The Financial Grimes: Burford, Standard Life Aberdeen

This top City analyst reviews the financial sector stocks making headlines today.

Jeremy Grime spent 15 years as a financial sector analyst, working at Altium Capital, RBC Capital Markets, Panmure Gordon and most recently as Director of Research at finnCap. Jeremy is also a qualified accountant.

Jeremy's blog is written with more experienced investors in mind. However, we have included a brief glossary at the bottom of the page to help those less familiar with some of the language used. For more on key financial metrics and valuation ratios click here.

Burford

Share Price 1121p

Market Cap £2.45 billion

Conflict Disclosure: No position

Burford Capital (LSE:BUR) operates in the global legal industry.

• Shares Burford are cross. Their shares fell 19% yesterday. Muddy Waters' tweet below is alleged to be the culprit.

• Statement from Burford this morning says the company has $400 million cash and cash equivalents at 5 August. They state that they are investigating whether market manipulation has occurred and will litigate if this has happened. They say they are "strongly suspicious". They say companies are largely powerless to intervene in this dynamic.

• Conclusion In my view their 85% ROIC is overstated relative to LCM and Manolete who make 138% and 180% ROE. However it is still a strong ROE. Just they will need more equity if they continue to grow.  They seem to protest too much. Lets see the 8 am report (if indeed it is Burford) but I doubt they are insolvent. Threatening litigation on an RNS will not endear them to the market.
  

Standard Life Aberdeen – H1 Results

Share Price 282p

Mkt Cap £6.79 billion

Conflict Disclosure: No Holding

Standard Life Aberdeen (LSE:SLA) is an investment company.

• Results The heart sinks when results come in 4 parts. Adjusted PBT down 10% to £280 million but EPS up9% to 8.9p.  Net outflows 2.9% and AUMA up 5% to £577.5 billion. Action has been taken to deliver £234 million of the targeted £350 million cost savings. Core operating profit was down 45% to £142 million while share of associates and joint ventures profits almost doubled to £116 million. The PBT also includes £22 million from increases in the value of seed investments etc. Surplus capital is £900 million. The Lloyds Banking Group (LSE:LLOY) settlement is disclosed today which includes a one off payment of £140 million which will be taken to P&L in H2. The outlook refers to investing for growth and the strong balance sheet

• Estimates Full year PBT expectation shows as £600 million on Sharepad but with the £140 million from Lloyds to come in H2 this will be higher on a one off basis. Going forward forecasts seem to be anticipating 4% PBT growth.

• Valuation EV/AUM 1.02%. PER 14X yield 7.7%. Price/NAV 1.2X

• Conclusion The shares are down 16% over the last 12 months.This company feels like it is where Man Group (LSE:EMG) was in 2015 when it was acquiring its way out of its core product becoming dated.  It will take a long time to turn round this asset manager and the temptation is for investors to buy value too early. It is still too early. 

For information about Jeremy's 'deep dive' company analysis, you can email him at jeremy@charltonillingworth.co.uk

Jeremy Grime is an independent equity markets analyst and freelance contributor, not a direct employee of interactive investor.