Broker tips: Big Technologies, EasyJet, Kitwave
By Iain Gilbert
Date: Wednesday 25 Sep 2024
(Sharecast News) - Analysts at Berenberg lowered their target price on technology platform operator Big Technologies from 155.0p to 140.0p on Wednesday but said it was more optimistic going into FY25 following a "tough" H1.
Berenberg said Big Technologies' H124 were primarily affected by the loss of its Columbia contract, with some revenue mix impact and additional investment to drive growth. Big Technologies now expects to deliver results at the lower end of market expectations for adjusted underlying earnings of £27.0m-29.5m.
"We reduce our sales estimate to £50m and our gross margin assumption to 70% (from 72%), resulting in our new adjusted EBITDA of circa £27m, in line with guidance. We also lower our FY25 revenue estimate given the MRR rate of £3.9m in June, which equates to an ARR of £46.8m, with the difference relative to our revenue forecast expected to come from new contract wins," said the German Bank.
"We expect that H224 will be the trough due to a full period loss of the Columbia contract and that the company will return to growth in FY25 due to the progress it is making in key geographies, notably the US."
Berenberg also noted that Big Technologies shares trade on a 2025 enterprise value-to-underlying earnings of 7.5x, with net cash representing one-third of its market cap - close to the lowest the shares have traded on since listing in 2021.
EasyJet flew higher on Wednesday as JPMorgan Cazenove highlighted the stock as "a high conviction" 'overweight' in the low-cost carrier space.
It noted the shares were flat this year despite more resilient pricing and earnings than peers and said it currently sees a "cleaner" pathway to high earnings growth in September 2025.
In a broader note on the sector, JPM said that as the sun sets on summer and it looks ahead into the final quarter, it sees a buying opportunity into winter for the European airlines sector.
"The sector has started to inflect upwards over the past month, however, remains a large underperformer versus the market this year, due to concerns over softer passenger demand as pricing has begun to normalise for the first time post pandemic," it said.
The bank said sector risk-reward now looks positive, which could lead to continued seasonal outperformance in Q4.
Analysts at Canaccord Genuity hiked their target price on foodservice wholesaler Kitwave from 455.0p to 495.0p on Wednesday following the group's £70.0m cash acquisition of Creed Catering Supplies.
Canaccord Genuity pointed out this latest acquisition was Kitwave's fifteenth acquisition since 2011 and its fifth since the firm's initial public offering back in May 2021. It also said the acquisition was "highly consistent" with Kitwave's "successful buy-and-build growth strategy" in what remains a "largely fragmented wholesale market".
"The acquisition will be earnings enhancing in the first full year of ownership and offers compelling strategic rationale with scope for additional synergies across buying, logistics and operations," said the Canadian bank, which reiterated its 'buy' rating on the stock.
"We have increased our FY25E/26E EBITDA forecasts by 25%/25%, respectively, and our FY25E/26E adj. EPS forecasts increase by 3%/6%, respectively, after accounting for higher interest charges given the acquisition and dilution from the equity raise."
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