Shares of the investment firm 3i Group PLC (LSE:III) rose almost 5% after an upgrade from a leading investment house.
Deutsche Bank moved to 'buy' from 'hold', raising its price target from 2,918 pence to 4,037 pence, citing the expected growth of its primary retail investment, the Dutch chain Action.
Its analysts noted that Action's robust customer appeal, efficient operating model, and successful store rollout have laid a strong foundation for growth, with the potential for the chain to expand its store count by over two-and-a-half times.
They also highlighted gains in Action’s sales per store and improved net margins driven by scaling efficiencies.
Deutsche's number crunchers projected that Action’s cash flow distributions could fully cover 3i’s investment in the retail chain within nine years, bolstering its earnings.
Despite a dip in valuations for other private equity assets in 3i’s portfolio last year, overall performance remains positive, with the German bank expecting improved returns across the portfolio this year and next.
Additionally, it predicted a steady return on investment from 3i’s infrastructure and ferry business, Scandlines, further supporting growth for the firm.
In afternoon trading, the stock was up 154p at 3,494p.