MENU

Is IOOF Holdings Limited about to enjoy a string of earnings upgrades?

Shares in IOOF Holdings Limited (ASX: IFL) may have stormed into a bull market over the past year, but there is more upside for the stock if Morgan Stanley’s prediction that the wealth manager is on the cusp of an upgrade cycle comes to pass.

The stock has jumped around 20% to last trade at $10.91 over the past 12 months, when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) is up around 7%.

The upbeat outlook for equity markets is just one supporting driver for wealth managers, but IOOF will get another boost from its acquisition of Australia and New Zealand Banking Group’s (ASX: ANZ) wealth business.

“Meaningful synergy upside for IOOF supports an upgrade cycle,” notes Morgan Stanley. “While the ANZ deal is potentially transformational, successful execution of the modular business model provides a ‘free option’ on growth.”

This is why it is important that IOOF provides reassurances to investors that the acquisition is on track to be completed by September 30 this year and the broker highlighted six areas that investors will need to pay close attention to.

The first is the retention of ANZ’s wealth advisors and the stability of Funds under Advice (FuA). The second is the growth of this advisor network while investors should also look at how well IOOF executes its modular business model.

The remaining three things to look for include IOOF’s ability to control its 2H17 expense base, its platform operating margin and its fourth quarter flows and margins for its advice business.

Morgan Stanley has an “outperform” recommendation on the stock with a price target of $13 a share.

However, this is the only wealth manager under its coverage that the broker is bullish on. While Challenger Ltd (ASX: CGF) has been a stronger performer with a gain of nearly 28% over the past year, the broker thinks it’s fully priced and has an “underperform” rating on the stock.

Meanwhile, it has a “neutral” rating on AMP Limited (ASX: AMP) even though the stock seems to have lots of room to play catch up as it has only managed to deliver a 2.4% increase over the past 12 months.

“Low expectations combined with a likely clean in-line result and reinstatement of the buyback present upside,” noted the broker. “But unlocking long-term value is likely to demand patience and strong execution.”

Looking for other blue-chip investment ideas? The experts at the Motley Fool have uncovered three that they believe are well placed to outperform the market this year.

Click on the link below to claim your free report and to find out what these stocks are.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited. The Motley Fool Australia owns shares of and has recommended Challenger Limited. 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.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!