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On Friday, JPMorgan analyst Siddharth Parameswaran adjusted the outlook for Perpetual Ltd (PPT:AU) (OTC: PRPLF), downgrading the company’s stock rating from Overweight to Neutral and reducing the price target from AUD24.00 to AUD22.00. The downgrade followed Perpetual’s first-half 2025 financial results, which did not meet JPMorgan’s forecasts.
Perpetual reported an underlying net profit after tax (UNPAT) of $100.5 million, falling short of JPMorgan’s forecast (JPMF) of $116 million by 13.4%. This shortfall was primarily attributed to a 2.8% revenue miss in Asset Management, driven by weaker base management fee margins due to the runoff in higher-margin JOHCM Funds Under Management (FUM). Parameswaran also noted a modest revenue miss in the Perpetual Corporate Trust and Wealth Management (PCT/WM) divisions, contributing to an overall group-wide revenue miss of 2.5%.
While total expenses were in line with JPMorgan’s forecasts, higher depreciation and amortization (D&A) and interest expenses negated a 1.7% operating expense beat. Perpetual announced a new strategy for the group, which includes significant cost reductions and the sale of its Wealth Management division to fund necessary investments. However, the net benefits of these changes are currently uncertain as further reorganization may lead to additional FUM losses, potentially impacting revenues and resulting in stranded costs.
Parameswaran also highlighted that Perpetual’s gearing, which stood at 32% in the first half of 2025, exceeded the company’s internal target of 30%. This increase was driven by below-the-line costs, including expenses related to the failed KKR scheme. The analyst expressed concerns about the potential for further financial impacts as Perpetual restructures its operations.
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