ICAP shares under cosh as Citigroup downgrades stock

28th Sep 2016 13:58

(ShareCast News) - ICAP shares dropped on Wednesday as Citigroup downgraded the stock to 'neutral' from 'buy' and slashed the target price to 490p from 530p.The broker is set to be renamed NEX Group Plc once it sells its global broking business to Tullett Prebon Plc for £1.1bn."NEX Group is going to be a capital-lite, cash-generative entity with lower ongoing regulatory capital requirements," Citi said."This, we think, will enable it to maintain good operating cash flow conversion levels and to pay a sustainable dividend policy of around 60% for fiscal year 2018 and beyond."For 2017, Citi believes the company can maintain its 22p DPS, based on the current business mix and the cash on its balance sheet that will remain after the disposal.Citi also lowered its average daily volume foreign exchange (FX) estimates for its FX business EBS, which account for 50% of NEX's earnings.Citi added that it acknowledges US elections in November and a possible US rate hike in December will be catalysts for heightened FX volatility."However, notwithstanding this, we believe consensus expectations for full year 2017 EBS revenues are too high."Shares fell 3.01% to 463.30p at 1410 BST.