Berenberg downgrades Signature Aviation to 'sell'
Berenberg downgraded Signature Aviation - formerly BBA Aviation - to ‘sell’ from ‘hold’ on Thursday as it said the stock’s re-rating has been too aggressive.
It noted that since its lows in April, Signature shares have rallied nearly 80% and are outperforming the FTSE 250 year to date.
"We feel the market has got ahead of itself. The aviation industry is facing its biggest crisis, perhaps ever, with the outcome, winners and losers yet to be determined," it said. "With this in mind, a 17x 2021 price-to-earnings (pre-IFRS 16), reflecting a ‘normal year’ earnings, is well above historical averages, despite the significantly higher degree of uncertainty."
Berenberg said that on consensus numbers, Signature is trading at its highest relative valuation versus the FTSE 250 over the last five years.
2Given the sluggish recovery expected - -our FY 2022 EBIT remains below FY 2019 - we think there is downside risk to the valuation, with material long-term earnings risk."
The bank maintained its 165p price target.
At 1020 BST, the shares were down 3.9% at 243.00p.