Investors should sell their shares in Perpetual, which has soared 81% 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%, 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% 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% 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%. “We are making no change to our sell call,” he says.