BROKERWATCH ICAP started as 'outperform' by Cazenove

Tue. July 08, 2008; Posted: 03:45 AM

LONDON, Jul 08, 2008 (Thomson Financial via COMTEX) -- IAPLF | Quote | Chart | News | PowerRating -- Cazenove has started ICAP Plc. as 'outperform', saying that in its view, there remain firm drivers for continued growth in derivative volumes, both over-the-counter and on exchange, according to market sources.

In a note to clients, Cazenove said that drivers include the continuing volatility of currencies, interest rates and credit markets driving an increasing desire to hedge risks, and an increased commitment of capital from banks and hedge funds to trading a variety of markets.

The broker also pointed to the continuing growth of absolute return and uncorrelated return strategies including algorithmic trading, and liberalisation of emerging markets and growth in onshore and local currency fixed income, derivatives and credit markets, as drivers.

Cazenove noted that ICAP has delivered compound growth in adjusted EPS of 17 percent in the four years to March 2008.

The broker said it expects this rate of growth to be broadly maintained in the next three years, but this can be achieved while assuming a slowing in the rate of growth of the core business.

Cazenove said that newly launched or newly acquired businesses offer scope for further upside to market estimates, in its view, with the area of post-trade servicing offering potentially the most interesting opportunity.

The broker noted that the stock currently trades on a PE ratio of 13.1 times for the year to March 2009, and a premium to its peers of some 30 percent in PE ratio terms.

tf.TFN-Europe_newsdesk@thomson.com tw/slm

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