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Canaccord Genuity raises target price on National Express to reflect higher value for ALSA unit

By Alexander Bueso

Date: Friday 18 Oct 2019

(Sharecast News) - Analysts at Cannacord Genuity bumped up their target price on shares of National Express, highlighting to clients the company's "best-in-class" margins in nearly all its business units and telling them to expect sustained profit growth over the following years.
The Canadian broker was also expecting a combination of organic growth and acquisitions to allow the transport operator to sustain its progressive dividend policy.

So, on the back of the recent "sizeable" €1.0bn long-term contract win in Morocco, analyst Gert Zonneveld decided to revise his earnings estimates higher, which in turn led him to mark up his target price on the stock from 465.0p to 515.0p.

That new contract wouldn't start contributing to profits until 2021, he said, but it would then begin delivering margins in-line or in excess of the approximately 14.0% achieved by its ALSA unit in Spain, possibly offset by lower margins at ALSA following the renewal of the coach concessions - which was likely to occur in 2020.

Nevertheless, the main reason behind Zonneveld's higher sum-of-the-parts based target price, which he increased from 465.0p to 515.0p, was the higher value of the Spanish unit.

The analyst kept his recommendation for National Express shares at 'buy'.


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