Investment manager Rathbone Brothers PLC (LON:RAT) is currently coping with a market that “underappreciates” the strength of its franchise, according to analysts at RBC.
In a note upgrading the FTSE 250 firm to ‘outperform’ from ‘sector perform’, the Canadian bank said they expected the company to deliver a “best-in-class” operating margin, meaning its profits will be “best cushioned among Discretionary Fund Managers from any adverse market moves impacting fee generation”.
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This was in spite of recent downward revisions to the group’s guidance, which led RBC to reduce its price target to 2,240p from 2,450p.
Analysts also highlighted “constructive underlying themes” in the UK wealth management sector such as “improving retail investor sentiment, a helpful policy landscape, continued low interest rates and sector consolidation opportunities”.
“Given the supportive themes, we are upbeat about the prospects for the sector to outperform the market in 2020”, RBC said.
“In summary, we believe the current share price undervalues the RAT franchise, and believe a re-rating is therefore likely over the next 12 months”, they added.
Rathbone’s shares were 2.8% higher at 2,020p in early trading on Friday.