ShoreCap downgrades TP ICAP, sending shares lower
By Abigail Townsend
Date: Monday 09 Dec 2019
(Sharecast News) - Shore Capital has cut its rating on TP ICAP, arguing that investors should be looking to take profits.
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."
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