The broker notes that the shares have underperformed since Elliott halved its holding in National Express from a 20% stake to a 10% interest on March 7.
Since then, National Express (NEX) has been driving with the brakes on in terms of share price performance, sliding from 230p in early March to around 195.4p at the beginning of May.
Liberum believes the fall is overdone for a company that has well diversified earnings.
“NEX’s 2013 earnings comprise 33% UK (bus 17%, Coach 11%, Rail just 4%), 33% North America and 40% Europe (Spain bus & coach 35%, Morocco 5%) netted off by 7% of overheads.
“We forecast 2013E EBIT [underlying earnings] of £190m and EPS of 21p, which we expect will grow by 7% p.a. 2013-15E (24p), as margins recover and debt is paid down,” Liberum’s rune-readers predict.
On the subject of debt, the bus and train operator remains focused on asset-light business development, which is allowing it to reduce gearing.
Liberum’s sum of the parts valuation is 279p, which suggests 46% upside. That’s enough to persuade the broker to upgrade the stock to ‘buy’ and bump up its price target by a quarter to 238p.
Shares were up 2% to 195.4p in lunch-time trading.