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Sprott Inc. was upgraded to buy from hold at TD Securities, where analyst Graham Ryding believes the asset manager is simply too inexpensive to ignore.
Mr. Ryding left his $4 price target on the stock unchanged, noting that it reflects $3.25 per share for Sprott’s base business and 75¢ per share for its long-term performance fee potential.
“We expect the growth in AUM to be supported by the launch of new funds (in particular, the recently launched factor-based Gold Miners ETF), in combination with decent mutual fund net sales momentum,” Mr. Ryding said.
The analyst highlighted the substantial capital available on Sprott’s balance sheet to seed new funds and make tuck-in acquisitions. He also noted the execution risk associated with the company’s transition phase as it deploys capital, as well as the importance of precious metals sentiment to both AUM growth and product launches.
TD’s update on Sprott comes as is now off research restriction following the closing of a $60-million secondary offering by the company’s founder, Eric Sprott.
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