I think the issue with SSPG's share price may be much simpler and more short-term. We are going to get a 4.9p per share dividend in March and a 20.9p per share special dividend in April. The question is whether the recent rise in SSPG's shares is due to these payments and whether they will fall by more than 25.8p when the shares go ex-div. I am a fan of their business model and of their Chief Exec, so I am going to hang on in there, take the dividends and hope for the best. If the price falls significantly following Goldman Sachs, why then, sir, I shall buy more.
(ShareCast News) - Goldman Sachs downgraded SSP, an operator of food and beverage outlets, to 'sell' from 'neutral' but lifted the price target to 575p from 535p.
The bank said SSP trades at a premium to leisure peers, concessions and contract caterers, and while the company's historical execution has been strong, it does not expect growth rates to pick up to levels that would justify this premium valuation.
It said the current valuation implies an acceleration in earnings growth to over 30%, which it does not think is likely given an inflationary cost environment and headwinds to profit, as SSP starts refurbishments at Chicago airport.
"Together, we expect these headwinds to limit the company's ability to deliver margin expansion in line with history," GS said.
The new target price of 575p implies 10% downside potential, hence the rating downgrade.
"Should the company outperform our expectations on cost efficiency (and hence profitability), we would need to revisit the outlook and our view. Additionally, and aside from company-specific factors, stronger travel trends or a faster pace of outsourcing would encourage us to take a more positive view on the broader sector, and SSP as a result."
(ShareCast News) - Barclays has upped its target price for SSP Group to 700p after the travel food outlet operator's encouraging first-quarter update.
Continued positive momentum was music to Barclays' ears, with SSP's management upgrading full year guidance for expected contract win growth to 4%, leading to "attractive" compounding for total shareholder return.
First-quarter results showed like-for-like sales in line but net contract gains up 8.1%, which was well ahead of previous full year guidance of 3%.
This contract win upgrade, coupled with a small upgrade from the recently announced acquisition of Stockheim Group, and a small forex downgrade means that Barclays full year earnings before interest and tax forecast increases 3% to £181m and for earnings per share increases 2.3% to 22.5p.
"The compounding TSR upgrade story continues," analysts said, having only recently upgraded SSP to 'overweight' from 'equal weight', saying that while the headline valuation metrics seemed high, a premium multiple was justified as we expected earnings upgrades and cash returns to lead to compounding total shareholder return.
Analysts at Canaccord Genuity remained impressed with SSP but retained their 'sell' rating on valuation grounds. The analysts upgraded their EPS forecasts by 5.7% to 22.8p foe 2018, 7.3% to 25.6p for 2019 and by 9% to 28.7p for 2020.
Canaccord upped its target price to 570p from 450p but retained the negative recommendation on valuation grounds, adding "the stock remains vulnerable to any market pull-back, in our view".
(ShareCast News) - Travel operator Tui was downgraded by JPMorgan Cazenove after its good share price run last year and what is expected to be a "less supportive" 2018, while SSP was upgraded as its shares offer an "attractive entry point".
In a wider look at European leisure stocks, the sector is expected to do well, delivering 10% growth in earnings per share this year, though this is only marginally better than the wider European markets at 9%, which calls for investors to be increasingly selective.
Cazenove's three key themes for 2018 are: catering stocks now differentiating mostly on top-line, which resulted in the upgrade of food franchise operator SSP to 'overweight' and a price target whooshing up to 765p from 520p, with a reiteration of the same rating for Compass.
SSP, whose share had fallen 9% so far in 2018, was the beneficiary of a "more aggressive" approach, with analysts saying their former forecasts for flat margins after 2018 were too low, with recent strong delivery, supportive guidance for the current year and recent management comments "suggest that there is instead potential for continued efficiencies".
New estimates that SSP's margin last year of 6.8% could have reached 7.4% if adjusted for investments in infrastructure and start -up costs, Cazenove's new forecasts for earnings per share for the next three years of 22.09, 23.95p and 24.86p.
Second, is that hotels are "unlikely to surprise positively, especially in the US", which sees Intercontinental Hotels remain at 'underweight', with the third theme being that travel and gaming newsflow is likely to be less supportive throughout the first half, which sees the downgrade of TUI and Ladbrokes Coral to 'neutral'.
Both these stocks had a strong run in 2017, supported by positive news on asset disposals, source markets resilience, destination for TUI, merger synergies, regulation and corporate action for Ladbrokes.
"We expect H1 to be less supportive in that regards and would stay away for the time being despite still attractive valuations across tour operators and gaming."
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