Jupiter Fund Management PLC (LON:JUP) shares edged higher after UBS upgraded its stance to ‘neutral’ from ‘sell’ and raised its target price to 300p.
UBS said cash flows at the company’s dynamic bond fund (DBF) have improved sharply over the past six months after recording £4bn of outflows in 2018.
The fund had more than £200mln of cash inflows in March, compared to more than £550mln of outflows in September.
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"As a result of this turnaround, we are increasing our 2019-21 flows estimates (we estimate £1.0bn of inflows for Jupiter in 2019 entirely driven by the DBF, up from our previous estimate of £0.4bn outflows), driving our 2019/20/21 earnings per share upwards by 3%/8%/11%," UBS said.
"This, in turn, drives our discounted cash flow-based price target upwards by 18% to 355p and leads us to upgrade the stock to neutral."
UBS said its views Jupiter as a well-run assets manager but its key weakness has been its concentrated reliance of a small number of funds for flows and growth.
The dynamic and strategic bond funds account for a large part of flows, which have shown significant levels of volatility over the past three years.
"Given the close correlation between Jupiter's historical retail flows and its forward price-earnings multiple, the market is pricing in net inflows to equal 5% of AUMs, in line with our 2020 forecast," UBS said.
Shares gained 2.5% to 355.8p in morning trading.