RBC likes National Express, which it says is a well-run business and appreciated by investors as evidenced by the well-supported placing at 230p in May.
The difficult backdrop also presents an opportunity for the group in some areas and RBC does not see any issues in finding a successor to Dean Finch, who is heading off to housebuilder Persimmon at the end of the month.
“We see National Express with a proven track record of overall PBT growth in modest growth markets, but also offering consistent FCF (free cashflow) generation, and a supportive dividend yield without under-investing in assets.
“The shares are UK listed but 4/5ths of FY19 turnover and 3/4 of underlying profit were generated outside of the UK.
“We like the National Express diversified business delivering consistently improved and above-average operating margins.”
Even so, the target price is now 270p, from 350p, and compares to 133p in the market today, down 5.8%.
Stagecoach, meanwhile, has been friendless since the pandemic began, says the broker, due to the lack of positive catalysts near-term and the increased Work-From-Home impact on traffic.
“The fact that the stock is no longer part of the FTSE 250 since June is not helping raise interest. Some wonder if the family could take it private given the (low) share price.”
RBC’s new target is 75p from 100p against a market price currently of 45.5p.