Kepler downgrades PageGroup after strong run
Kepler Cheuvreux downgraded its stance on recruiter PageGroup to ‘hold’ from ‘buy’ on Thursday following a strong run, saying it expects to see a gradual slowdown in top-line growth.
It said the valuation is no longer undemanding. After the 26% increase in the share price year-to-date, the stock is trading at 11.5x 2018E EV/EBITDA, which is a premium of around 10% to specialist peers.
Kepler lifted its 2018-20 earnings before interest and taxes estimates by around 4-5% and upped its price target on Page to 600p from 560p.
"Based on our new TP the stock would trade at 11.7x 2018E EV/EBVITDA, a 13% premium to its specialist peers.
"Although we still see the risk to our estimates is somewhat to the upside, we also believe with a developing trade war and an expected slowdown in fee income growth this upside is limited."
Kepler said the dividend yield of more than 5% will provide good support to the share price.
PageGroup reported record second-quarter profit on Wednesday of £208.2m, up 14.5%, but profits in the UK fell 1.9%.
At 1140 BST, the shares were down 1.5% to 577p.