Compass Group (CPG)

Sector:

Tourism and Leisure Services

Index:

FTSE 100

2,662.00p
   
  • Change Today:
    -11.00p
  • 52 Week High: 2,782.00
  • 52 Week Low: 2,084.00
  • Currency: UK Pounds
  • Shares Issued: 1,697.43m
  • Volume: 2,051,063
  • Market Cap: £45,186m
  • RiskGrade: 212
  • Beta: 0.67

Broker tips: Auction Technology, Compass Group, THG

By Michele Maatouk

Date: Tuesday 17 Sep 2024

LONDON (ShareCast) - (Sharecast News) - JPMorgan Cazenove upgraded Auction Technology on Tuesday to 'overweight' from neutral' as it argued the shares are overly discounting earnings risk into 2025.
It noted the stock has fallen 53% in the past year as macro factors pressured market growth, coupled with internal challenges from rotated volumes and rate card changes impacting performance.

"While some would argue that visibility still remains low near term, with a lack of company commentary on trading making the bottom hard to call, we see risk reward turning at these level," the bank said.

"We now screen (only) 3% below consensus on FY25 EBITDA (JPMe $86m) and argue that initiatives to drive gross merchandise value are bearing fruit, while levers to build monetization through value-added services can stabilize earnings and grow EBITDA +7% into FY25E."

In addition, JPM said it sees a strong case for rising cash returns to shareholders to stand as a near-term catalyst, and finds the valuation of 7.8x EV/EBITDA 2025E attractive on a growth adjusted basis, "with a high equity cash flow yield in-hand (8%)".

JPM cut its price target on the shares to 530p from 543p.

RBC Capital Markets downgraded Compass Group to 'sector perform' from 'outperform' as shares are now trading ahead of its unchanged price target of 2,400p.

"We continue to like CPG as a good all-weather stock with structural growth characteristics and a demonstrably defensive earnings profile," it said. "However, as shares are now trading ahead of both our unchanged PT and their 10-year adjusted price-to-earnings average, we see a slower burn from here and lower our rating."

RBC said that having risen 15% year-to-date, well ahead of the local FTSE 100 index and towards the high end of the Pan-Euro Business Services sector in total shareholder return terms, Compass now trades broadly in line with the price target.

"The calendarised P/E multiple of circa 26x for CY24 and circa 23x for CY25 puts it comfortably ahead of its 10-year 12-month rolling forward average P/E (ex lockdown-blighted 2020/21) of just under 21x," it said.

"We believe our (unchanged) DCF-derived PT of 2,400p gives CPG the benefit of the doubt for class-leading organic growth and margins, plus more generous medium-term and terminal growth assumptions. Pushing the PT higher at this point would, we think, be a contrivance."

RBC said the investment case is well understood and relative performance from here is more a call on the macro situation.

"Despite its huge scale, CPG is a relatively straightforward business to understand, with tried and tested management and performance ('MAP') processes driving dependable growth, and consequently a very sizeable investor fan club," it said.

"As the macro backdrop is, in our view, little clearer than it was at the start of the year, further outperformance on a 12-month view is arguably now more dependent on the market's perception of CPG as something of a safe haven - less compelling, even if proved correct."

Jefferies cut its target price for ecommerce group THG on the back of weaker-than-expected numbers for its Nutrition business, but said it was encouraged by improving momentum within the division going into the second half.

The broker also hailed strong performances from the Beauty and Ingenuity arms in the first half, and expressed optimism surrounding the company's plans to demerge tech platform Ingenuity into a separate entity.

Jefferies cut its target price from 105p to 100p after THG said that full-year EBITDA would be at the lower end of market expectations, but the broker still kept a 'buy' rating on the stock.

The Nutrition division, which owns performance supplements brand Myprotein, saw revenues fall 7.5% and EBITDA drop 58% on the back of yen weakness, whey protein price inflation and falling selling prices.

"There are positives though, with: 1) offline continuing to perform strongly, 2) the rebrand now largely complete, 3) Nutrition set to exit Q3 having returned to growth, and 4) local manufacturing having now commenced in Japan, providing a partial hedge going forwards," Jefferies said.

As for THG's planned demerger of Ingenuity, the broker labelled it a "potentially very interesting development that could leave a listed business consisting of two high quality, strategically relevant, cash-generative assets in Beauty and Nutrition".

Jefferies added: "Clearly the relative capital structures would be an important consideration, but we see this as potentially unlocking considerable value for investors in the standalone ecommerce operations."

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Note 1: Prices and trades are provided by Digital Look Corporate Solutions and are delayed by at least 15 minutes.

Note 2: RiskGrade figures are provided by RiskMetrics.

 

Compass Market Data

Currency UK Pounds
Share Price 2,662.00p
Change Today -11.00p
% Change -0.41 %
52 Week High 2,782.00
52 Week Low 2,084.00
Volume 2,051,063
Shares Issued 1,697.43m
Market Cap £45,186m
Beta 0.67
RiskGrade 212

Compass Star Ratings

Compare performance with the sector and the market.
more star ratings
Key: vs Market vs Sector
Value
98.19% below the market average98.19% below the market average98.19% below the market average98.19% below the market average98.19% below the market average
100% below the sector average100% below the sector average100% below the sector average100% below the sector average100% below the sector average
Price Trend
79.77% above the market average79.77% above the market average79.77% above the market average79.77% above the market average79.77% above the market average
47.17% above the sector average47.17% above the sector average47.17% above the sector average47.17% above the sector average47.17% above the sector average
Income
83.56% below the market average83.56% below the market average83.56% below the market average83.56% below the market average83.56% below the market average
88.89% below the sector average88.89% below the sector average88.89% below the sector average88.89% below the sector average88.89% below the sector average
Growth
55.98% above the market average55.98% above the market average55.98% above the market average55.98% above the market average55.98% above the market average
34.69% below the sector average34.69% below the sector average34.69% below the sector average34.69% below the sector average34.69% below the sector average

What The Brokers Say

Strong Buy 6
Buy 7
Neutral 7
Sell 2
Strong Sell 0
Total 22
buy
Broker recommendations should not be taken as investment advice, and are provided by the authorised brokers listed on this page.

Compass Dividends

  Latest Previous
  Final Interim
Ex-Div 16-Jan-25 13-Jun-24
Paid 27-Feb-25 25-Jul-24
Amount 39.10¢ 20.70¢

Trades for 13-Dec-2024

Time Volume / Share Price
15:17 0 @ 2,657.00p
15:15 0 @ 2,658.00p
16:41 60,064 @ 2,660.16p
16:35 1,982 @ 2,662.00p
16:35 295 @ 2,662.00p

Compass Key Personnel

CEO Dominic Blakemore
COO Palmer Brown
CFO Petros Parras

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