DB downgrades Ashmore to “sell,” upgrades FDM to “buy” on flow outlooks

Investing.com -- Deutsche Bank Research has downgraded Ashmore (LON:ASHM) to “sell” from “hold,” citing concerns over overly optimistic market expectations for fund flows and elevated valuation levels. 

The brokerage has lowered its target price from 140p to 130p, compared with the stock’s last close of 166p.

David McCann at Deutsche Bank Research highlighted that the market appears too bullish on Ashmore’s projected return to meaningful net inflows. 

Consensus expects net flows of $0.8 billion, or 2% of opening assets under management (AuM), for FY26E, rising to $3 billion, or 6% of opening AuM, in FY27E. 

Deutsche Bank’s estimates, however, indicate a negative scenario, projecting net outflows of $0.5 billion, or 1%, in both fiscal years 2026 and 2027.

Even the most optimistic scenario within consensus, assuming net flows of $4.8 billion or 9% of opening AuM in FY27, would still leave the stock trading on a price-to-earnings ratio materially higher than traditional asset management peers.

Ashmore trades at a FY27E price to management fee earnings of 21x on DB estimates and 21x on consensus, or 20x / 19x respectively on headline P/E. 

This contrasts sharply with traditional sector peers, which typically trade on a P/E of c.10-12x, underlining a significant valuation premium that DB considers unjustified given the flow outlook.

In contrast, DB has upgraded FDM Group Holdings Plc (LON:FDM) to “buy” from “hold,” lifting its target from 145p to 180p, above the last close of 139p. 

Tintin Stormont at DB noted that while macroeconomic and geopolitical uncertainties continue to affect client confidence and extend decision cycles, activity levels have started to pick up across key geographies including the UK, North America, and Australia. 

In response, FDM has cautiously increased its number of consultants in training and currently has 2,003 consultants at client sites, compared with 2,173 at the end of June and DB’s year-end forecast of 1,973. 

The group’s balance sheet remains strong at £40 million with no debt, and an interim dividend per share of 6p is scheduled for payment on 14 Nov.