- Compass Group
- 29 April 2024 09:30:20
Source: Sharecast
Previously, the bank had been ‘overweight’ the shares with a 440p price target.
"While we acknowledge the long-term growth potential from scaling up existing fund strategies and M&A, Bridgepoint’s current premium valuation is not justified by the near-term earnings growth profile, in our view, as we expect fee-related earnings (FRE) to decline by 1% between 2022-25 before the next flagship vintage Bridgepoint Europe VIII fees kick in in 2026," it said.
"This is also in the context of our cautious view on the private markets sector overall, particularly an expected slowdown in fundraising being reflected in slower fee growth and lower exits being reflected in lower carried interest revenues in the estimates across our coverage."
JPM said that given an accretive transaction is far from certain, and considering the fundraising headwinds it sees across the private markets sector and not just specific to Bridgepoint, it reckons the shares’ premium valuation is not justified, hence the relaunch at UW.
Elsewhere, RBC Capital Markets lifted its price target on shares of caterer Compass Group to 1,675p from 1,625p.
It said that following the company’s consensus-beating first-half earnings this week, its FY23 and FY24 earnings per share estimates rise by around 3%, underpinning a similar quantum of uplift to the price target.
RBC did, however, also note that it questions the quality of the beat, "given the material restructuring charges taken below the line".
"Compass Group is getting much right and continues to outpace the competition, but we think this is more than priced into the shares and see risks to both earnings and the elevated valuation multiple as recessionary indicators signal tougher times ahead," RBC said.
It kept its rating on the shares at ‘underperform’.
