RBC upgrades Jupiter on chunky return estimates

RBC Capital Markets has upgraded Jupiter Fund Management as it believes current forecasts underestimate the group's inflows and capital returns.

After Monday's trading update, RBC's new 'outperform' rating, up from the previous 'sector perform', is accompanied by a 3% increase in the target price to 475p.

With a diversification strategy in place, the Canadian bank thinks net flow forecasts "could be conservative" and it expects Jupiter to return a huge chunk of its current market value to shareholders by the end of the 2017 financial year.

Forecasts for earnings per share are increased 1% for the current year, based on updated assets under management calculations after the flows and investment performance announced in Monday's results, while both 2016 and 2017 EPS are lifted 4%, while the changes to SICAV fees could be further profit-enhancing over time.

"Shareholders should continue to benefit from attractive returns," RBC analysts said, estimating a total dividend yield of 6% based on our 2015 forecast, which is among the highest in the sector.

"Further we estimate that Jupiter could return ~20% of its current market value to shareholders through 2017."

"Our expectation for fairly flat net inflows going forward is achievable and could even be conservative given Jupiter’s strong brand name and diversification efforts by product, geography and client type. "