RBC Capital Markets slashes target price on IntegraFin

RBC Capital said it had updated its estimates for IntegraFin to reflect recent market movements and cost guidance delivered at the time of the firm's interim results.

The Canadian bank stated the key moving parts to its earnings per share adjustments were higher cost growth and market-to-market impacts on revenues.

RBC said the strengthening of cost growth assumptions reflected company guidance around further increasing headcount, as well as the bank's expectation that IntegraFin will raise employee salaries in light of the current inflationary economic backdrop.

"As a result, we now look for YoY underlying expense growth of 21% in FY22E, 10% in FY23E, and 6% in FY24E Negative market moves in the quarter mean we now forecast Q3 FUD of £52.2bn, a 2.5% fall QoQ. Within this movement, we expect a robust net flow result of +£1.1bn in the quarter. Nevertheless, the lower FUD weighs on our fee revenue forecasts for all years," said the analysts.

The net impact of all RBC's changes was reductions to its EPS estimates of 11%, 19%, and 14% for 2022, 2023, and 2024, and a reduction in dividend per share estimates by 6%, 15%, and 14%, respectively.

"We remain favourably disposed to IHP's market positioning and long-term growth prospects. The group can offer a premium service at an average price point, which makes for a compelling proposition. At current levels we see a case for deep underlying value in the shares, but given stunted short-term earnings growth we can envisage a better entry point on a 12m view and retain our 'sector perform' rating," concluded RBC.

Reporting by Iain Gilbert at Sharecast.com