January 18, 2010: TD analyst boosts Sprott’s performance-fee estimate

More analysts are warming to Sprott Inc. by raising their price targets on its stock, (Click here to see the full story) but they are still reluctant to slap a buy; on shares of the money manager.

TD Newcrest analyst Doug Young became the latest to boost his one-year target on Sprott, raising it Monday to $5.00 a share from $4.25. But he is maintaining his “hold rating” on the investment firm.

Sprott, which went public in 2008 at $10 a share, has been continuing to face net redemptions with the departure of star hedge fund manager Jean-Francois Tardif.

Mr. Young's price target increase stems from Sprott’s fourth-quarter performance fees, which he now expects to be about $32.6-million compared with his previous estimate of $10.7-million.

His fourth-quarter, per-share profit estimate has doubled to 14 cents from 7 cents (consensus is 7 cents), while his 2010 special dividend estimate stemming from 2009 performance fees has moved up to 12 cents from 4 cents.

The only problem is that Sprott is expected to experience about $80-million in net redemptions in the latest quarter, he said in a note to clients. “While this is an improvement from the third quarter of 2009 ($252-million), it is still a negative data point in our view…

"We believe Sprott needs to broaden its product and service platform in order to successfully increase its share of the lucrative high net worth channel, and this will not be a quick fix in our view.”