RE: UBS - A signal to buy?18 Apr 2024 15:29
On Thursday, UBS downgraded shares of SSP Group Plc (SSPG:LN) (OTC: SSPPF), a company operating food and beverage outlets in travel locations, from 'Buy' to 'Neutral'. The firm also revised the price target for the stock to £2.25 from the previous target of £3.20.
The decision comes as SSP Group is poised to benefit from the ongoing recovery in European aviation traffic and the rapidly growing Asian market. However, UBS pointed out that the company faces significant near-term cash flow constraints due to Covid-related catch-up capital expenditures (capex) and growth capex necessary for its expansion plans. This financial pressure is expected to delay and dilute the investment case for SSP Group.
According to UBS, while SSP Group's shares are trading broadly in line with other contract caterers when adjusted for different earnings growth rates, the firm's weaker cash flow situation makes other opportunities within the wider Leisure sector more attractive in the near term.
SSP Group Plc operates a variety of brands in airports, railway stations, and motorway service areas, offering food and drink to travelers. The company has been recovering from the impacts of the COVID-19 pandemic, which significantly disrupted the travel industry and, consequently, SSP's operations. The downgrade reflects a cautious stance on the company's short-term financial outlook despite the broader recovery in its market.