Broker tips: Marlowe, Fevertree
By Iain Gilbert
Date: Tuesday 30 Apr 2024
(Sharecast News) - Analysts at Berenberg slightly lowered their target price on software and services firm Marlowe from 720.0p to 710.0p on Tuesday but said the group's divestment of certain Governance, Risk and Compliance software and service assets had left it with a "much cleaner and simpler-to-understand equity story".
Berenberg stated that ahead of its full-year results and the expected completion of the disposal by the end of Q125, it had updated its model to show the group in its continuing form of Compliance Services, which comprises Testing, Inspection and Certification and Occupational Health businesses.
"From here, a story focused on organic growth for the near-term, margin improvement and cash generation should address legacy investor concerns over the model," said the Geran bank, which kept its 'buy' rating on the stock.
"On our new numbers, Marlowe trades on 8.4x EV/EBITDA, which we think is attractive. We move our price target 710p (from 720p), at which point Marlowe would trade on 12.1x EV/EBITDA, to reflect model changes and an updated set of peer multiples."
Deutsche Bank initiated coverage of drinks company Fevertree with a 'buy' rating and 1,600.0p target price on Tuesday as it said its investment thesis was underpinned by a leading position in the premiumisation of the global mixer category.
"We believe in the long-term premiumisation opportunity and think Fevertree is well positioned given its first-mover advantage, strong brand credentials, high-quality products and capital-light business model," DB said. "After two years of challenging performance, we are confident in a strong margin recovery this year and over the medium term and do not believe the recent margin dilution is structural.
DB also said it believes in the longer-term revenue potential of global mixer premiumisation and does not think these have been fully captured in the current share price.
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