Shares in Man Group top the FTSE 100 fallers list, dropping 13.9 percent to extend recent falls following last week's first half results, with Citigroup cutting its rating for the hedge fund manager to 'hold' from 'buy'.
The broker says it has cut its EPS estimates for Man Group by 6 percent for full year 2008/09 and by 22 percent for full year 2009/10 to reflect lower assets under management.
Citigroup points out that Man Group' s near-term outlook depends on one 'engine' of growth, its AHL hedge fund.
Having even one engine puts Man Group in a better position than its peers, Citigroup thinks, but, in its view, more AHL also means more earnings volatility for the firm.
Citigroup notes Man Group has $1.5 billion surplus capital and a 14 percent free cashflow FCF yield, which supports a 12 percent dividend yield for investors while they wait for a share price recovery.
But the broker says that with negative earnings momentum and challenging asset under management trends, it is hard to see what will trigger recovery in the stock in the near term.
Citigroup has reduced its price target for Man Group to 265 pence from 570.
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