LONDON (SHARECAST) - Jefferies has maintained its 'hold' rating and 1,220p target price for transport group Go-Ahead, saying that while the new target for bus profits should be well-received, there is still some uncertainty surrounding rail franchises.
Go-Ahead said that bus operating profit should grow to £100m by 2015/2016, which Jefferies says is "feasible" as long as there is a "step change in performance". Analyst Joe Spooner said that annual bus profit have ranged between £64m and £70m over the past five years.
He said that this new target "should be well received as the observation to date has been that the group has needed rail to provide the cushion in its dividend cover, but rail faces the uncertainty of expiring franchises."
"The new target implies existing rail profits will be replaced by bus by FY16."
Spooner said: "Although 1Q trading at London Midland looked a little stronger than we expected, the franchise is small and trading elsewhere was essentially as we looked for.
[…] We don't expect FY13 consensus forecasts to change, but dependent on the phasing of the new bus profit target, consensus FY14 eps may rise by a low double digit percentage, compounding higher in future years as more of the bus target is factored into the outlook."
By 10:18, Go-Ahead was trading 4.57% higher at 1,349p.
LONDON (SHARECAST) - Jefferies has maintained its 'hold' rating and 1,220p target price for transport group Go-Ahead, saying that while the new target for bus profits should be well-received, there is still some uncertainty surrounding rail franchises.
