trend after first quarter results showed strong growth in client numbers. Its shares are up 92p at £13.75 and topping the risers in the leading index.

    We are particularly pleased with the reported trading data for the first quarter of the financial year given lower stock markets and weakness in investor confidence during the period....These stock market falls meant that despite record new business in the quarter, overall assets under administration fell by £0.5bn.

    Looking ahead, early indications suggest considerable interest in next year’s Lloyds share sale...

    We expect substantial industry growth due to the increase in self investment and the shift from defined benefit pensions to defined contribution pensions. We also expect auto-enrolment to significantly increase the proportion of the population with money to manage most of which will have to be done through self-invest platforms like Hargreaves due to the scale of these pension assets.

    Furthermore real industry growth (around 3% per annum) can be expected from market movements. Hargreaves Lansdown dominates a growth industry and its market position does not seem to have been negatively impacted by the RDR changes...The group’s scale benefits are substantial and unmatched providing it with by far the highest operating margin and the buying power to provide the cheapest fund prices in the market.

    We are huge admirers of the Hargreaves Lansdown business model and can see conceivable scenarios that would value the company at over 1500p. However, our central valuation case, based on 25 times our June 2017 earnings per share forecast is currently 1155p means we currently retain a hold recommendation.

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