Berenberg initiates coverage of ME Group

Berenberg has initiated coverage of ME Group International with a ‘buy’ rating.

In a note published on Monday, the bank argued that the UK designer and manufacturer of automated vending machines was "significantly higher quality than the market believes". It pointed to 20+% operating margins, a 25% return on capital employed and a "significant opportunity to roll out its new format - laundry and food - over the coming years".

Analyst Eleanor Spencer continued: "We forecast a double-digit earnings before interest, tax, depreciation and amortisation compound annual growth rate over the next three years, and believe the company has scope to pay out around 21% of its market cap over the same period, offering significant returns for shareholders.

"We initiate coverage with a ‘buy’ rating and a 200p price target, offering 25% upside potential."

As at 1215 BST, shares in Surrey-based ME Group - formerly called Photo-Me International - were up 3% at 164.2p.