Hays weakness 'a good buying opportunity', says RBC Capital
By Michele Maatouk
Date: Monday 20 May 2019
(Sharecast News) - RBC Capital Markets upgraded its stance on shares of recruiter Hays to 'outperform' from 'sector perform' on Monday as it argued that recent weakness has created a good buying opportunity.
The Canadian bank, which left its price target unchanged at 175p, said that while it recognises uncertainty over key markets, the recent weakness presents a good buying opportunity into a "quality operator". It pointed out that Hays has underperformed other staffers in its universe by around 15% year-to-date amid tough trading in its three key markets.
Germany has weakened from a high level, reflecting tougher automotive, the UK remains tough, albeit stable given Brexit, and Australia has slowed from a high level ahead of elections, RBC said.
"The growth outlook is currently more uncertain in the key markets of Germany, UK and Australia. However, Hays is an extremely well-run business, headcount is managed closely, management focus on the right things strategically and it's very clean from an accounting perspective.
"We also believe that much of the weaker outlook is now factored into the valuation after the underperformance year-to-date and that the balance sheet and dividend provide downside support."
It added that given its a large temporary book, even in a downturn, cashflow at Hays should remain strong as working capital flows back in.
At 1250 BST, the shares were down 0.7% at 148p.
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