BofA stays at 'buy' for Serco, spies upside from Brexit and global defence
Serco Group
178.10p
17:05 18/04/24
Analysts at Bank of America stood by their 'buy' recommendation for shares of Serco following the outsourcer's pre-close update.
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To back up their case, BofA pointed to the 'opportunity' from Brexit fallout and "global defence upside", adding that the firm was well-positioned to gain a greater share of the domestic market.
On the back of the above, BofA trimmed its estimate for the company's underlying trading profit in 2020 by 1% to £161m but raised that for 2021 by 6% to £165m.
Also contributing to the broker's higher estimates for 2021 was the firm's acquisition of Facilities First Australia, which it said explained Serco's better-than-expected guidance versus BofA's previous projections.
BofA upped its target price for Serco from 185.0p to 190.0p, putting on 24 times' their estimated price-to-earnings multiple for 2021 and a 15% premium against the Stoxx 600 which was not "too dissimilar" from its average 12-year premium of approximately 20%.