Source: Sharecast
Diploma, a decentralised, value-added distributor of specialist products, focuses on what it calls "small yet critical" components. The nature of the components provided means that Diploma serves customers' opex budgets, not capex budgets, offering "a high degree of insulation" from the economic cycle.
Berenberg noted that Diploma has guided to 5%-plus organic growth per year, operating margins of more than 20% and over 90% free cash flow conversion, with cash proceeds being used to drive further M&A.
"The quality of Diploma’s earnings has significantly (and we think structurally) improved in recent years, and the group now sits firmly in the FTSE 100. As such, we think there is merit in comparing Diploma with a peer set of leading global compounders. In light of this evolved peer set, the significant capacity for M&A, and likely upside risk to outer-year organic forecasts, we increase our price target to 6,350p," said Berenberg.
"We forecast Diploma to have leverage of 0.8x net debt/EBITDA at the end of FY25, offering significant firepower for M&A and meaningful upside risk to our forecasts. At the same time, we think an organic recovery in the Seals division will offset the impact of any eventual slowdown in Peerless's momentum."
RBC Capital Markets lifted its price target on Vistry to 500p from 475p on Thursday after the housebuilder's half-year results a day earlier, but kept its rating at 'underperform'.
"What a difference almost a year makes - following a very challenging eleven months Vistry is back to its usual self of seeing its glass significantly more than half full," RBC said. "Riding on the back of a fully UK Government backed social and affordable housing sector Vistry is looking to grow profits for shareholders.
The Canadian bank said, "the scene is set and the lighting on set is flattering, but the actors still need to play their part for the show to be a success". RBC also noted that interestingly, despite the upbeat tone, guidance was unchanged, suggesting Vistry was not fully out of the woods just yet."
"Vistry is turning its fortunes around, but as they say, 'talk is cheap, but money buys houses'; we are not ready to change our rating yet, but our PT moves to 500p reflect the progress made," said RBC.
Shore Capital has reiterated a 'buy' rating for ticketing platform Trainline, saying the stock was being "unfairly discounted" by the market at current levels.
Trainline shares jumped on Thursday after the company provided a first-half update that showed trading was tracking ahead of full-year expectations. While full-year guidance was unchanged, with net ticket sales expected to grow 6-9% and revenues by 0-3%, Trainline said that adjusted underlying earnings growth should come in at the top end of the 6-9% guidance range due to operating leverage and work on costs.
The result, Shore Capital said, was a 2% upgrade to its adjusted EBITDA forecast from £170.8m to £173m.
Looking ahead, the broker said: "We believe TRN's equity is being unfairly discounted due to wider UK government noise. This leaves the group trading on a 7x EV/EBITDA multiple (14x PER), despite improving margins and a low double-digit FCFY.
"TRN is well positioned, in our view, to take advantage of the growing digitalisation of the UK rail network, explore European TAM opportunities in line with planned increased carrier competition, whilst also leveraging the proprietary technology platform for further customer engagement and B2B potential."
Jefferies has cut its recommendations on Hays and Ashtead Group, following a review of Europe's business and employment services sector.
Ashtead was downgraded to 'hold' from 'buy' as Jefferies noted that Ashtead's shares have "rallied strongly and re-rated" on improving US construction outlook sentiment. However, the analysts also cautioned that near-term earnings momentum appeared to have remained muted.
Hays was also cut to 'hold' from a previous 'buy' rating, with Jefferies arguing that it expects earnings momentum to remain negative on the back of "continued headwinds on perm" and said it anticipates further downgrades.
