Berenberg starts Brooks Macdonald at 'buy'

(Sharecast News) - Berenberg initiated coverage of Brooks Macdonald with a 'buy' rating and a 1,600p price target on Friday, arguing that the current share price undervalued the group's recovery prospects despite clearer signs of improving net flows.

The German bank said Brooks now offers a holistic wealthmanagement service across investment management and financial planning for both advisers and private clients. While the evolution to this model had created shortterm earnings headwinds, Berenberg said it expected the business to return to earnings growth in a sector with longterm structural expansion. It also highlighted the current EV/EBIT multiple of 6x as too low given the outlook.

Berenberg pointed to structural market drivers, noting an addressable market growing at around 7% a year and the importance of Brooks' exposure to managed portfolio services.

The broker expects FY26 to mark an inflection point - with flows, revenues and operating margins returning to growth after recent headwinds - and forecasts 8% compound annual growth in operating profits over the next three years.

Cash generation was also expected to improve as restructuring and acquisition costs fall away, supporting rising dividends. Berenberg sees the yield increasing from around 6% in FY26 to more than 7% in FY28, backed by a robust balance sheet.

Berenberg added that its 1,600p target price, based on a discounted cashflow model and equivalent to roughly 11x FY27 earnings, implied around 25% upside.

Reporting by Iain Gilbert at Sharecast.com