Broker tips: Countrywide, Just Group, SSP Group

Expecting strategic announcements from Countrywide's first market update following its recent profit warning, analysts at Berenberg said if the firm could find room for investment to improve its competitive positioning, brighter days could be ahead.

Berenberg upped its recommendation on Countrywide to 'hold' on Wednesday, stating that if the group was to invest in technology to reduce the cost of delivering its core sales and lettings business and come up with a reasonable digital strategy, it could see a swift return to form.

Countrywide's dwindling core sales and lettings business was behind the profit warning, with management now expecting EBITDA to be approximately £65m, 12% shy of a consensus forecast of £73.8m.

Berenberg lowered its forecast numbers after the profit warning while reiterating its target price of 95p along with the upgrade until Countrywide's trading update on 8 March.

"We reduce our 2018 EPS by 8% and 2019 by 6%. We now value Countrywide on 7.5x our 2018 P/E, implying our 95p price target. The 5% downside implies our Hold recommendation," the analysts noted.

Barclays upped its target price for SSP Group to 700p after the travel food outlet operator's encouraging first-quarter update.

Continued positive momentum was music to Barclays' ears, with SSP's management upgrading full-year guidance for expected contract wins growth to 4%, leading to "attractive" compounding for total shareholder return.

The expected increase to contracts wins, coupled with a small upgrade from the recently announced acquisition of Stockheim Group, and a small forex downgrade means that Barclays full-year earnings before interest and tax forecast increases 3% to £181m and for earnings per share increases 2.3% to 22.5p.

Analysts at Canaccord Genuity remained impressed with SSP but retained their 'sell' rating on valuation grounds. The analysts upgraded their EPS forecasts by 5.7% to 22.8p for 2018, 7.3% to 25.6p for 2019 and by 9% to 28.7p for 2020.

Canaccord upped its target price to 570p from 450p but retained the negative recommendation on valuation grounds, adding "the stock remains vulnerable to any market pull-back, in our view".

Numis reiterated its 'buy' rating on retirement specialist Just Group on Wednesday, saying any discount in the share price for a stock overhang is likely to evaporate.

The brokerage noted reports of a 5.5% stake sale by private equity group Cinven on 22 January at 149p per share and said that if this took place, it would clear Cinven's residual holding in the group. This follows on from a 50m share sale by Permira earlier this month, which took it's holding down to 17.7% from 23%.

"The latest sale of stock has impacted the share price while the market absorbs it. Investors should now focus on the company's fundamentals and recent achievements, as any discount in the share price for a stock overhang is likely to evaporate," said Numis.

It pointed out that the company has maintained pricing discipline, which along with growing volumes and cost savings has seen its margins rise from 3.3% pro forma in 2015 to 8.9% in the first half of 2017. In addition, it has improved its Solvency II capital ratios from 136% to 150% and achieved an A+ IFS rating from Fitch.