Canaccord Genuity reiterates 'buy' rating on Trainline ahead of interims

Analysts at Canaccord Genuity reiterated their 'buy' rating on online ticket retailer Trainline on Friday ahead of the group's interim results on 2 November.

Canaccord expects Trainline to deliver a strong update, with potential for upgrades to full-year consensus. It noted that Trainline already reported in a first-half trading update that group net ticket sales had grown 23% to £2.65bn and group revenues were up 19% to £197m despite ongoing train strikes. Growth reflected channel shift, new product development and a recovery in industry passenger volume growth.

The Canadian bank said that while no underlying earnings guidance was given, with growth being driven by UK consumers and software-as-a-service Trainline Solutions, this should be "positive" for EBITDA given "significantly higher margins".

"In September, the company reiterated guidance of NTS and revenue growth between 13-22% (consensus NTS +17%, revenue growth +16%) and EBITDA margin between 2.15-2.25% of NTS (consensus 2.1%). The company requires H2 NTS growth of just 12% to meet consensus, while the implied consensus EBITDA conversion is just circa 48%, well below the pre-Covid average of circa 70%," it said.

Canaccord, which also reiterated its 371.0p target price on the stock, forecasts interim revenue growth of 19% to £197.0m and underlying earnings growth of 24% to £56.0m, with adjusted pre-tax profits rising 32% to £17.9m.

"Trainline stock has never been cheaper since initial public offering, trading on a FY24E price-to-earnings ratio of 22.4x, enterprise value/EBITDA of 10.8x, free cash flow circa 6%. We currently forecast earnings per share doubling between FY24E-28E (four-year compound annual growth rate 22%); yet based on the current share price, this could treble assuming all FCF is used to buy back shares (four-year CAGR 33%)," added the analysts.

Reporting by Iain Gilbert at Sharecast.com