Why Janus Henderson Group shares look a buy

The Janus Henderson Group (ASX: JHG) share price is up 4.5% to $47.53 today after the dual-listed international asset manager posted a decent quarter of growth for the period ending September 30 2017.

Investment house UBS has also reportedly slapped a buy rating on the business thanks to a strong outlook and a solid quarter of funds under management growth.

Notably the newly-combined entity also significantly raised its cost savings targets from an annualised US$110 million to US$125 million and as I pointed out several times previously the potential for merger-related cost savings is strong thanks to the multiple shared services across the two asset managers.

Across two merged asset managers cost savings can be found across the fee-earinng and particularly non–fee-earning sides of the businesses.

For example in the back office services like fund accounting, reconciliations, settlements, corporate actions processing, and custody could be shared with substantial cost savings.

While client-facing roles such as business development, distribution, or client services could also be shared, while other operational roles like human resources, risk, compliance, marketing, presentations, IT, or performance reporting could also be merged with big cost savings.

The merger also offers opportunities to grow revenues via crossover in its retail distribution and institutional business development channels and investment product offerings.

Unsurprisingly, the stock hit a record high today on the back of the increased cost savings target and is one I have suggested is among a handful of investment grade financial services businesses on the ASX. Henderson has a strong reputation in the UK, while Janus in the US has a decent track record of investment returns.


The US scrip sells for US$35.36 (ASX for $47.65) and it will pay a dividend of US$0.32 cents per share on adjusted earnings of US$0.56 cents per share. On an annualised basis the US scrip sells for 16x adjusted earnings, which looks reasonable value given the cost savings ahead. The Australian shares trade on an FX-adjuted almost equivalent valuation.

However, in the asset management space on the ASX I still prefer the growth, value, and yield on offer from Macquarie Group Ltd (ASX: MQG), with shares changing hands for $97.50 today.

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Motley Fool contributor Tom Richardson owns shares of Macquarie Group Limited.

You can find Tom on Twitter @tommyr345

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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