Liberum ups National Express to 'buy', highlights diversified exposure
Liberum upgraded National Express to 'buy' from 'hold' on Monday, lifting the price target to 470p from 410p as it said the company's consistent execution of a controlled risk strategy, which is delivering steady compounding growth, is not fully reflected in the rating.
FTSE 250
19,391.30
17:09 19/04/24
FTSE 350
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FTSE All-Share
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Go-Ahead Group
1,546.00p
16:34 07/10/22
Mobico Group
60.05p
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Stagecoach Group
104.70p
16:34 27/06/22
Travel & Leisure
7,521.61
17:10 19/04/24
It said the group's diversified exposure to multiple geographies, transport modes and regulatory regimes means National Express is not reliant on any one source for current earnings or future growth and noted that the transport operator has been able to deliver consistently over the past four years.
"It has pursued and realised steady growth opportunities across multiple areas, with a balance between organic growth, contract wins and acquisitions. The effectiveness of this controlled risk strategy is evident in how the group has overcome challenges," Liberum said.
It argued that the group's exit from the UK rail industry was well-timed, doubly so with the benefit of hindsight.
"Although it continues to have a material presence in the UK, the majority of earnings and value are derived overseas," it said, adding that even within the UK, National Express faces below-average political risk, with its local bus operations in the West Midlands benefitting from a supportive local transport authority with little or no interest in imposing regulated contracts and the long-distance coach services attracting little political interest.
"Its value-for-money proposition should also position it well in any period of greater economic uncertainty," the brokerage said.
As part of its note on UK public transport, Liberum said investor sentiment towards bus and rail operators was at an all-time low.
"There is much to be fearful of. Many rail franchises are struggling. Road congestion and weak economic activity continue to dampen regional bus volumes. London bus budgets are under pressure.
"Political risk remains high, with bus re-regulation still lurking, and worse to come from any change in government. However, depressed valuations create opportunities."
It upped its price target on buy-rated FirstGroup to 130p from 110p and on hold-rated Go-Ahead to 1,850p from 1,840p.
At 1120 GMT National Express shares were up 1% to 383.60p, Stagecoach was down 0.9% at 155.40p and Go-Ahead was up 0.4% at 1,792p.