Peel Hunt has upgraded its call on shares Bloomsbury Publishing PLC (LON:BMY), stating the recent price weakness was ‘unmerited’.
The broker moved to ‘add’ from ‘hold’ but kept its 290p price target. The shares are currently changing hands for 268p, up 3% on the day, but down 12% over the past month.
“We think this fall is unmerited given the strong series of CoVID updates, and perhaps reflects the inevitable hiatus in news flow,” Peel Hunt said in a note to clients.
“We recommend investors use this current share price weakness to add to positions.”
It reckons Bloomsbury has a number of strengths, including its strong management team, a diverse offering and ‘defensive qualities’ as well as having scope for ‘material M&A’.
Peel also pointed out that an estimated quarter of the company’s equity value is represented by cash.
There is also working capital tied up in the business and a “world-class library of publishing rights” – which further add to the value of the business.
It noted out that the stock trades on an enterprise multiple of just seven-times, while the free cash flow yield is 7%.
“Bloomsbury is well resourced and asset rich,” the broker explained.
“Its performance during the pandemic has highlighted its resilient characteristics.
“A strong pre-close trading update pre-empts the prelims in May. As a consequence, the shares have drifted as the company enters this closed period.”