Perpetual's recent decision to engage in exclusive talks with KKR to sell its Wealth Management and Corporate Trust divisions, which is set to fetch a substantial $2.175 billion in cash, undoubtedly signifies a juncture in the company's journey. But what implications does this hold for Perpetual's future, and is now the opportune time to consider it as an investment opportunity? asks Wealth Within chief analyst Dale Gillham.
Interestingly, Perpetual's share price experienced a notable 7% drop following the announcement.
This reaction suggests a degree of scepticism, with some viewing the divestment of key business arms as a potential concern rather than a positive development. However, if the deal comes to fruition, Perpetual will gain significantly.
Firstly, the company would become debt-free, instantly strengthening its financial position and potentially paving the way for more favourable financial outcomes in future. Additionally, focusing solely on asset management could drive efficiency and strategic alignment, ultimately delivering long-term value for shareholders. Throw in a treasure trove of capital available to deploy for new projects and expansion, and you can see why there is real potential for Perpetual ahead.
Turning to the share price, which currently hovers around $20, it's worth considering the historical significance of this price level. Dating back to 1999, each time the stock has dipped to $20, it has consistently rebounded, often yielding substantial gains of over 100%.
This historical pattern suggests the potential for Perpetual's share price to rise in the years ahead.
I will be watching with interest the progression of talks with KKR.
As always, I encourage you to analyse Perpetual's chart to look for confirmation that the share price is ready to rise.
Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in bookstores and online at www.wealthwithin.com.au.