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RBC Capital lifts rating for Aberdeen Asset Management to 'sector perform'

RBC’s analysts have modestly raised their EPS estimates “as lower net flow assumptions are offset by improved investment performance and FX assumptions.”
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In early morning trading, Aberdeen shares were up nearly 5%, or 12.1p at 262.9p

Aberdeen Asset Management PLC (LON:ADN) got a lift today as broker RBC Capital raised its rating for the emerging markets-focused funds group, albeit only to ‘sector perform’ from ‘underperform’.

In early morning trading, Aberdeen shares were up nearly 5%, or 12.1p at 262.9p.

In a note to clients, RBC’s analysts said they have modestly raised their earnings per share estimates for the asset manager by 0.4% for 2017 and 0.1% for 2018 “as  lower net flow assumptions are offset by improved investment performance and FX assumptions.”

However, their 2019 EPS estimate is reduced by 2.8% and they trimmed their target price to 285p from 290p.

The analysts said: “While we think there is decent upside potential to our price target, given the risks, we do not believe a more positive rating is warranted.

“Nonetheless, the risk in the near-term is to the upside based upon an oversold share price, a reasonable valuation, a high dividend yield, stabilising revenue margin, well controlled cost base, and the real possibility of M&A.”

They added: “Aberdeen’s negatives are well-known by the market and more than reflected in the share price; we thus believe an upward redistribution of analyst ratings is more likely than an increase in the negative bias of the distribution.”

The analysts said the biggest risk to its rating remains Aberdeen’s net fund flows, which they anticipate seeing a material recovery in 2018.

However, they added: “Should flows not recover as we anticipate, this could mean that our upgrade was premature.”

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