Analysts at RBC hiked their target price for shares of First Group on the back of improved estimates for the company’s UK bus and rail franchise.
Linked to the above, they deemed the recent takeover offer from I Squared valuing the company at 118.0p per shares as too low.
“We expect FirstGroup shares to outperform further on a longer term view, although near term share price performance is likely to depend on whether a firm offer on improved terms is made,” analyst Ruairi Cullinane said in a research report sent to clients.
RBC said that on its improved estimates the shares’ target price was now 160.0p instead of 115.0p, implying an Enterprise value-to-earnings before interest and taxes multiple of approximately eight times for 2022/23.
That compared to the 7.3 offered by I Squared.
The analyst also noted that previous transaction multiples were generally in the 10-16.0 times’ EV/EBIT range.
“We expect FirstGroup shares to outperform further on a longer term view, although near term share price performance is likely to depend on whether a firm offer on improved terms is made.”
