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Price ($) 16.52
Date of Price 11/1/2012
52-Week Range ($) $11.44-$17.67
Market Cap ($bn) 1.74
Current Yield 6.11%
12-Month Target Range $16.50-$20.50
Company DataAlliance BernsteinTicker Symbol: AB
Prepared by: Eric Johanson, Accel Investments
11/1/2012
Company Profile:
Alliance Bernstein (AB) provides investment management services
in the US and internationally. As of
September 30, 2012 the company reported $419 billion in assets
under management (AUM) from
institutional, retail, and private wealth clients.
2009 2010 2011 2012E 2013E
Total Revenue $2,906,879 $2,948,557 $2,749,891 $2,631,722
$2,910,180
Net Income $578,508 $427,099 -$211,567 $276,947 $341,273
EPS $2.07 $1.58 -$0.62 $1.01 $1.25
Investment Thesis:
Approximately 70% of ABs revenue is driven by fees related to
assets under management, in line with
industry averages. AB is currently trading at a discounted AUM/P
multiple versus competitors. This is
due to decreased flows toward higher-margin equity assets, and
increased flows toward fixed-income
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securities. As economic conditions improve, we expect equity
flows to increase, driving higher future
earnings.
AUM is driven by two factors - investment performance and
investor confidence - which tend to be
positively correlated.
The investment management sector as a whole has experienced
volatility since the financial crisis in
2009. Investor confidence has been slow to recover, evidenced by
the low yield (high investor demand)
for fixed-income instruments. As the economy continues to
stabilize (particularly in the US), equity
market conditions should improve followed by investor confidence
and increased levels of assets under
management. Despite poor equity trends of late, AB still
displays the best metrics on an Equity-only
AUM basis.
The charts show ABs currently favorable price and AUM metrics
versus industry competitors:
Highlights:
Revenues in Q3 2012 increased 10% and the company experienced
net customer inflows of $5 billion,
the most since 2000. In light of this news several Wall Street
analysts have upgraded AB to a buy rating,
signaling the potential for improved investment performance and
AUM trends.
The current market price of AB is near our 12-month target
intrinsic value of $16.50, but has high
upside potential with improving market and company-specific
conditions. It is supported on the
downside by its favorable 5% dividend yield. We recommend
holding the stock at these levels for its
favorable dividend and potential price appreciation.
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Comparable Company Analysis:
AB LM JNS IVZ BLK
Market Cap (bn) $1.74 $3.36 $1.59 $10.71 $32.35
AUM (bn) $419.00 $650.70 $152.40 $683.00 $3,560.00
Equity $101.00 $153.40 $88.00 $300.00 $1,744.00Fixed $240.00
$369.40 $23.80 $167.00 $1,244.00
Revenue (bn): $2.60 $2.58 $0.88 $4.04 $9.02
EPS (ttm): n/a $1.08 $0.60 $1.56 $12.91
P/E (ttm): n/a 23.17 14.25 15.41 14.57
Fwd P/E 12.68 11.05 13.46 10.6 12.54
P/B 1.08 0.63 1.14 1.32 1.33
AUM/P 240.80 193.66 95.85 63.77 110.05
EqAUM/P 58.05 45.65 55.35 28.01 53.91
