Broker tips: National Express, Craneware

(Sharecast News) - Liberum slashed its price target on National Express from 365.0p to 290.0p on Monday to remove upside from the now-abandoned Stagecoach deal Last week, Stagecoach agreed to be bought by German asset manager DWS in a £595.0m cash deal, withdrawing its support for a previously-agreed £470.0m deal with National Express.

Liberum said: "Although National Express is reserving judgement on how it reacts, we doubt that the group is either willing or able to put together an improved offer that would be more appealing to Stagecoach shareholders.

"We strongly suspect that Stagecoach's shareholders would prefer cash consideration. In uncertain times, the certainty and faster completion offered by a cash offer from a non-trade buyer is likely to be preferred, even at the risk of foregoing the longer-term upside potential offered by National Express shares."

The broker, which stood by its 'buy' rating on the stock, said the proposed Stagecoach acquisition complemented the strategy of National Express, but was not central to it. It argued that while the deal had compelling synergies, "it was not a must-do deal". As a result, increasing the price paid materially is likely to be unappealing to National Express management.

Liberum also noted that passenger volumes were 70-80% of pre-pandemic levels and said it expects the recovery to continue but also cautioned that there had been a delay from the Omicron variant and driver shortages in National Express' North American school bus business.

Analysts at Berenberg cut their target price on software firm Craneware from 3,100.0p to 2,725.0p on Monday despite the group's interim results being in line with its January trading update.

Berenberg stated that while Omicron-variant-based headwinds affected services revenue at Craneware during the first half of its trading year, it believes that the interim results will provide "more confidence" to investors.

The German bank said Craneware has "a high degree of revenue visibility" and its margin performance was exceeding expectations as "strong organic growth opportunities" were beginning to materialise.

"As Craneware's valuation is now the cheapest it has been in over five years, we believe the risk/reward on the stock is highly favourable," said Berenberg.

"Cost synergies that have been delivered ahead of schedule mean Craneware achieved a 28.75% EBITDA margin during the period. This is better than our expectations and was achieved during a period of cost inflation across the tech industry. Given that our FY22 EBITDA margin forecast is 29.3%, we believe any further cost synergies would drive upside to this. We have previously highlighted that there is as much as 20% upside to our current estimates from cost synergies."