Jefferies lifts AJ Bell valuation after assets hit record high

investmentweek.co.uk:

Jefferies’ investment thesis for the company lies on the exposure of the platform to the large UK advisor market and to the smaller, but higher-margin, D2C market.

In a fourth quarter trading statement on Thursday (18 January), the platform reported that its AUA had hit a record £76.2bn, following a 15% surge of net inflows into its platform business over 2023.

Following the update, Jefferies equity analysts Julian Roberts, Tom Mills, Laura Gris Trillo and Fangfei Li have boosted AJ Bell's valuation by 3% to 390p and lifted the revenue forecasts for the company by 4% and 5% for the 2024 and 2025 financial year, respectively. 

Consumer Duty risks drive Hargreaves Lansdown and AJ Bell 'Sell' rating from UBS

In a letter to investment platform provider CEOs in December, the regulator set out its concerns on the way firms deal with any interest earned on customer cash balances and called for them to make changes by 29 February 2024.

In November, UBS launched its research coverage of platform providers AJ Bell and Hargreaves Lansdown, placing a ‘Sell' rating on both, citing perceived Consumer Duty risks.

The analysts acknowledged there is a group of investors that believe both AJ Bell and competitor Hargreaves Lansdown will have to reduce their retained interest margins and pay more to customers to satisfy the Financial Conduct Authority's Consumer Duty. 

However, the Jefferies analysts said AJ Bell has a «good argument» to leave its charges unchanged, given their D2C all-in customer costs are lower than for many peers and the firm does not «double dip», meaning they do not charge fees on cash and take interest on it.

«The fees are transparent; it is free and easy to move cash into higher-yielding assets or accounts and they