Canaccord Genuity cuts Regus target price on uncertainty in UK
Analysts at Canaccord Genuity cut their target price on Regus's shares to reflect part of the risk arising from their worst case scenario for the UK market.
The flexible workspace provider's business model was highly sensitive to the macroeconomic health of its markets, analysts Matthew Walker and Aynsley Lammin said in a research note sent to clients on 15 August.
In light of the above, they welcomed the prudent approach of Regus's management when it came to their guidance for capital expenditures and its strong focus on cash and returns.
Nevertheless, "the UK represents the greatest unknown in the short term, and occupancy has fallen over the past 12 months," they said.
Their worst case scenario for the company's profitability (in trms of earnings before interest and taxes) in British markets equated to £60m, roughly aa quarter of the group total.
In their opinion, such a sharp downturn was unlikely to materialise but believed it best to capture some of that risk in their valuation.
Furthermore, they continued to see value in the shares as earnings were expected to progress on the back of the sites it had rolled out over the past three years. The company's bottom line was also expected to benefit from FX tailwinds.
Walker and Lammin cut their target on the stock from 390p to 355p while reiterating their 'buy' recommendation.