Broker tips: Big Technologies, Ocado, Go-Ahead Group
By Iain Gilbert
Date: Monday 27 Jun 2022
(Sharecast News) - Analysts at Berenberg initiated coverage on software-as-a-services firm Big Technologies with a 'buy' rating and 320.0p target price on Monday, branding the group as "the big disrupter".
Berenberg stated Big Technologies was a disruptive company that entirely generates revenues from its criminal justice product, Buddi Smart Tag, which provides real-time tracking of monitored offenders on rehabilitative programmes.
With the group taking market share from incumbents that operate on legacy technology by winning long-term government contracts, providing high revenue visibility, and its "good pricing power" and "less price-sensitive" customer base, Berenberg said Big Technologies was "a good asset to own during inflationary cycles".
"The group is expected to grow its top line and EPS by mid-teens percentages, as per our base case, but there is scope for c70% outperformance of our FY 2024 earnings estimate through a combination of more contract wins and highly accretive M&A in the next 12-15 months," said Berenberg.
Credit Suisse downgraded Ocado on Monday to 'neutral' from 'outperform' and slashed its price target on the stock to 960.0p from 1,600.0p.
The bank said it was revising its model assumptions following the capital raise and in line with new disclosure provided by the company at its recent modelling seminar as well as medium-term and short-term targets confirmed by Ocado.
"Our target price change is primarily driven by: (i) changes in generic customer fulfilment centre (CFC) economic assumptions; (ii) effect from the capital raise; (iii) reallocation and better visibility of central cost and Technology cost; (iv) increased WACC assumption from 8.3% to 8.5%; and (v) changes in retail valuation," it said.
CS said it was broadly in line with the mid-term guidance given by the company.
The bank said it sees no further capital raise need and expects Ocado to turn free cash flow positive in 2026. It also sees around $14bn of Kroger sales to be fulfilled through Ocado facilities.
A lack of immediate catalysts might be an issue for investor confidence, while a number of new partnerships signed would be positive, it added.
Analysts at RBC Capital Markets lowered their target price on public transport operator Go-Ahead Group from 'outperform' to 'sector perform' on Monday, stating the risk/reward scenario for the stock now looked more balanced.
RBC Capital Markets pointed out that Go-Ahead had backed an offer from a consortium of Kinetic Holding and Globalvia, both backed by Canada's OP Trust and other funds, in which shareholders will receive £15 per share.
It also noted that another bidder, Australian-listed Kelsian, remained interested and stated that the market was discounting some probability of a counter offer in Go-Ahead shares.
The Canadian bank hiked its target price on Go-Ahead from 1,000.0p to 1,600.0p, citing a similar probability and potential upside from this to the market.
"We see upside beyond our PT if a counter offer is made, however, market conditions have tightened in recent weeks, and we think it is reasonably probable that no counter offer is made," said RBC
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