IG Group Holdings PLC (LON:IGG) has been downgraded to ‘hold’ from ‘buy’ and had its target price raised to 695p from 668p by analysts at Liberum, who said that they only saw “slight earnings growth in the next two years” following first half results that met the broker’s expectations.
In a note on Thursday, Liberum said the spread-better was now “fair value” and that their forecasts for the 2020 financial year were now “in line with the median estimate”.
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“We have been buyers since 534p, but with the shares having rerated from 11.6x calendar 2020 to 16.0x, they are, in our opinion, less attractive”, the broker said, adding that they did not think analysts had yet taken into account the potential impact of new regulations in the Australian market.
“We…find it improbable that lower leverage will not soon come to Australia, so we model 50% of revenues being protected by the Wholesale Client designation, and a 55% impact to the other 50%. This is material at a group level, meaning that…Australia revenues decline £14mln in [2021].”
Liberum also questioned whether the replacement for outgoing finance boss Paul Mainwaring “would wish to maintain the dividend at a 100% payout”.
The assessment pulled IG’s shares down 1.2% to 662.2p in late-morning trading.