Bunzl shares ‘attractively valued’, says Berenberg

Outsourcer Bunzl rallied on Friday after Berenberg lifted its stance on the shares to ‘buy’ from ‘hold’, as it argued that the recent relative underperformance has run its course.

"Bunzl, described by the Financial Times as the most boring company in the FTSE 100, often gets overlooked by investors; but this is to neglect a well-run, attractively priced, acquisitive compounding business, where expectations are too cautious," the bank said.

Berenberg noted that after a relatively strong performance from the shares following the March 2020 market trough, since November the re-opening trade has taken hold and investors have rotated out of - or bet against - the perceived 2020 winners.

"We think the recent relative underperformance of Bunzl has run its course. The shares are attractively valued and consensus estimates are conservative; we note the robustness of the group’s balance sheet (net debt/EBITDA will on our estimates head towards 1x by year-end); and think Bunzl is well placed to continue to compound shareholder value via M&A."

The bank, which lifted its price target on the stock to 2,750p from 2,650p, said the reopening of economies should provide a boost to Bunzl’s retail and foodservice businesses, although it will mean reduced demand for Covid-related products that brought the company more than £1.3bn in revenue.

"The reversal of that PPE tailwind will dampen growth, but the headwind is well understood by the market and sufficiently reflected in estimates. As such, we think consensus estimates for the full year look manageable and we envisage upside risk to estimates as the year progresses," it said.

At 0940 BST, the shares were up 2.6% at 2,530p.