Acquiring 3% Stake In Monte Dei Paschi May Pressure Future Earnings Due To Liquidity Strain

Key Takeaways

• Strategic acquisitions and integrations may increase costs and pressure net margins, despite potential long-term benefits from future dividends.
  
• Shareholder dilution from new share issuance for the LTI plan could impact future earnings per share.
  
• Strategic acquisitions and adaptable product offerings position Anima Holding for sustained growth, enhanced earnings, and improved profitability amidst strong asset management trends.

Catalysts

Anima Holding S.p.A. is a publicly owned investment manager.

• The strategic acquisition of a 3% stake in Monte dei Paschi could lead to short-term pressure on return on liquidity, thereby affecting earnings, despite expectations of future dividend benefits starting in 2025.
  
• The outlook for performance fees is expected to decline in 2025 compared to 2024, which might negatively impact total revenue growth and overall profitability.
  
• The shift towards higher-priced, more profitable asset mixes, although positive for net margins in the near term, could be offset by an increase in structural costs due to the integration of newly acquired businesses like Castello and Kairos, potentially impacting net income.
  
• The high fixed personnel costs influenced by the acquisition of Vita Srl and Halldis, along with the current high level of performance fees and potential market volatility, might pressure net margins and earnings in the future.
  
• The limitation to cancel shares for the LTI plan and the issuance of new shares to service the LTI, totaling 5.9 million new shares, may lead to potential shareholder dilution, affecting future earnings per share.

Anima Holding Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Anima Holding's revenue will decrease by 27.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 17.3% today to 43.4% in 3 years time.
• Analysts expect earnings to reach €220.8 million (and earnings per share of €0.69) by about March 2028, down from €227.9 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.9x on those 2028 earnings, up from 9.5x today. This future PE is lower than the current PE for the GB Capital Markets industry at 13.5x.
• Analysts expect the number of shares outstanding to decline by 2.6% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.88%, as per the Simply Wall St company report.

Anima Holding Future Earnings Per Share Growth

Risks

• Anima Holding has seen strong growth in assets under management and administration, with a notable increase in net inflows and revenue, indicating potential ongoing strength in its revenue streams.
  
• The acquisition and integration of strategic companies like Castello and Kairos have contributed to profitability and operational expansion, which could enhance overall earnings.
  
• The adaptability of Anima’s product offerings to changing client preferences, as seen in shifting assets from bonds to flexible solutions, suggests the potential for improved earnings and net margins.
  
• An increased focus on and positive indicators from retail inflows reflect healthy consumer demand and strategic partnerships, which could drive further revenue growth.
  
• Strategic investments, such as the increased stake in Monte dei Paschi, aligned with historical relationships and expected dividend income, may provide long-term financial benefits that could bolster net profits.

Valuation

• The analysts have a consensus price target of €6.75 for Anima Holding based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €7.0, and the most bearish reporting a price target of just €5.7.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €509.0 million, earnings will come to €220.8 million, and it would be trading on a PE ratio of 11.9x, assuming you use a discount rate of 10.9%.
• Given the current share price of €6.98, the analyst price target of €6.75 is 3.5% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.