ShoreCap downgrades TP ICAP, sending shares lower
Shore Capital has cut its rating on TP ICAP, arguing that investors should be looking to take profits.
Financial Services
14,075.11
17:09 19/04/24
FTSE 250
19,391.30
17:09 19/04/24
FTSE 350
4,341.08
17:09 19/04/24
FTSE All-Share
4,296.41
17:08 19/04/24
TP Icap Group
207.50p
17:10 19/04/24
Downgrading the interdealer brokerage to ‘sell’, analysts Vivek Raja and Paul McGinnis said: “The stock is trading on around 12 times 12-month forward earnings compared to a long-term average of around 9 times.
“The current 30% premium, in our view, is not justified and we struggle on fundamentals to reason why TP ICAP should be worth more than its long-term average valuation.
“We think the risk to current-year consensus earnings per share is on balance on the upside. However, we would use what may be a final round of upgrades to lock in profits at a premium rating on above-normal, near-term trading conditions.”
The downgrade weighed heavily on the stock, sending it 2% lower to 396.10p by 1400 GMT. ShoreCap said 315p was fair value.
Raja and McGinnis added: “Structural price pressures inhibit revenue growth to 1-2% per year, so costs ought to be the lever for profit growth. However, we anticipate a pick-up in infrastructure investment, which should deliver long-term productivity benefits, constrains EPS growth in the near term.”