Broker tips: St James's Place, RS Group, Lancashire Holdings

Analysts at Berenberg lowered their target price on wealth manager St James's Place from 1,500.0p to 1,365.0p on Monday but remained positive on the group as a whole.

Berenberg stated St James's Place was "well positioned" to benefit from structural growth tailwinds, supported by high retention, low client price elasticity, low net flow volatility, and better relative advisor growth prospects.

The German bank, which also reiterated its 'buy' rating on the stock, noted that SJP's recent net flow performance helped highlight a model that can "better weather falling consumer confidence" and a "tougher economic backdrop" relative to some of its peers, due to its "more resilient client base and product set".

"Although near-term sentiment may remain challenged given SJP is materially exposed to markets, we believe that the long-term thesis is unchanged. This rests on greater pension and investment market participation and the unwind of suboptimal financial advice consumption," said the analysts.

Berenberg cut its earnings per share estimates on the stock by 9%, mainly due to market performance.

JPMorgan Cazenove downgraded RS Group on Monday to 'underweight' from 'neutral' and cut its price target on the stock to 820.0p from 1,050.0p following the company's first-half results last week.

JPM said the downgrade was driven by a combination of a deteriorating macroeconomic outlook, with RS Group continuing to invest into its cost base, increased uncertainty following the CEO's leave of absence, and its preference for more defensive exposure elsewhere in its business services coverage.

"We had already become relatively more cautious on RS1 and downgraded to neutral last month and although RS1 delivered strong results in Americas and APAC in H1 (in-line with the view that H1 has continued to be strong), the year-over-year margin decline in Europe was a negative surprise," the bank said.

"This highlighted one of the risks we flagged, namely that RS1 is likely to see margin pressure in the near term as it has been increasing opex ahead of the cycle turning."

JPM said that overall, it still sees the business as being well run and with a strong strategy medium term, but expects a better entry point in the future.

Analysts at RBC Capital Markets raised their target price on insurance and reinsurance firm Lancashire Holdings from 550.0p to 600.0p on Monday following a year-to-date trading update from the group.

RBC Capital said that it forecast net income of $42.0m for Lancashire in 2022, up from previous estimates of $22.0m - owing to lower-than-expected natural catastrophe losses outside Hurricane Ian, and, to a lesser degree, stronger growth.

For 2023-24, RBC increased its estimates by 6-7%, primarily from stronger growth, reflecting the "harder rating environment", while its combined ratios were roughly unchanged at 79%/77%.

"LRE's high share of cat business makes it more geared towards cat loss trends, an area of elevated uncertainty owing the experience in recent years. The current valuation however appears to have overly discounted this, and we see good value at current book multiples," said RBC, which also reiterated its 'outperform' rating on the stock.