M&A growth is likely to continue to drive growth at business support giant Bunzl plc (LON:BNZL), said Japanese house Nomura today.
It rates the shares as a repeated 'buy' and kicks up the target price handsomely to 2237p from 2123p.
Andrew Chu notes that for 2015, the firm reported 5% (ex-forex) revenue growth, of which 4.5% came from acquisitions and over the last three years, M&A has contributed an average of 6.3% pa to group revenue growth while Bunzl’s organic growth has been at low single digits.
"The current acquisition pipeline consists of more than 500 companies and Bunzl bought only 22 and 17 companies in 2015 and 2014, respectively.
"Given that the company will enter new geographies, we expect the pipeline to grow. Bunzl operates in 29 countries and plans to expand this to 35 countries by 2017."
Bunzl, he reckons, has similar dynamics to consumer staples, for example, pricing power, strong cash flow generation and an ability to consolidate a highly-fragmented industry.
Elsewhere, heavyweight Goldman repeats a 'buy' on airlines giant IAG (LON:IAG), saying it continues to strengthen its competitive position and medium-term return on capital prospects by improving unit costs, increasing exposure to concentrated markets and playing an active role in industry consolidation.
The broker expects strong free cash flow generation over 2016- 2018 to underpin its dividend policy and support progressive deleveraging, thus strengthening further the balance sheet.
Goldman's returns-based 12-month price target is raised to 810p, representing 49% upside, it said.
Elsewhere in brokerland, Barclays (LON:BARC) is chopped down to 'hold' from 'buy' by HSBC, but conversely Goldman repeats a 'conviction buy' on the banking share though it does lower the target price to 265p from 310p.
To smaller fry and the eye tracking specialist Seeing Machines Limited (LON:SEE) revealed today it had completed a £6.7mln stock placing at a premium to the existing price that has brought in a new strategic investor. Manufacturer VSI, which will appoint Yong Kang (YK) Ng to the Seeing Machines board, has a number of high profile customers, including posh vacuum maker Dyson. It employs 11,000 staff and last year posted revenues of £340mln last year. House broker Finncap said: "This is yet another impressive development partner for Seeing Machines, sitting alongside Caterpillar, General Motors, Takata, Boeing, and Samsung. "VSI’s funding and manufacturing expertise will assist with the continuing development and production of its DSS devices. Some dilution is traded for additional funding while the OEM business continues to examine options for a spin out to ensure its own long-term funding." It targets 12p for the shares against a current price of 4.875p.