Search Share Prices
Broker tips: GKN, G4S, Johnson Matthey
Berenberg upped its price target on GKN to 455p from 365p on Monday, sticking with its 'buy' rating as it said it seems inevitable the engineer will end up being owned by Melrose Industries, after it rejected a £7bn bid last week.
GKN said on Friday that it had rejected a bid proposal from Melrose and appointed Anne Stevens as chief executive, as it announced plans to separate its aerospace and automotive businesses. It said that the bid was "entirely opportunistic and that the terms fundamentally undervalue the company and its prospects".
"The rejected 405p bid undervalues GKN, in our view, but we believe Melrose has scope to significantly increase its offer by the 9 February deadline," Berenberg said, also highlighting the potential of a counter-bid following press reports that private equity firm Carlyle might interested in making an offer.
The bank is assuming Melrose will up its offer to 455p, which indicates a further 8% upside to the GKN share price. "Given that the deal structure allows significant participation in any upside that Melrose achieves, we believe GKN management will be hard pushed to reject such an offer."
According to Berenberg, Melrose walking away is the least likely outcome. It said that previous transactions demonstrate that Melrose's management is financially disciplined and that it does not over-pay.
Citi upgraded its view on G4S stock to 'buy', pointing to an acceleration in organic growth, cost savings, benefits from re-financing and the possibility that the company might benefit from consolidation in its sector.
After troughing in the first quarter of 2018, growth was seen accelerating towards 5% thereafer.
The broker's analysts were also upbeat on the outlook for its Cash360 offering.
"G4S is ideally positioned to rapidly grow a portfolio of Cash360 high-margin contracts and we forecast 25% top line growth from 2019. Walmart is an important reference client, providing valuable client testimonials."
In parallel, in EBITA terms the security specialist's operating margins were seen improving from 6.6% in 2017 to 7.0% by 2019.
Analysts at Berenberg upgraded their recommendation on shares ofJohnson Matthey from 'hold' to 'buy' on the back of its recent market share gains in European autocatalysts.
That, they believed, should translate into a return to a high single-digit rate of growth in profits.
Yet at present, its autocatalysts unit was trading at an implied 2018 price-to-earings multiple of 10.2, for a roughly 37% discount to the wider European chemicals sector which was changing hands on a multiple of 17.5.
Those market share gains and the introduction of Euro 6 regulation would lead to earnings growth of approximately 6% per year at the autocatalysts unit out to fiscal year 2022, Berenberg said.