Analysts at Berenberg lowered their target price on coach operator National Express from 340.0p to 300.0p on Monday after adjusting numbers on the stock now that the dust has settled on the potential acquisition of Stagecoach and the subsequent counterbid from DWS.
Berenberg stated it has now taken “a cautious approach” to interpreting guidance on margins, partly because National Express management remains “constrained by takeover panel rules” in its interactions with analysts, which drives “a relatively meaningful downgrade” to its near-term estimates.
However, despite this, Berenberg stated it continues to see value in National Express shares, particularly given the supportive valuations across bids in the space.
“In the last 12 months, there have been take-out bids for direct peers to approximately half of NEX’s assets – namely a) the EQT acquisition of First Group’s US School and Transit businesses and b) the DWS bid for Stagecoach, a UK bus business,” said the German bank, which reiterated its ‘buy’ rating on the stock.
“Putting NEX’s comparable assets (which we believe to be of higher quality) on the same multiples suggests that the leftovers (ie ALSA and UK coach) are only being valued at circa 3x EV/EBIT. Valuing NEX’s assets at a 15% premium to the peers would suggest that ALSA and UK coach are being valued at virtually zero.”
