JPM assumes coverage of Upper Crust owner SSP at 'overweight'

JPMorgan Cazenove moved to an ‘overweight’ rating on SSP on Thursday following a period of restriction, with a 370p price target.

The bank said its positive stance was based on: "(1) SSP’s business mix being weighted towards domestic & leisure passengers; (2) new space visibility and unit pipeline; (3) strong balance sheet offering financial flexibility; (4) the North American opportunity; and (5) its track record on cost management".

Overall, JPM sits around 5% above Bloomberg consensus for FY24E EBIT.

"Whilst we note the macro uncertainties related to Russia/Ukraine, we have seen the beginning of a shift towards ‘endemic’ status for Covid-19 in many regions across the world," it said. "Although the journey towards that point is unlikely to be linear, we like SSP as a ‘second derivative’ play on passenger volumes recovering to pre Covid-19 levels."

JPM said a sharp inflexion in recovery could be coming. It noted that SSP is around 60% weighted towards domestic travel and is also 60% weighted towards leisure passengers.

"We expect these segments to rebound the quickest post Covid-19. Although its sales recovery (and share price) has lagged that of peers, the loosening of restrictions in the UK and Europe could provide an acceleration in its recovery versus 2019 levels."