Broker tips: Judges Scientific, Serco

Berenberg said Judges Scientific's acquisition of the cutting-edge coatings provider for an initial consideration of £12.3m was "attractive strategically" and could add roughly 4% to FY25 underlying earnings, providing some cushioning to estimates from temporary end-market weakness.

"Following Judges’ acquisition, we have increased our sales forecasts by low to mid-single-digit percentage points in FY24 through to FY26, and low to mid-single-digit for adjusted EBIT over the same period. This reflects our new expectation of higher sales volumes and our continued expectations of end-market recovery driving a return to growth (and margin expansion) from FY25 onwards," said Berenberg.

The German bank, which reiterated its 'buy' rating on the stock, added that Judges currently trades on an 18.9x enterprise value/underlying earnings ratio.

RBC Capital Markets has reiterated its 'outperform' call and 230.0p target price on Serco Group, saying the essential public services providers' strong execution and prospects are currently "underappreciated" by the market.

In an in-depth research report published on Tuesday, RBC highlighted Serco's "robust drivers" across and diverse business mix, where addressable markets remain large with "significant room for growth".

"Top down drivers remain strong given high public debt levels, political change, geopolitics, increased focus on matters beyond price and capability in bids and the increased use of technology. Key markets like Defence, Immigration and Health all have current structural growth drivers," the broker said.

Meanwhile, the company's business in the North American defence market has been a "major success story" over the past five years, but is overlooked by the market, it added.

"The shares have been lacklustre, despite strong financial delivery, and we believe SRP is now materially undervalued. [...] In an uncertain world and an expensive overall Business Services sector, we believe Serco warrants attention," RBC said.