Shore Capital upgraded fund management services provider JTC on Wednesday to ‘buy’ from ‘hold’ following recent weakness, which it said does not reflect the business fundamentals evidenced by the in-line full-year trading update on 3 February.
It noted that after achieving a peak share price of 935p at the start of the year, JTC has lost around 20% year-to-date in a short space of time and is now less than 4% above the level just before the acquisition of US-based fund services provider SALI was announced in October.
“Given JTC’s high degree of revenue visibility and disciplined approach to M&A, earnings per share momentum has been relatively resilient and, after tweaking our forecasts, we think our assumptions remain prudent,” the broker said.
“Compared to a current 12-month forward price-to-earnings of circa 24x, our fair value of 900p (previously 925p) implies c29x, which we think is reasonable given JTC’s revenue quality, profitability (EBITDA margin 33-36%), growth (EPS 17% compound FY20A-23F) and strong cash conversion.”
At 1100 GMT, the shares were up 2.3% at 763.50p.
