BROKERWATCH ICAP and Tullett Prebon 'buy' at Kaupthing, Singer & Friedlander

Tue. July 15, 2008; Posted: 07:15 AM

LONDON, Jul 15, 2008 (Thomson Financial via COMTEX) -- TULLF | Quote | Chart | News | PowerRating -- ICAP and Tullett Prebon have both been initiated as 'buy' at Kaupthing, Singer & Friedlander as the broker believes the pair have strong positions in a market with good growth potential.

Kauthing recommended that investors hold both inter-dealer brokers but said Tullett currently offers better value.

It said wholesale market volatility, and hence volume, is a key driver of the inter-dealer broker fees and commissions. The likelihood of growth more than offsets the potential risk from periods of low volatility and of increased competition as banks combine to form their own platforms.

Longer term, Kaupthing analysts are looking for revenue growth of about 7 percent to 8 percent, in line with historical trends, and they think the operating environment over the next 12 to 18 months points to a higher level of organic revenue growth for these companies in the region of 10 percent.

ICAP and Tullett Prebon are at different stages of their own cycles, but both are set to benefit from the positive backdrop to the over the counter market going forward, the broker said.

ICAP's electronic business, in particular, has the scale and connectivity to benefit from the growth in financial product innovation.

The high barriers to entry are more challenging to the development of Tullett's electronic platform, but Kaupthing believes any significant developments in Tullett's electronic platform would be taken positively. deborah.hyde@thomson.com dlh/hjp

Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.

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