UBS downgrades Hays on valuation
UBS downgraded Hays to ‘neutral’ from ‘buy’ saying the risk/reward is now more balanced, but lifted the price target to 140p from 130p as it upped estimates slightly due to FX.
FTSE 250
20,508.75
15:45 15/11/24
FTSE 350
4,453.56
15:45 15/11/24
FTSE All-Share
4,411.85
15:45 15/11/24
Hays
78.20p
15:45 15/11/24
Support Services
10,885.48
15:45 15/11/24
The bank pointed out that the good news has now passed, saying UK macroeconomic data has rebounded, concerns over contagion have faded, and Hays has re-rated from a low.
UBS said Hays’ first-quarter trading update on 18 November will be key. It noted that July and August are quiet months, so the trend in September is a better indication.
“We expect group like-for-like growth of around 2% (including UK -12%) after Q4 +8%, but for tougher comps and UK deterioration to impact thereafter.
“However we continue to see upside risk to consensus (particularly with the continued GBP weakening): we are around 4% ahead of the consensus mid-point on EBITA, but 15% above the lower end.”
In addition, UBS pointed out that Hays' special cash return policy sees the shares yielding more than 5% even in tough markets.