Citigroup upgrades Biffa to 'neutral', says now in position to buy 'distressed' rivals

Monday's decision followed a downgrade on 9 June in anticipation of the impending equity dilution.

Now however, the investment debate around the waste management firm was more "balanced", what with the roughly £100.0m of newly raised equity sitting on its balance sheet.

Indeed, the group should be "well-positioned" to consolidate any distressed Industrial and Commercial competitors, Citi judged.

"This roll-up opportunity is an important component to the Biffa bull thesis," the broker continued.

"We balance this upside against the potential for prolonged distorted market conditions and the structural challenge in Landfill Gas (about a quarter of group profits) where subsidy expiry in 2027 could see profits evaporate."

On the basis of an 11 times enterprise value-to-earnings before interest, taxes, depreciation and amortisation, Citi's target price for the shares was unchanged at 210.0p.

The EV/EBITDA multiple excluded losses from recycling and Citi valued the Energy from Waste opportunity separately.