Date: Monday 26 Sep 2011
RBS has upgraded its rating on Ashmore to “buy” from “hold” following heavy falls in the fund manager’s share price lately.
“We see the recent share price pullback as an excellent opportunity to gain exposure to this high quality business,” RBS says.
It points to Ashmore’s “strong funds flow outlook” and its “excellent capital position.” It also notes that, at 18% of funds under management, it has only minimal exposure to equities.
RBS lowers its target price on Ashmore to 404p from 415p.
Elsewhere in the sector, RBS is concerned about Jupiter Fund Managements’ exposure to equities and has lowered its rating on the stock to “sell” from “hold”, with the target price reduced to 171p from 205p.
“We downgrade the stock from Hold to Sell on our belief that the mark-to-market downgrades for Jupiter are likely to be larger over the next two weeks given the company's higher equity exposure (83% versus 47% sector average),” RBS says.
On the positive side, RBS notes that Jupiter’s strong position in the UK market, which accounts for 89% of funds under management “should hold it in good stead relative to some other markets where we anticipate substantial redemptions.”
It notes that Jupiter trades at a premium valuation of around 12.8 times expected earnings in 2012, against 10 times in the broader sector.
RBS also downgrades asset manager Schroders, to “hold” from “buy”, while slashing its target price on the stock to 1,250p from 1,970p.
It notes that, while Schroders offers compelling long-term value, share price performance is a more important concern in the current environment of equity falls.
“In that context, we see exposure to stable fund flow markets, fixed-interest assets and cost flexibility as being drivers of relative outperformance; we see high exposure to equities, volatile fund flow markets and cost inflexibility as drivers of relative underperformance,” RBS says.
Its preferred asset management stock is Man Group, on which it has a “buy” rating.
Citi reiterates its buy/medium risk rating on Aberdeen Asset Management after the fund manager’s trading update today.
At £176.9m, assets under management were 3% higher than Citi’s forecasts of £172.5bn.
“Despite a challenging market backdrop, stronger than industry fund flows are reassuring,” Citi notes.
“Also, Aberdeen’s recent pay down of bond debt will reduce interest costs (helping the bottom line) and we see scope for management of other costs: we estimate staff costs make up 60% total, and around 1/3 of non-staff costs are outsourced third party administration costs which vary with AUM levels.”
Citi has a 230p target price on Aberdeen.
Seymour Pierce continues to see medical technology group Lifeline Scientific making strong progress on sales, product development and geographical expansion.
The broker has a 260p target price on Lifeline and a “buy” recommendation.
“The phasing of R&D expenditure means the company is ahead of our interim earnings expectations, while we anticipate total investment for the full-year to be in line with our existing assumptions,” Seymour Pierce notes.
It points to Lifeline’s low valuation of 12.6 times estimated 2012 earnings, which compares with 16.8 for peer Advanced Medical Solutions and 17.4 for Surgical Innovations.
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