Broker's View: Canaccord Genuity

In a note entitled ‘Firm foundations’, Canaccord Genuity analyst Katrina Hart views Brewin Dolphin, the fully listed money manager and broker, as a buy. She has also ratcheted up her target price for the shares, recently swapping hands at 129p, to 213p, suggesting handsome upside for investors.

Hart notes that recent interim results met the broker’s expectations, with pre-tax profits increasing by 21 per cent to £20.3 million and the dividend maintained at 3.55p. Net cash increased to £51.5 million, ‘implying a £9.5 million surplus over regulatory capital requirements’.

Forecasting full-year earnings of 12.3p – equating to 16 per cent annual growth – Hart argues that Brewin’s estimated calendar 2011 p/e of 8.9 and yield of 6.2 per cent ‘go a long way to discounting the short-term market risk’, and on a longer-term view she thinks the shares ‘could recover by 65 per cent to 213p, based on our risk-weighted sum-of-the-parts analysis’.

Rockhopper’s Falklands hopes
Over in the resources space, research colleague Richard Slape has waxed lyrical about Rockhopper Exploration (see fund manager focus column), the North Falkland Basin oil and gas explorer, on confirmation that well 14/10-2 on the Sea Lion prospect has been successfully suspended for testing.

With further positive updates expected from the company, with remaining cash equivalent to 90p per share, over the coming weeks and Slape reckoning that ‘a field of this size would be worth 343p per share’, he still regards Rockhopper as a speculative buy and reiterates his 433p price target. This is still significantly north of the current 230p AIM market price, even after a recent surge higher.