Panmure Liberum has upgraded Polar Capital Holdings PLC (AIM:POLR) from Hold to Buy, pointing to stronger-than-expected assets under management and an eye-catching dividend yield.
Despite a difficult quarter for fund flows, which included the loss of a healthcare mandate and some institutional redemptions, total assets rose 8% to £23.2 billion.
That comfortably beat Panmure’s forecast of £22.7 billion, thanks largely to buoyant markets which added £2.7 billion over the period.
Net outflows came in at £632 million, slightly worse than expected, but already well flagged. “The strength of markets shows (again) that sometimes the focus on quarterly flows can miss some bigger drivers to revenues and profits,” the broker said.
The house is also more confident that Polar’s dividend will be maintained. The shares go ex-dividend today for the second interim payout of 32p, and on current estimates, the total yield is about 10%.
Panmure's new target price is 600p, up from 545p, which implies a yield of 7.7% if the dividend holds.
Valuation is undemanding. Even adjusting for the ups and downs of performance fees, the shares trade on less than 11 times forecast earnings.
While the incoming chief executive will have a say on payouts in due course, Panmure sees enough value and stability now to justify the upgrade.
In afternoon trading, the shares were off 4% at 466.48p.