FirstGroup PLC (LON:FGP) saw its shares drive higher on Tuesday after City broker Peel Hunt initiated coverage on the transport operator with a ‘buy’ rating and a 164p target price.
In mid-morning trading, shares in the FTSE 250-listed firm were 3% higher at 121.60p.
READ: FirstGroup looks at selling all North American businesses
In a note to clients, the Peel Hunt analysts pointed out that FirstGroup gave a strategic update in mid-December stating that the monetisation of First Student and First Transit would deliver material value enhancement for all shareholders.
They noted that advisers have been appointed to explore all options for the firm - which also owns the US Greyhound buses business - including their potential disposal, and yet the stock has barely advanced since that time.
The analysts said: “We see considerable value that can be realised from improved operational performance, notably reduced insurance costs and higher First Bus margins, and the break-up of the group, which is clearly underway, and therefore initiate coverage with a Buy recommendation”.