Investing.com — UBS upgraded St James’s Place Plc (LON:SJP) to “buy” from “neutral” on Friday, citing earnings growth prospects and valuation support, while cutting its 12-month price target by 6% to 1,465p from 1,565p to reflect potential risks linked to artificial intelligence.
The brokerage said the stock, which closed at 1,271p on Feb. 19, is down 13% year to date and 14% over the past month, mainly due to read-across from the launch of an AI-powered tax planning tool in the United States.
UBS said its revised base case assumes net flows fall to nil by 2032, reducing its valuation by 6% to 1,465p.
UBS said St James’s Place trades at 12.5x its 2027 underlying cash earnings estimate, below the 13-15x range for peers.
The brokerage forecasts double-digit medium-term earnings growth, supported by changes to the group’s charging structure implemented in August 2025 and the gradual run-off of £51.1 billion in “Gestation” funds under management (FUM) at 1H25 that currently earn no margin.
The brokerage expects underlying cash results to more than double from £392 million in 2023 to £873 million by 2030.
It forecasts underlying cash results of £454 million in 2025, £396 million in 2026 and £515 million in 2027, rising to £1.03 billion by 2032. UBS estimates IFRS earnings per share at 88.9p in 2025, 90.7p in 2026 and 115.1p in 2027, increasing to 292.2p by 2032.
The bank said it has incorporated AI-related disruption into its forecasts by lowering gross flow assumptions. It expects gross inflows of £21.9 billion in 2025, £22.7 billion in 2026 and £23.1 billion in 2027, with growth moderating to flat by 2030. Net inflows are forecast to decline from £6.2 billion in 2025 to £2 billion in 2030, with net flows falling to nil by 2032.
Assets under management are projected to rise from £220 billion in 2025 to £304.6 billion in 2030, driven mainly by assumed market returns of 5% per year.
UBS outlined five AI sensitivity scenarios. In its new base case, net flows fall to nil by 2032, implying a valuation of 1,465p. In a “gross flow stress” scenario, gross flows fall to nil by 2032, implying 20% downside to 1,170p.
An “accelerated stress” case, with no gross flows from 2027, implies 60% downside to 585p. A fee pressure scenario, assuming 1 basis point of annual margin compression to 37 basis points by 2032, implies 30% downside to 1,035p.
An expense benefit scenario, assuming a 20% reduction in 2032 controllable costs to £300 million, implies 6% upside to 1,560p.
UBS said it is below consensus on underlying cash results through 2030 due to lower gross flow assumptions. For 2030, it forecasts £873 million versus consensus of £911.3 million, a 4.2% difference. It projects 2030 FUM at £304.6 billion compared with consensus of £317.0 billion.
The bank said it expects a £50 million share buyback to be announced with full-year 2025 results, alongside a further £65.5 million pre-tax release from the client redress provision, equivalent to about £50 million post-tax.
The provision, initially set at about £425 million pre-tax, included £235 million for potential refunds, £120 million in administration expenses and £70 million for interest and discounting, UBS estimates show. The company released £84.5 million at 1H25, leaving £65.5 million, according to UBS.
UBS said it expects the payout ratio to rise to 70% from 2027, compared with the current 50%. It estimates limited excess liquidity of about £60 million at 1H25 after accounting for £2.2 billion in liquid assets, a £320 million client redress provision, £128 million in dividends and buybacks, £582 million in deferred tax liabilities and a £576 million management solvency buffer.
The brokerage also highlighted £5.7 billion of third-party cash balances held with Flagstone that do not earn a margin. It said management plans to explore options around a cash proposition during 2026, with potential introduction in 2027.