Broker snap: Panmure Gordon ups target on RSA

18th Feb 2013 11:39

Analysts at Panmure Gordon have this morning issued a research note telling clients to 'hold' on to shares of non-life insurer RSA. In their view the company's valuation is fully up to speed, given the improving but still challenging trading conditions.In greater detail, they explain that RSA still has work to do in areas such as Italy and in the UK with its large Motability fleet scheme, where any improvement in motor rates negotiated later this year will still take time to translate into better earned premiums.For Panmure Gordon the shares' upside is likely to be restricted by their current valuation metrics, which are now at a relatively high price/net tangible asset value ratio of 2.1 times and a price-to-earnings multiple of 10.8. The downside, on the other hand, ought to be limited given the firm's 7.1% dividend yield. Hence the brokerage firm's decision to maintain its hold recommendation but to increase its target price to 130p (up from 11op) to reflect its valuation roll-through. Nevertheless, the broker adds that "we see much greater upside in the life sector, particularly in St James's Place and Aviva."AB