Berenberg boosts target price for On The Beach after succesful year

Analysts at Berenberg reiterated their ‘buy’ rating of On The Beach (OTB) on Friday telling clients they expect the company’s payout to increase by 25% in 2018, highlighting prospects for stronger-than-expected organic growth and the company's drive to expand abroad.

Berenberg explained that while OTB’s growth had been in line with their previous forecasts, they believe organic growth "could accelerate further as the year progresses."

In the research note sent to clients, the broker increased its target price for OTB from 520p to 600p also citing expectations of growth in the business’ international projects, with their expectation being that the Swedish division will begin to break even this year.

Furthermore, the analysts also projected a highly successful 2018 for the online holiday retailer, forecasting a 26% increase in net profit, a 21% increase in sales and a 48% jump in its net cash position.

As well, the analysts highlighted that OTB has grown "consistently ahead of the market", having increased its share from 9% to 22% since 2011.

"We forecast multiple levers with which OTB can increase UK margins significantly. Most notably, as its base of repeat customers grows, it could make material savings in its online marketing spend, which remains at more than 40% of sales," they said to clients

Berenberg also anticipated OTB’s dividends per share would increase strongly over its forecast horizon, rising to £5.39 in 2020, a 93% increase on the £2.80 at which they stood at in 2017.

As of 1632 GMT, OTB’s shares had risen 2.99% to 516.00p.