RBC had initiated TP ICAP PLC (LON:TCAP) as a ‘Top Pick’ as it said the firm’s key brokerage franchises were “underappreciated”.
The Canadian bank said it saw the inter-dealer broker’s Data & Analytics business as “a source of robust, high-quality earnings growth”, with regulation having opened a “wider – and likely more lucrative – product/service universe”.
READ: TP ICAP buys US energy broker Axiom Commodity Group; revenue rises 1% in four-month period
“We believe TP ICAP is positioned to offer regulation-related products to buy-side (e.g., portfolio valuation, best execution, TCA) and sell-side (e.g., FRTB). D&A may also offer an easier route into establishing meaningful connectivity with the buy-side, which could then evolve into transactional relationships”.
Analysts added that the FTSE 250 firm’s energy arm was “likely in a position to influence market structure” in terms of oil, while its rates division made it “the leading global inter-dealer of OTC interest rate derivatives”.
TP ICAP’s energy arm was boosted in November when it acquired US energy broker Axiom Commodity Group for an initial US$15.1mln, with a deferred, non-contingent consideration of US$3.1mln to be paid over three years and a further US$10.9mln of deferred contingent consideration may be payable depending upon how the business performs over the same period.
The bank also initiated the group with a 500p price target, adding that the company could experiment with direct-to-consumer models in its credit division “with little risk” following a general market shift to D2C which had had “negative implications for TP ICAP's franchise”.
In mid-morning trading Monday, TP ICAP shares were up 1.1% at 300.5p.