Man Group gets a boost from RBC upgrade

23rd Jul 2015 11:31

(ShareCast News) - Man Group got a boost after RBC Capital Markets upgraded the stock to 'outperform' from 'sector perform' noting that the shares have dropped 30% since 10 April when they hit a year-to-date high.During the same period, the group's flagship AHL fund has declined by 12%, RBC noted. "We believe the share price reaction is overdone and presents an attractive entry point."RBC said some discount to the sector valuation is warranted because of Man's lower visibility over flows, investment performance and performance fee generation, and the higher percentage of Man's earnings derived from lower quality performance fees than its peers. However, the size of the discount that Man trades at to its peers is too wide.It said that while the correlation between the company's share price and AHL performance is too high, in this instance it actually presents a buying opportunity.Furthermore, RBC reckons Man should generate nearly double the performance fees in the first half of this year that it did in the same period last year and that the first-half results should show strong growth across the board.The Canadian bank said consensus forecasts are undemanding. "We believe that Bloomberg consensus forecasts will likely be exceeded, and in our opinion with consensus so low Man should soon enter an upgrade cycle, with the first-half results being the catalyst."RBC cut its price target on the stock to 185p from 195p as it reduced forecasts but said the new target price yields a 25% implied all-in return, which is one of the highest in its coverage universe.At 10:45, Man shares were up 1.6% at 155p.