GMP Falls the Most in 5 Months on CIBC Downgrade: Toronto Mover

GMP Capital Inc. (GMP), Canada’s second- biggest non-bank brokerage, fell the most in more than five months after a Canadian Imperial Bank of Commerce analyst downgraded the stock.

GMP dropped 6.8 percent to C$6.47 today in Toronto, the most since Sept. 21. The decline came after Toronto-based GMP posted fourth-quarter profit on March 1 that beat analysts’ estimates on increased investment-banking revenue and higher fees from its funds.

“We do not see the higher level of revenue continuing into the current quarter,” said CIBC’s Paul Holden, who downgraded the stock to sector perform from sector outperform. “Transaction volumes have slowed once again.”

GMP’s fourth-quarter profit almost tripled to C$6.7 million ($6.5 million), or 8 cents a share, from C$2.4 million, or 2 cents, a year earlier. Revenue rose 11 percent to C$80.5 million. Excluding some items, GMP said it earned 17 cents a share, beating the 12-cent average estimate of four analysts surveyed by Bloomberg News.

GMP has climbed 11 percent this year, outperforming the 2.2 percent gain of Canada’s benchmark Standard & Poor’s/TSX Composite Index.

“Given the run-up in GMP’s share price and the reduction to our price target, the risk/reward is not as compelling today,” Holden said.

Comments about Canada’s capital markets by GMP Chief Executive Officer Harris Fricker during a March 1 conference call prompted Sumit Malhotra, a Macquarie Capital Markets analyst, to say in a note today that a better revenue backdrop remains elusive.

“Fricker was typically candid in referring to the equity underwriting pipeline as ‘tepid,’ an issue that remains one of our biggest obstacles in getting more bullish on GMP shares,” said Malhotra, who rates the shares underperform.

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; David Scanlan at dscanlan@bloomberg.net

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