20th Mar 2024 17:23
(Alliance News) - TP ICAP Group PLC stands to benefit from a float of its Parameta Solutions unit, while 2024 could also been a strong one on an operational basis, as the interdealer broker could reap the rewards of election uncertainty.
Shore Capital Markets, which rates the stock at 'buy', lifted its fair value per share to 280 pence from 200p.
Earlier in March, it said it is exploring a minority float of its Parameta Solutions data arm.
"The board believes that Parameta's significant growth prospects, and the intrinsic value of the business, are not appropriately reflected in our share price. We are therefore exploring options for unlocking value for shareholders, whilst retaining ownership of the asset, which include a potential IPO of a minority stake in the business," Chief Executive Nicolas Breteau said.
Shore has a fair value of GBP1.26 billion for the core TP ICAP business, and GBP896 million for Parameta.
Shore added: "We derive a fair value of GBP900 million for Parameta equivalent to around 40% of TCAP's overall value, which could prove conservative if at IPO the market is prepared to attribute greater value to growth or if further scale can improve its profit margin."
TP ICAP shares rose 0.2% to 220.60 pence each in London on Wednesday. It has a market capitalisation of GBP1.70 billion.
Shore lifted its operating profit estimate for TP ICAP, taking it closer to consensus. It now predicts operating profit of GBP310 million, its forecast lifted from GBP298 million.
Shore noted foreign exchange effects, amid a stronger sterling, as well as tough earnings comparatives, kept a lid on its estimates for TP ICAP.
Shore analysts added: "More positively, Liquidnet's equity franchise faces benign comparatives in 2024, and if block trading volumes continue to improve, our revenue assumptions could prove conservative. Liquidnet's D2C Credit proposition is yet to get off the ground and we disappointingly sensed de-emphasis on this as a strategic priority in 2023 results. Should the company eventually achieve a critical mass of dealer connections to aggregate sufficient liquidity to prove the concept, this ought to entail significant revenue upgrades as we assume nothing in our model for this."
In addition, Shore said TP ICAP stands to benefit from "market turbulence around political uncertainty", with "2024 being a year of elections across the globe".
By Eric Cunha, Alliance News news editor
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