Upper Crust owner SSP slumps on MS downgrade

MS noted the shares have rallied strongly since last week’s Pfizer/BioNTech vaccine news, more than any other stock in its coverage. It now trades above the bank’s new price target.

It said the company is a good play on both recovering travel volumes and consolidating the fragmented travel food & beverage sector, where it has a strong track record of contract wins.

"However, Covid-19 has changed the investment case markedly and we now have less confidence SSP can return to prior growth rates and multiples, and see cash burn continuing for at least another six months, which could mean a second equity raise is needed," said MS.

As reasons for the downgrade, it pointed to a late recovery in international travel, weaker near-term trading, uncertainty over structural revenue losses, uncertainty over margin recovery and the possibility of a second equity raise.

"While the Pfizer/BioNTech/Moderna vaccine news is clearly a positive, BioNTech scientists have said they do not see life returning to normal until next winter," the bank said. "In addition, if vaccines are rolled out at different speeds globally, this could lead to differing international infection and immunity rates, which could lead authorities to limit international travel until some sort of parity is reached.

"We think domestic travel is likely to recovery sooner than international travel and SSP is fairly evenly split between the two."

At 1120 GMT, SSP shares were down 5.8% at 347.60p.