Fund management services provider JTC slumped on Friday after Shore Capital downgraded the stock to ‘sell’ from ‘hold’, saying it was time to take some profits after recent share price strength.
Shore noted that since the trading update on 22 July, the shares have risen 24%. Since the update, JTC’s 12-month forward price-to-earnings has expanded from around 21x to 27x, with limited yield support.
“Evidently this hasn’t been driven by earnings expectations,” it said. “We therefore think that, reading across from Sanne’s takeout, the market has placed a private equity bid premium on JTC’s shares.”
ShoreCap said the breadth of employee ownership is one of JTC’s hallmark successes and a feature which reduces the likelihood of a PE bid succeeding.
“As such, JTC’s valuation looks stretched to us,” it said.
At 1145 BST, the shares were down 5.2% at 725.55p.
