RAB

The Kaupthing Singer & Friedlander analyst’s pessimistic stance on RAB reaps big rewards

by Simon Keane

Sarah Ing, analyst at Kaupthing Singer & Friedlander, has secured a tidy one-week 21.1% return from going short RAB Capital (RAB), capitalising upon a loss which massively outstripped the FTSE All-Share’s thumping 6.5% fall. Ing only started covering the hedge fund manager on 31 July when she initiated coverage with a ‘fair value’ recommendation.

The ‘sell’, which Ing put in place on 28 August, followed concerns about a continuing poor performance of the group’s larger funds. This recommendation sees the analyst move into Shares’ ‘Top 50 calls’ list at position 44.

No sooner was the ink dry on Ing’s note than RAB co-founder Philip Richards announced he would relinquish his position of chief executive position so he can focus on running the key RAB Special Situations fund. Since July’s launch of coverage, Ing has been significantly more pessimistic on RAB than her peers with a current full-year earnings per share (EPS) forecast of 2p, 26.2% below the 2.7p consensus.

Ing warned the company would have to grapple with rising redemptions unless performance of the company’s funds improved. Assets under management were last disclosed as being $5.4 billion on 24 July but Ing forecasts them to hit $4.8 billion by the year end and deteriorate further in 2009 to trough at $4.5 billion.

Richards’ Special Situations fund has recently suffered from its exposure to small companies and latterly the mining sector. His reputation was also dented by a high-profile investment in Northern Rock. RAB’s shares have now hit Ing’s 37p price target where she sees the stock drawing support from a considerable cash pile.