Groupe Steria: H1 13 conference call feedback: positive catalysts needed!
BUY, Fair Value EUR15 vs. EUR16 (+41%)
We reiterate our Buy rating and shave our DCF-derived fair value to EUR15 from EUR16 on reduced ests. and medium-term assumptions (-EUR1-2 on sales growth and -EUR2 on the op. margin), and a EUR78m reduction in the pension deficit to EUR281m thanks to a rise in long-term interest rates (+EUR2-3). While following yesterday’s 10% plunge the undervaluation of Steria’s shares is obvious, we consider no stock price take-off may take place without a strong positive catalyst. Such a trigger may be op. margin growth acceleration from 2014 thanks to cost-cutting in France (to be announced late October) or the signing of a Police deal in the UK some time in H1 14.
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