UBS has upped its stance for Hays plc (LON:HAS) to ‘buy’ from ‘neutral’ as it looks for a ‘margin break-out ahead’ for the staffing group .
In a note to clients, the Swiss bank’s analysts said: “We now expect cyclical upgrades to continue in the near term as indicators remain strong, and see mid-term structural upgrades as a positive price/mix shift (e.g. Germany) drives margins to new highs.”
They added: “We see conversion margins >26% by 2022e, which alone would support a higher valuation today – and the November CMD may highlight an even more ambitious roadmap.
“In addition to this earnings momentum, an ongoing cash story is attractive with c.10% of the marketcap potentially returned over the next 20 months.”
The analysts concluded: “Staffing remains a cyclical industry, but we view Hays as a best-in-class core holding across the sector.
They raised their underlying forecasts for Hays by 2-8% and upped their target price to 210p from 185p as “higher margins support a higher valuation”.
In mid morning trading, Hays shares were up 0.9%, or 1.8p at 192.8p.