On Friday, UBS downgraded shares of Platinum Asset Management Ltd. (ASX:PTM) (OTC: PTMGF) from Neutral to Sell, adjusting the price target to AUD0.91 from the previous AUD1.05. The decision comes amid concerns over the company's ongoing revenue challenges and strategic direction.
The downgrade was influenced by the persistent revenue leakage at Platinum Asset Management, despite the company achieving $25 million in cost reductions, which are reportedly ahead of schedule. The firm's efforts to cut costs are seen as an attempt to offset the outflows in funds under management (FUM), a cycle that UBS suggests could be difficult to break.
Platinum Asset Management's core flagship fund continues to underperform, casting doubts on the company's growth strategies, which include launching new products such as a quant hedge fund and positioning as a sub-advisory distributor. UBS finds these plans to be out of step with the firm's traditional investment-focused approach and questions the feasibility of Platinum becoming a preferred distribution partner for third parties.
UBS anticipates a structural decline in earnings for Platinum Asset Management to continue, with no expected terminal value beyond the fiscal year 2030 included in their discounted dividend model (DDM).
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