Tullet Prebon shares fall after HSBC rating downgrade

5th Dec 2016 09:19

(ShareCast News) - Tullett Prebon's shares fell on Monday as HSBC downgraded the inter-dealer money broker's stock to 'hold' from buy' but raised the target price to 480p from 460pThe share price has rallied more than 50% from lows in July following the Brexit vote as the company benefits from foreign exchange headwinds. Investors also see cost synergies and reduced broker compensation targets.Meanwhile, the company is still awaiting final regulatory approval for its merger with ICAP's Global Broking business. Tullett has said the approval should be granted year-end.HSBC said it had expected that all approvals would have been granted much earlier in the fourth quarter of 2016."We therefore think that it is time for management to deliver now in terms of final approvals as well as execution of merger and its promised cost synergies," the bank said.HSBC expects earnings per share of 36.94p in 2016, compared to a previous estimate of 20.27p, as it has removed IGBB revenues from its guidance..For 2017 HSBC has lifted its EPS forecast to 38.30p from 37.32p as it sees reduced broker compensation during this fiscal year. The new EPS guidance for 2016 is 9% above consensus forecasts while 2017 EPS estimate is 3% ahead. "While still having above-consensus forecasts, we now see relatively limited upside of 8% for the shares despite several earnings upgrades in the past several months and therefore downgrade shares to Hold," said HSBC."We believe that dividend yield is a good reason to hold the shares but most of the promised merger benefits now seem to be in the price."Shares dipped 1.61% to 440.50p at 0934 GMT.