Citi upgrades G4S to 'buy'

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.

The broker also pointed out how on 13.5 times its estimated EV/EBITA multiple, the shares were changing hands at an 11% discount to the business services sector.

Citi set its target price for the shares at 350p.