Credit Suisse calculates that the company’s capital position dropped to the lower end of the target range in March because of the large expansion in sub-investment-grade credit spreads and a drop in equity markets.
Furthermore, the broker assesses that around half of the third quarter investment loss will not unwind because of changes in asset mix.
With hindsight, Credit Suisse suggests an equity raising may have been easier and a less dilutive option.
In the short term the broker is concerned that investors may overestimate the extent and speed at which an investment market unwinding will occur and there is downside risk to consensus forecasts. Neutral rating maintained. Target rises to $5.70 from $4.25.
Sector: Diversified Financials.
Target price is $5.70.Current Price is $5.22. Difference: $0.48 – (brackets indicate current price is over target). If CGF meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges – negative figures indicate an expected loss).
