The Perpetual Limited (ASX: PPT) share price tumbled with the ASX 200 index on Monday.
The fund managerâs shares dropped over 3% to $27.25.
This means the Perpetual share price is now down 26% since the start of the year.
Broker tips Perpetual share price to bounce back strongly
The team at Bell Potter are positive on the fund manager and believe its shares could bounce back very strongly.
According to a note, the broker has retained its buy rating and lifted its price target on the companyâs shares to $39.80.
Based on the current Perpetual share price of $27.25, this implies potential upside of 46% for investors over the next 12 months.
The broker is also forecasting a dividend yield of approximately 7.5% in FY 2023, stretching the total potential return beyond 50%.
What did the broker say?
Bell Potter is a fan of the companyâs plan to acquire Pendal Group Ltd (ASX: PDL). It commented:
We believe the agreed acquisition of PDL is good news and should create a strong company with a wide product set and global distribution opportunities, which should drive growth over the next few years.
In addition, excluding the Pendal acquisition, the broker sees significant value in the Perpetual share price. Particularly after recent weakness. It concluded:
We value Perpetual (excluding Pendal) using DCF valuation, with a WACC of 10.0% applied to EBITDA after tax. This gives a value for the business of $2.3bn or $39.78 per share (which we round to $39.80 as a target price). This is 3.6% higher than our previous valuation of $38.40 per share. The 9.4% fall in the share price on August 25 following the [Pendal] announcement seems at odds with the strong trading and benefits of the merger, and we would see this recent weakness as a buying opportunity.
The post Why Bell Potter is tipping 46% upside for this beaten-up ASX 200 share appeared first on The Motley Fool Australia.
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More reading
- The Pendal takeover will create a $200b asset manager, so why is the Perpetual share price tanking?
- Why City Chic, Flight Centre, Perpetual, and Woolworths shares are sinking
- Pendal share price soars 15% on takeover news
- Perpetual share price tumbles on full-year earnings and takeover news
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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