Broker tips: Ascential, CAB Payments

25th Jul 2024 15:45

(Sharecast News) - Analysts at Berenberg upgraded business-to-business media firm Ascential to 'buy' from 'hold' and hiked their target price on the stock to 568.0p from 395.0p following a takeover offer from Informa.

Berenberg stated Informa had made a firm offer for Ascential at 568.0p per share, in line with the possible offer price disclosed on 23 July, and representing a 53% premium to the closing price on 22 July and valuing the company on a CY24 and CY25 enterprise value/underlying earnings ratio of 15.7x and 13.8x, respectively, pre-synergies.

"The CY25 EV/EBITDA of 13.8x, pre synergies is higher than historical take-out multiples in the sector - Informa bought Tarsus for 12.5x EV/EBITDA in May 2023. It also bought UBM for 14.3x in January 2018. Hyve was also bought by Providence February 2023 at >11x EV/EBITDA. When we take into account the potential synergies and better-than-expected trading, we estimate the implied CY25 EV/EBITDA valuation to be c11.5," said Berenberg.

The German bank added that Informa noted in its H1 results that its larger events were growing at above-average rates, benefiting from scale economics, and that Ascential expects H124 revenue to be roughly £158.0m, as organic growth came to 15% year-on-year.

Over at Canaccord Genuity, analysts cut their target price on fintech group CAB Payments from 240.0p to 214.0p on Thursday following the group's H124 trading update.

Canaccord Genuity said CAB Payments' update highlighted the group's underlying outperformance relative to its estimated sector and subsector growth. However, CAB Payments also noted that conditions were difficult during the period.

"H124 results have suffered from the impact of lower revenues but also recurring operating costs being an estimated c.15% higher, due to the new business strain associated with an increased salesforce and establishment of EU and US offices," said Canaccord Genuity.

The Canadian bank said it was "disappointing" that short-term performance had fallen below its expectations but stated it was supportive of the strategy of continued investment in building out the platform, for what it believes to be a "valuable strategic asset".

With that said, Canaccord left its valuation methodology unchanged, stating that given a 17-19% cut to its adjusted underlying earnings and earnings per share forecasts, and a slight re-rating of the payments sector, this results in its new price target of 214.0p.

"If CAB can deliver against revised expectations, consistently, then the upside could be significant, hence we retain our 'speculative buy' rating," added the analysts.