Investors should sell their shares in Perpetual, which has soared 81 per cent in the last 12 months, says Citigroup’s Nigel Pittaway.
Pittaway predicts the stock will fall to $38 in a year. At 1300 AEST Perpetual shares were down 35 cents, or 0.8 per cent, to $41.18.
“While it is possible Perpetual could surprise favourably on costs again, only a relatively small amount of transformation savings were scheduled to be achieved during the second half of 2013,” says Pittaway.
Perpetual’s cost cutting program plans to slash $50 million of expenses by 2015 after achieving $31 million in cost savings in 2013. Perpetual shares have benefited from a rise in share prices, the S&P/AS200 Index is up 22 per cent in the last 12 months, helping to bolster funds under management by $1.4 billion to $24.3 billion.
The company plans to pay out between 80 and 100 per cent of its net profit in dividends annually.
Pittaway, however, says Perpetual’s earnings per share in its 2013 financial year will only increase by 1 per cent. “We are making no change to our sell call,” he says.