Citi Changes Its Estimates On OM Asset Management, Cites Sequence Differences

Citi has maintained its buy rating on OM Asset Management PLC OMAM, increasing its price target by 10 percent to $20 for the upcoming 12 months.

The change in target price was driven by the announcement of the Landmark Partners deal Wednesday. According to Citi, the investors will value OM Asset Management stock based on the collective impact of Landmark and repurchases.

Citi kept its three-stage upward revaluation cycle on the company, changing only the places of the second and third phases. The updated version looks like this:

• Phase 1 — franchise proof of concept
• Phase 2 — deals
• Phase 3 — buyback

The previously stated phase 3 (deals) now represents the second phase, as the deals are happening faster compared to the modest buybacks.

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Further Estimate Changes

OM Asset Management will trade at 9.3x and 8.1x multiples for 2017 and 2018 calendar years respectively, according to the updated forecast from Citi Research. The estimated EPS for 2017 now stands at $1.62, up from $1.37, and EPS for 2018 increased to $1.82 from $1.59 estimated previously.

Citi also mentioned that its model can still be conservative, suggesting two possible reasons:

• 1. Assumed $6 billion capital raises for Landmark in 2017–2018 can be viewed as conservative, taking into account the recent trends for Landmark, strong sector allocations and management’s guidance.
• 2. Assumed modest QTQ repurchase is also a conservative approach, as it ignores the possibility of buyback directly from the parent. OM Asset Management is still a potential buyer of 66 percent stake of OML-L.