Canaccord Genuity ups Travis Perkins to 'buy' following Wickes demerger
Analysts at Canaccord Genuity raised their rating on business services firm Travis Perkins from 'hold' to 'buy' on Tuesday, following the group's successful demerger from Wickes.
Canaccord said the group had taken "a big step" in its strategic move to simplify and focus on trade businesses, with the analysts now expecting the group to be well placed to deliver "attractive shareholder value" over the medium term.
The Canadian bank stated that the improved operational performance and market outperformance of Travis Perkins' merchanting business should continue and gain momentum, while Toolsation would provide it with "a very attractive growth engine".
"The balance sheet improves post the demerger of Wickes with substantially less operating leases within the group and modest bank net debt expected this year," said Canaccord, which also hiked its target price on the stock from 1,635.0p to 1,725.0p.
"Arguably, the backdrop is now is more conducive for a disposal of the plumbing and heating business. Proceeds from a potential P&H disposal would further strengthen the balance sheet and reinforce the argument for additional capital returns," it added.
Canaccord also stated it did not expect any big acquisitions, but rather "less risky, possible smaller bolt-ons"
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