PageGroup PLC (LON:PAGE) shares received a boost on Monday after RBC Capital Markets upgraded the stock, saying it looks like the “best staffing play at this point”.
RBC raised its rating on the UK recruiter to ‘outperform’ from ‘sector perform’ and lifted its target price to 640p from 490p. The upgrade comes after the company reported better-than-expected fourth quarter profit and said it sees full year operating profit beating market forecasts.
READ: Pagegroup overcomes subdued UK market to put in a strong finish to the year
“It has been out of favour, has the best geographic spread and has seen strong growth acceleration,” said RBC.
“Headcount investment should pay off and it will be the biggest beneficiary of any further improvement in the permanent (jobs) market.”
RBC also thinks permanent recruitment could begin to outstrip temporary growth given the evidence of wage inflation and skills shortages emerging. This would be a big driver of gross margin, as well as sentiment, it said.
READ: PageGroup shares drop as it warns about risks of continued lull in Brexit-hit UK jobs market
RBC said Page has diversified itself by geography and speciality since the “glory days” of 2006-07 when it was geared towards financial services and accounting in the UK.
The broker expects Page can pay special dividends of £40mln, £75mln and £80mln in 2018, 2019 and 2020, respectively. Page effectively has a dividend yield of 5% for 2018 and over 7% for 2019 and 2020, RBC said.
Shares rose 3.5% to 551p each in early trading.