Peel Hunt upgrades Serco, says NSBU acquisition 'very good fit'
By Michele Maatouk
Date: Wednesday 12 Jun 2019
(Sharecast News) - Peel Hunt upgraded its stance on Serco shares to 'add' from 'hold' on Wednesday, lifting the price target to 146p from 129p as it highlighted the company's "strategically attractive" acquisition of leading US navy service provider NSBU.
Serco announced last month that it was buying NSBU, for $225m.
"NSBU is a very good fit with Serco's existing business; there is a significant step-up in engineering capability and the US Navy is one of the most attractive segments in Serco's portfolio," the broker said.
It added that the acquisition is a further step in the evolution to Serco becoming a normal company in growth mode.
Peel Hunt also pointed out that the acquisition increases the size of Serco's US defence business by 74%. It said Serco's revenue mix from defence will increase from 30% to around 35% thanks to the deal, and the Americas as a proportion of the group will rise to around 26% from 20%.
The broker upped its pre-tax profit estimate for 2020 by 17% to £123.2m and its estimate for 2021 by 16% to £139m.
At 1530 BST, the shares were down 0.2% at 133.30p.
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