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Tullett Prebon reaps reward of energy exposure

The global interdealer broker has benefited from its increased exposure to commodity market trading
March 1, 2016

The shadow hanging over full-year results from Tullett Prebon (TLPR) is its headline-grabbing deal to buy rival ICAP 's (IAP) voice broking business. With these figures came the publication of the prospectus ahead of a vote for both sets of shareholders on 24 March, while dealmakers work to appease competition regulators in the US and UK.

IC TIP: Hold at 349p

Tullett is a rare beast on the stock market in that it has benefited from volatile global commodity markets, with energy and commodities trading its largest revenue source. During the year the group acquired Moab Oil, increasing its crude oil and energy broking products in the US. But the big lift for these numbers was the 2014 purchase of oil market dealer PVM, which did its bit to help group operating profit up from £47.6m to £121.9m. But it was not all good news, as continued low interest rates have dampened investor appetite for fixed income and interest rate derivatives.

Management plans to cut headcount in Europe and the Middle East in response to declining revenue, and to restructure broking contracts in North America - in an attempt to reduce fixed costs and the level of payout as a percentage of broking revenue.

Analysts at Numis Securities are forecasting adjusted pre-tax profit of £99.4m for 2016, giving adjusted EPS of 32.9p, up from £93.7m and adjusted EPS of 31.5p in 2015.

TULLETT PREBON (TLPR)

ORD PRICE:349.3pMARKET VALUE:£850m
TOUCH:349.3-350p12-MONTH HIGH:416pLOW: 287p
DIVIDEND YIELD:4.8%PE RATIO:10
NET ASSET VALUE:222p*NET CASH:£139m

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201191011941.316.5
2012851-38.0-28.116.85
201380484.430.116.85
201470433.511.216.85
201579610634.016.85
% change+13+216+204-

Ex-div: 28 Apr

Payment: 19 May

*Includes intangible assets of £380m, or 156p a share