TP ICAP Group Plc (LON: TCAP) was the topic of conversation in an exclusive interview discussing financial services stocks with Fund Manager Gervais Williams of The Diverse Income Trust plc (LON:DIVI).
DirectorsTalk asked: TP ICAP is a global leader in the financial market infrastructure so unless you’re involved in energy and commodities pricing or foreign exchange, most people have probably never come across them. But their recent annual results had revenues up 3% at almost £2.2 billion and a highly profitable dividend payer. What’s your view on them?
Gervais commented:
“It’s interesting, the share price has come up quite a long way in the last, say, 12 months. It’s moved up from about 1.55GBp up to about 2.25GBp so it’s already come a long way. But it’s still standing on a low valuation, it’s still yielding a bit over 6%, maybe 6.5% according to Bloomberg and specifically, there’s quite a lot of excitement about TP ICAP Group’s data subsidiary, the Parameta Solutions business, which they’re going to be selling a part of it to demonstrate the value of that.
Whilst that may be moving the share price in the short term, the much greater upside, and the area I’m much more excited about is the Liquidnet business. This is providing additional liquidity, not so much to equities, but now moving across to the credit markets. They’ve got quite a few global banks involved now and I think that’s really going to start accelerating.
I noticed recently that the Canaccord note has actually upgraded their price target from 2.66 to 3.26. That’s really an incredible upside potential for a company which has already performed well and already starting to do the right things, so I think there’s lots more in the tank from here.”
