RBC Capital upgrades PageGroup, Hays

RBC Capital Markets upgraded its stance on shares of recruiters PageGroup and Hays on Monday, citing improving confidence for the former and an attractive entry point for the latter.

Hays was lifted from ‘sector perform’. RBC said that as confidence in the sustainability of the global hiring recovery grows, it reckons Hays' lacklustre year-to-date share price performance versus the wider UK market and 13% underperformance versus PageGroup looks anomalous.

"We believe the forthcoming Q4 update is likely to lead to upgrades to FY22 estimates and, though we leave our currently top-end EBITA estimates essentially unchanged, we raise our medium-term EBITA and free cash flow estimated, driving up our discounted cash flow-derived price target to 195p from 150p and upgrade our rating to ‘outperform’," it said.

PageGroup was also lifted from ‘sector perform’ to 'outperform' and its price target boosted from 525p to 700p.

"Following strong Q2 fee performance, ongoing positive recruitment survey results, cost control, productivity improvements and improving tax efficiency, we raise our FY21 earnings per share by a huge 53%," RBC said.

"The shares now look too cheap given the pace of profit and cash recovery and we believe investors will see more than 20% of market cap returned to them in the next three years."