RBC upgrades Brewin Dolphin to 'outperform'

RBC Capital Markets upgraded Brewin Dolphin Holdings to an ‘outperform’ rating from ‘sector perform’ on Wednesday after the company reported its third quarter interims.

The investment management and financial planning firm said total income rose 1% to £71.3m in the third quarter, bringing total income for the nine months ended 30 June to £208.5m.

“In the first nine months of its fiscal year, Brewin earned 75% of our full year 2016 total income forecast of £278.6n,” said RBC.

“We are confident that our 2016 forecasts are achievable despite the market backdrop.”

Total funds under management rose 2.1% to £33.5bn in the quarter.

Brewin’s core discretionary business delivered funds under management in the third quarter of £26.8bn, up 3.5%, which chief executive David Nicol said demonstrated its resilience in the face of uncertain market conditions.

“A decent IMS from Brewin, one that we could even characterise as very decent given the market backdrop,” RBC said.

“Brewin is a financial company that we believe should not experience downgrades, and small upgrades are a possibility, but with an uncertain market and flow outlook, we retain our forecasts.”

RBC added that Brewin’s share price has fallen 24% so far in fiscal year 2016. However the broker said it believes the underperformance is overdone and recovery in the share price is warranted.

“We reiterate our 275p price target, but because of Brewin's share price underperformance, and given its 12x calendar year 2017 price to earnings multiple, 5%+ dividend yield and over-capitalised balance sheet, we upgrade to ‘outperform’.”

Shares rose 7.05% to 253.70p at 1047 BST.