Integration Of Robeco And Accuro And European Expansion Will Strengthen Future Position

Key Takeaways

• Strategic focus on Private Banking and investment in client-facing talent and technology are set to drive scalable growth, enhancing revenue and earnings.
  
• Inorganic growth and private equity fund launches contribute to increased assets under management, commission income, and potentially higher revenue growth and profitability.
  
• Lower margins and shifts in client preferences, alongside macroeconomic and geopolitical risks, could challenge Van Lanschot Kempen's revenue elasticity and overall financial health.

Catalysts

Provides various financial services in the Netherlands and internationally.

• Van Lanschot Kempen's strategic focus on Private Banking growth in the Netherlands, Belgium, and Switzerland, coupled with investments in client-facing talent and technology, is expected to drive scalable growth, potentially boosting revenue and earnings.
  
• The integration of the Robeco online investment platform and Accuro in Belgium shows strong inorganic growth, contributing to an increase in assets under management and commission income, which may positively impact net margins.
  
• The launch of private equity funds in the Netherlands and Belgium signals expansion in high-margin private market solutions, which could enhance revenue growth and profitability over time.
  
• Continued focus on cost control, even amid inflationary pressures and strategic investments, is likely to improve operating efficiency, reducing the cost/income ratio and supporting higher net margins.
  
• Encouraging signs of cooperation between Investment Banking and Private Banking could lead to increased commission income and profitability as market conditions for M&A and capital market transactions improve, aiding earnings growth.

Van Lanschot Kempen Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Van Lanschot Kempen's revenue will grow by 4.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 18.2% today to 20.0% in 3 years time.
• Analysts expect earnings to reach €163.3 million (and earnings per share of €3.86) by about March 2028, up from €131.9 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 15.6x on those 2028 earnings, which is the same as it is today today. This future PE is greater than the current PE for the NL Capital Markets industry at 11.4x.
• Analysts expect the number of shares outstanding to decline by 0.09% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.2%, as per the Simply Wall St company report.

Van Lanschot Kempen Future Earnings Per Share Growth

Risks

• The company's lower margins in the Netherlands, driven by a shift in client preferences from discretionary to advisory products, could negatively impact net margins.
  
• The miss in commission income from the merchant bank segment and the reliance on seasonal effects to boost assets under management casts uncertainty over consistent revenue generation.
  
• The anticipated decline in net interest income due to reduced interest margins and client shifts from savings to investments could affect overall earnings negatively.
  
• The firm's growth expectations based on macro and geopolitical trends, such as continued business sales by entrepreneurs and regulatory impacts on real estate, carry inherent risks that could undermine future revenue projections.
  
• High inflation and wage pressures in the Netherlands could lead to increased operating costs, potentially squeezing net margins if income does not grow at the expected pace.

Valuation

• The analysts have a consensus price target of €47.75 for Van Lanschot Kempen based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €816.2 million, earnings will come to €163.3 million, and it would be trading on a PE ratio of 15.6x, assuming you use a discount rate of 8.2%.
• Given the current share price of €48.45, the analyst price target of €47.75 is 1.5% 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.