GMP Capital CEO Harris FrickerFernando Morales/The Globe and Mail
GMP Capital Inc.
Thursday's close: $6.71, up 17 cents
52-week trading range: $4.25 - $9 a share
Annual dividend: 20 cents a share for a yield of 3 per cent
Analysts' ratings: There were one buy, two holds and two sells, according to Bloomberg data. Target prices range from $4.25 to $9 a share.
Recent history: Shares of the Canadian non-bank brokerage firm shed 11 per cent [including dividends] over the past year as it struggled to break even amid volatile domestic stock markets. GMP Capital has been restructuring and trimming costs in the face of declining revenue and trading volume. The stock has climbed since the firm announced last week that it cut 15 jobs to save more than $5-million a year. During the past 12 months, job cuts totalled 52 or about 16 per cent of GMP's total head count. The company also said that 51 employees in its GMP Securities unit were transferred to wealth management firm Richardson GMP, which it co-owns.
Outlook: With GMP Capital becoming a leaner operation and the potential for stronger domestic markets this year, "GMP is a good way to play improving equity markets in Canada," said Steven Palmer, president of AlphaNorth Asset Management Inc. "The market is getting better, trading volumes will be better, and corporate finance work will raise a lot more money than it did last year."
Mr. Palmer, who bought GMP shares last week, is forecasting the broader Canadian stock market to outpace its U.S. peer after two years of underperformance. While the S&P/TSX Composite, including dividends, rose 7 per cent last year, and the S&P/TSX Venture Composite shed 18 per cent, the S&P 500 Total Return came in with an 18-per-cent gain.
The Canadian market underperformed largely because of the battered resource sector, he said. "There was a big fear that China was slowing significantly...But now you have accelerating growth in China and the United States, while there is talk of Japan increasing stimulus for its economy. Those are the three biggest economies in the world."
With global growth set to improve this year, Canadian resource stocks should benefit, and that will help GMP because it is heavily focused on small to mid-cap names in this sector, Mr. Palmer added. "It's kind of a proxy on the market...We think that $10 a share [for the stock] is reasonable this year."
Technical analysis indicates that GMP shares bottomed in July, and that coincides with the bottom for the domestic markets, he noted. "The stock has climbed since that time. Last week, it broke above its September high so I like that."