Perpetual disappointment

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Perpetual has sacked its CEO, creating even more uncertainty about the stock. Morningstar has described the announcement as a “total surprise” saying that the board’s anxiety “shines a new light on the depth of PPT’s problems”. One can only agree that the high-level strategic questions remain unanswered. After an underwhelming strategy last year there will be yet another strategic review. Which means that uncertainty around th stock will remain. Much depends on maintaining the brand at a time when funds management has really taken a major credibility hit – a not undeserved response, one has to say.

Macquarie has a neutral recommendation and a price target of $21.89:

“Geoff Lloyd has been appointed new CEO, previously Group Executive Private Wealth and Retail Distribution at PPT (last 18mths) and before that at St George (member of Group Executive) where he led the wealth management portfolio, and GM Advice and Private Banking at BT (following the WBC merger). 3 key priorities have been set between the new CEO and the board: 1) work harder and faster to refine the growth strategy; 2) deliver meaningful cost reductions; and 3) reinvigorate sales & distribution.

DPS: One area the Board will provide clarity at the 1H12 result is the DPS, 1H12 MRE $0.37 Vs consensus $0.58, 2H12 MRE $0.68 Vs consensus $0.73. While the 80%–100% dividend payout policy is based on reported NPAT (annualised basis) PPT could look through ~$0.26 in costs associated with the closure of the international business and platform admin agreement and pay out above the range. PPT holds net cash ~$120m and has paid out above 100% of reported NPAT since FY07. We estimate the „additional‟ consensus FY12 DPS payment above reported NPAT is ~10% of net cash.”

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It is a truism that companies with strategic uncertainty tend to underperform the market. Worse, the company has lost quite a few senior executives over the last 18 months. This must be damaging the brand and brand is vital in an industry that is fast losing its cache. The global de-leveraging is reversing the “financialisation” of developed economies, and all parts of the finance industry are coming under much greater scrutiny. Morningstar has a hold recommendation.

Macquarie (12)