Brokers' views: Arden Partners

Contrasting recommendations for two FTSE 250 stocks from Arden Partners this month. The broker has upgraded its recommendation stance on, and target price for, IG Group following full-year figures to May that met or exceeded expectations. Following the pleasing numbers, the broker upgraded IG from ‘neutral’ to ‘buy’ and raised its target price for the shares, presently 458p, by 5 per cent, from 475p to 500p.

Arden, forecasting growth in adjusted pre-tax profits from £157.6 million to £176.8 million for the current year to May, on turnover set to lift to £334 million (2010: £298.6 million), believes IG should continue to outperform the broader market. IG, it considers, should continue to grow in existing markets including the UK, Europe, Australia and Singapore, while expanding into new markets and making selective acquisitions.

Prudent to sell Provident

Elsewhere, clients are still being urged to sell fellow ‘second-liner’ Provident Financial at 882p, after the home credit provider reported first-half results that missed the broker’s and consensus expectations.

Provident unveiled pre-tax profits of £54 million (2009: £53.1 million), below Arden’s £56 million forecast and the £56.9 million City consensus. Earnings per share were 29.5p, a mild disappointment given that the broker was expecting 30.1p and the average forecast of other City number crunchers was 31p, though Provident did hold its dividend at 25.4p, in line with Arden’s expectations.

Although Arden is sticking with its sell stance on the business, given the downside risk, it is maintaining its 800p price target, believing ‘the dividend yield will support the shares at the 800p level’.