Charles Stanley upgrades Friends Life after recent falls

18th Dec 2014 10:23

Charles Stanley has lifted its stance on insurance firm Friends Life Group (FLG), saying it sees limited downside after recent falls in the stock.The shares have fallen by around 10% since the broker last reiterated its 'reduce' rating on 8 December at around 380p.It said this was due to the falls in Aviva's own share price - with the stocks now linked given the recent share-exchange merger between the two - as well as concerns about the strategic merits of the deal.Aviva has offered 0.74 of its own shares for each FLG share, meaning that any weakness in Aviva's stock will inevitably lead to falls in FLG.General equity-market weakness over the recent slump in oil and current turmoil in Russia didn't help either, it added."With FLG shares now trading at the level before bid talks with Aviva were confirmed on 21 November and once again yielding 6% on a stand-alone basis, we believe further downside may be limited and so upgrade our recommendation," said analyst Minal Shah.Shah added: "At current share-price levels and lower (circa 350p) we feel investors would be better off holding on to the shares which should yield a near-term cash payout of circa 24p (including the 10p sweetener) assuming the deal completes in the second quarter of 2015."Aviva's shares have fallen by nearly 15% since 21 November and, at 468p, the stock now appears to be on a trough valuation with upside potential."FLG was trading 2% higher at 356.9p by 11:26.