Broker tips: Easyjet, Hollywood Bowl, Whitbread, Cerillion, AJ Bell

(Sharecast News) - JPMorgan said in a research note on Monday that Castlelake was "credible" after the US investment firm confirmed it was in the early stages of considering a takeover offer for Easyjet, but that no approach had been made.

"Firm and speculated interest in Easyjet is not new given the share price underperformance, with several potential avenues for value to be unlocked," the bank said. "However, challenges around current/future ownership may be stumbling blocks.

"In our view, the interest could also put Easyjet 'in play' and crystallise interest from other financial or strategic parties, or provide fresh impetus for management to deliver shareholder value."

JPM also pointed to Easyjet's underperformance, with the shares down 22% year to date due to the impact of the Middle East conflict but said Easyjet has also materially underperformed Ryanair over the last five years, with subdued margin performance, no cash returns story, and question marks over strategy.

"Easyjet has several attractive features for an alternative owner, including its current/future fleet assets and slots at constrained primary airports," JPM said, adding that a financial break-up and/or network rationalisation were both feasible. JPM also said the book value of Easyjet's current aircraft was worth around £5bn.

JPM stated it believes that easyJet and minority shareholders would at least consider a deal at the right price. However, it also pointed out that ownership challenges may arise. It noted that founder Stelios owns around 15% of the share capital, and was paid annual royalties for brand rights which are financially lucrative.

Analysts at RBC Capital Markets slightly lowered their target price on ten-pin bowling centres operator Hollywood Bowl from 420p to 415p on Monday, updating its model following the firm's interim results.

RBC Capital, which said Hollywood Bowl was "picking up the pace of expansion", noted that recent trading had been in line with expectations, with momentum in Canada improving as new greenfield sites continued to perform strongly.

The Canadian bank said five Canadian openings were now expected by the end of FY27, up from two previously, with around 40 further potential locations identified., while te UK pipeline also grew, with three new sites now planned for FY27 and two for FY28.

RBC said the accelerated rollout meant Hollywood Bowl was bringing forward its Canadian target of 35 sites from 2035 to 2032, while still aiming for 95 UK centres by 2035.

However, like‑for‑like growth in Canada has been softer than expected, and RBC now forecasts 2% LFL growth versus 6% previously, though it also expects the expanding greenfield estate to support mid‑term improvement. UK LFL expectations remain unchanged at 3%.

RBC also highlighted strong spend‑per‑game trends in both regions, supported by investment in amusements, dynamic pricing and VIP lanes, though it also noted that this was partly offset by weaker volumes.

"We incorporate our expectations for the new capacity growth, softer expectations for Canadian LFL and the new £5m buyback into our forecasts, the net result is a 1% increase to adjusted EBITDA in FY27E and 3% in FY28E," said RBC.

Berenberg lowered their target price on Premier Inn owner Whitbread from 2,900p to 2,280p on Monday as it said the firm had delivered the operational "reset" it had outlined earlier in the year, but argued that the company's new five‑year plan still relies on ambitious assumptions and remains heavily weighted toward later years.

Berenberg said Whitbread's updated strategy continued to depend on consistent UK revenue per available room growth and the successful deployment of £1.5bn of sale‑and‑leaseback proceeds, while near‑term visibility remained limited.

The German bank, which has a 'hold' rating on the stock, also noted that leverage was close to the group's threshold and that the pause in buybacks for FY27 would constrain shareholder returns.

Whitbread reported FY26 revenue of £2.92bn and pre-tax profits of £483m, broadly flat year‑on‑year and slightly ahead of the broker's expectations. However, guidance for FY27 included several headwinds - an extension of its Accelerating Growth Plan, higher cost inflation, one‑off charges in Germany, Middle East impacts, lower room‑growth expectations and the suspension of buybacks.

The company's new five‑year plan includes a £110m business‑rates headwind, offset by expected contributions from UK network expansion, the extended AGP and further progress in Germany. Whitbread was now targeting FY31 pre-tax profits of £648m, but Berenberg said it was remaining cautious and forecast just £561m.

Reflecting near‑term food‑and‑beverage closures, Berenberg cut its revenue estimates by 6 to 10% and trimmed earnings per share forecasts by 15 to 21%. It now expects FY27 pre-tax profits of £379m.

Shares in Cerillion dropped on Monday on the back of weaker first-half results, though broker Canaccord Genuity maintained a positive view on the stock, predicting a strong second half from the the billing, charging and customer relationship management software provider.

As previously flagged, muted recognition of high-margin software licence revenue (down 19% over last year) coupled with 12% decline in services revenues meant that first-half sales softened 14% to £18.0m for the six months ended 31 March.

As a result, adjusted EBITDA fell 38% to £6.2m, while adjusted profit before tax declined 41% to £5.5m.

The company said the drop reflected the timing of new orders from both new and existing customers, but material software licence revenue was expected to be recognised in the second half.

"Cerillion's trading update telegraphed another 2H-weighted year in the making and today's interims provide us with further comfort that its record Omantel win can drive a strong second half and double-digit organic growth for the year," Canaccord Genuity said.

The broker kept a 'buy' rating on the stock, but lowered its target price from 2,250p to 2,060p, saying that while there was "a lot to do in the second half", visibility remains good.

Shore Capital has upgraded its rating on AJ Bell from 'hold' to 'buy' after an "amazing beat" from the investment platform with its interim results two weeks ago.

Despite costs coming in higher than expected, underlying pre-tax profit was up 15% at £79m as a result of a better-than-predicted margin performance, coming in 12% ahead of the consensus forecast. Revenues, up 19% at £183m, were 6% of the market estimate, driven by higher transaction levels and higher recurring ad valorem charging.

"That was an amazing beat. Yes, in part this is driven by transaction frequency and type, to an extent that may not be sustained, but the increased marketing spend is driving further great returns," Shore Capital said.

As a result, the broker said the results have driven "huge upgrades" as it hiked its target price for the shares to 700p, compared with Monday's market price of 606.9p, more or less unchanged from Friday's close.

"Though we believe we have taken on board the company's guidance re the many factors which might slow, and having digested the specific costs guidance, we end up with a 42% PBT margin this year, above guidance, and a 700p TP, which would on our numbers be 22.5x this year and 19x FY27F," Shore Capital said. "That out year multiple is in line with where the company has recently traded, while evidence of its virtuous flywheel is all the more obvious."