Johannesburg - Financial services group Metropolitan has received the thumbs-up from analysts and rating agencies on the back of its strong capital position.
On Friday, Nedgroup Securities upgraded Metropolitan from "hold" to "buy". "Metropolitan remains strongly capitalised and is well positioned to navigate any potential correction in equity markets," Nedgroup Securities said in a report to clients.
It said it expected Metropolitan to use about R300m worth of its R1.7bn of capital for share buybacks in the coming year. The buybacks are expected to enhance shareholder earnings.
This, coupled with an improving operating environment, showed the firm was expected to reach a 12-month price target of 1 670 cents per share, representing a 20.5% premium to its present level.
It is also trading on a dividend yield of about 7.5%, which is considered attractive.
Despite a relatively upbeat set of results from Metropolitan when it reported earlier in March, it did not capture the eye of many asset managers. The company reported a 6% increase in its embedded value to 1 811c/share and raised its dividend.
At the time of reporting, group CEO Wilhelm van Zyl told shareholders: "A great deal of uncertainty remains as to the direction in which markets will move next, with many of the determining factors in the hands of foreign and local policymakers."
Stockbrokerage Barnard Jacobs Mellet (BJM) at the time advised shareholders: "The counter remains attractively priced, but may need some action to allow for an unlock of value."
Simon Fillmore from Independent Securities was also upbeat about Metropolitan's prospects. "It has been one of our favoured picks for some time," he said, citing well-focused management and high entry barriers into many of the markets in which Metropolitan operates.
Shares in Metropolitan were off 0.5% (7c) to 1 473c in late trade on Friday afternoon.