RBC Capital Markets upgrades Brewin Dolphin to 'outperform'

29th Jun 2015 08:55

RBC Capital Markets upgraded Brewin Dolphin to 'outperform' from 'sector perform' and kept the price target unchanged at 335p.It said Brewin's underperformance is overdone and presents an attractive entry point, noting that the share price has declined 17% in the past six weeks. It attributed the decline to Brewin's guidance on 27 May for lower net inflows and a lower revenue margin than originally anticipated.RBC also pointed out that Brewin trades at double-digit discounts to its closest peer Rathbone and the broader European diversified financials sector.It added that the market has focused on the forecast reductions that occurred four weeks ago and lost sight of the company's growth prospects. "We still forecast double-digit profitability growth rates throughout our forecast horizon," said RBC.In terms of the dividend, Brewin is yielding 4%, which is considerably above its closest peer Rathbone and even above the broader European diversified financials sector average at 3.7%.RBC also pointed to the company's strong balance sheet, which it expects to be used to provide capital for organic growth initiatives, M&A and extraordinary returns.The brokerage said it believes part of the underperformance in Brewin's share price is because of market confusion about the company's growth strategy, and an event focused on growth will help provide clarity."In our opinion management will likely update the market on their growth strategy in September, prior to Brewin entering a closed period," it said.At 09:20, Brewin shares were down 1.1% at 295.20p.