Broker snap: Buy Ashmore after falls, says RBS

26th Sep 2011 10:42

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.---RG