Broker tips: IAG, Dalata Hotels, OSB
By Iain Gilbert
Date: Wednesday 18 Dec 2024
(Sharecast News) - Jefferies hiked its price target on BA and Iberia owner IAG on Wednesday to 350.0p from 270.0p saying it expects Q4 to deliver similar trends to Q3, driving confidence in the short-term macro and travel environment.
"Medium term, we see a multi-year earnings and re-rating story, as the BA turnaround and delivery of the NG fleet offer scope for further consensus upside and re-rating potential as the company approaches best-in-class return on invested capital and free cash flow generation," it said.
The bank, which has a 'buy' rating on the stock, updated its model for Q3 results and ahead of full-year results in February. It raised EBITDA estimates by 5-9% in FY24-26 and earnings per share estimates by 9-20% on lower interest expenses and share buybacks.
Jefferies said BA's target to reach 15% EBIT margins by 2027 versus 10% in 2023 appears a "sensible" midcycle target, but it believes may be conservative in an upcycle. It noted that Iberia already makes 14% margins versus BA's 10% in 2023.
"Our benchmarking shows fuel costs are the largest driver of margin differential. We believe this should narrow as BA receives its A320/1 Neos and 777-9/787-10s," it said. "Achieving the same new generation fleet mix as Iberia alone would drive circa 500bps of margin expansion, on top of the announced self-help initiatives."
Analysts at Berenberg reiterated their 'buy' rating and 480.0p target price on Dalata Hotels on Wednesday, stating the group was "ending the year on a high note".
Dalata Hotels announced a solid FY24 trading update on Wednesday, with the company stating it expects adjusted underlying in excess of €232.0m for the year - reflecting 4% growth year-on-year. FY24 group revenue per available room growth was expected to be 1% ahead of FY23 on a like-for-like basis, with November and December 3.5% ahead year-on-year.
Berenberg stated that given that at the time of its interim results, Dalata had seen LFL RevPAR fall by 1%, its FY performance demonstrated "a robust H2 performance".
"Looking into 2025, while Dalata will experience cost inflation (with hotel payroll costs expected to increase 5% lfl), considering the company's track record of protecting margins, we remain confident in its ability to grow EBITDA yoy," said Berenberg.
The German bank added that with management's "exceptional track record of creating value for shareholders" and the company's attractive pipeline - which should drive further growth - it remains confident in the outlook for Dalata.
OSB Group tumbled on Wednesday as Peel Hunt downgraded the shares to 'hold' from 'add' but lifted its price target on the stock to 414.0p from 395.0p.
"Due to ongoing weak conditions in the mortgage market and a recent £1.25bn securitisation issue, we now anticipate negative loan growth in 2024 and lower growth than previously expected for both 2025 and 2026," the broker said.
Nevertheless, it said the outlook for OSB's medium-term returns has improved slightly.
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN