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3 reasons to buy Perpetual Limited

Credit: Lif

Fund manager Perpetual Limited (ASX: PPT) is not your average funds management business.

Perpetual, which has a market capitalisation of $2 billion, has a heritage which dates back nearly 130 years. This provides the group with a brand strength, operating history and level of trust which can be hard to mimic for newly established firms.

Perpetual also operates across three divisions, namely: specialised asset management, personal advisory to high net worth clients, and corporate fiduciary services.

With the share price having slipped around 16% over the past six months, now could be an opportune time to take a closer look at one of Australia’s largest and most respected listed fund managers.

Here are three reasons to be positive about the group’s outlook…

  1. The retirement boom is approaching as baby boomers reach the end of their careers and transition into the retirement phase. With its established brand and long-term client base Perpetual is well positioned to grow its business including via attracting the next-of-kin of current clients.
  2. Perpetual is also positioning its business to succeed in the structural asset allocation shift which is currently underway. For many years now, superannuation has been (arguably) too concentrated in Australian equities. Perpetual is positioning itself for the diversification trend by boosting its offering of other asset classes such as global equities.
  3. The valuation of Perpetual could hold appeal for long-term investors. The group achieved diluted underlying earnings per share in financial year 2015 of 283 cents per share (cps) and paid fully franked dividends totalling 240 cps. With the shares currently trading around the $45 level, the stock has a trailing price-to-earnings (PE) ratio of 15.9x and a dividend yield of 5.3%. This is appealing from a relative valuation point-of-view with both the historic and forecast data showing Perpetual is trading on a lower PE and a higher yield than its peers BT Investment Management Ltd (ASX: BTT) and Platinum Asset Management Limited (ASX: PTM).

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Motley Fool contributor Tim McArthur owns shares in Perpetual Ltd. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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