Shares in Man Group climb 6.7 percent, topping the list of FTSE 100 gainers and having endured a torrid 18 months, as Citigroup raises its rating on the hedge fund firm to “buy” from “neutral”, despite cutting earnings forecasts, as it believes Man is now at the end of its downgrade cycle.
Man Group, which looks set to drop out of Britain’s blue chip index at the latest quarterly review by indexes provider FTSE this week, has seen its shares fall more than 70 percent since the start of 2011, as the firm has hemorrhaged funds in the face of turbulent financial markets with concerns centering around the performance of its flagship AHL fund.
The sharp decline has left Man at trough multiples on trough earnings, according to Citigroup, on 8.1 times 2013 price-to-earnings (PE) and 12.3 times management fee PE.
“Our 90 pence price target (down from 100 pence) assumes no AHL contribution to performance fee earnings until 2014, and only 2 percent AHL returns from now to end 2012. We believe this is conservative: AHL saw its best returns in 2008, the last time we saw significant market dislocation,” Citigroup says in a note.
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