Canaccord upgrades Rathbones after share price weakness

Canaccord Genuity upgraded Rathbone Brothers to ‘buy’ from ‘hold’ on Friday following recent share price weakness.

The brokerage, which left it price target unchanged at 2,705p, noted that the shares have been relatively weak since the start of the year, dropping by 3% and leaving them trading at a discount to Brewin Dolphin and Brooks Macdonald on a current year price-to-earnings multiple.

"We do not believe this fall or discount is justified and, as reflected in our respective target multiples, believe that Rathbones remains the quality play in the sector and should trade at a premium.

"Given the recent share price weakness and a potential twelve month total shareholder return of 11.9% (9.2% potential price upside and a 2.7% prospective dividend yield), we raise our recommendation," it said.

Canaccord said the drop in total first-quarter funds under management was in line with its broad expectations given market weakness over the quarter. The brokerage added that it places greater emphasis on net inflows and net operating income, not least as equity markets have broadly recovered since the quarter end.

"Overall, the flows did not give us cause for concern and the growth in net operating income was supportive of our full year forecasts. While there was no update provided on any potential acquisition opportunities, given management's strong track record, we believe that any opportunity would be approached in a very disciplined manner to ensure it was value enhancing for all stakeholders."