Broker tips: Rosebank Industries, IntegraFin

(Sharecast News) - Rosebank Industries rallied on Tuesday after both Citi and Jefferies reinstated coverage of the shares at 'buy'.

Jefferies, which has a 470p price target on the stock, said it was reinstating coverage following the completion of the MW & CPM acquisitions.

"Rosebank transitions from a single-asset story to a group of three under-optimised US industrial businesses, and credible improvement levers suggest significant margin upside potential, with early execution at ECI underpinning our confidence in delivery," the bank said.

It added that at 12.7x 27F EV/EBIT, the valuation is supportive and its price target offers 35% potential upside.

Separately, Citi noted that the $2.1bn acquisition of CPM and $950m acquisition of MW Components double the revenue of Rosebank to around $2.4bn when combined with the ECI business acquired last year.

"The model is again to significantly improve margins (by 600-700bps in both cases) and double shareholder investment from the recent £1.9bn equity raise over the planned 3-5 year holding period," it said. "With the ECI turnaround on track and a strong track record on improving acquired businesses, we see attractive returns and resume coverage with a buy rating and £4.50 target price."

Elsewhere, Shore Capital upgraded IntegraFin to 'buy' from 'hold' and lifted the price target to 400p from 350p as it said the Transact owner is "an excellent business, properly undervalued".

"We all know that UK fund outflows have left some quality businesses looking like unloved flotsam on the market tides, but is there a better example than this?" it said.

"IntegraFin is a 51% profit before tax margin platform business, with 10% market share but whose brand, proprietary technology and customer service is now winning a 25% share of net flows, trading on less than 14x Y2 despite earnings compounding at 19% '25-27F," the broker said.

Shore Capital said its numbers are above consensus because of the market moves since the first-half results.

It argued that IntegraFin is a key beneficiary of new technologies, since IFAs (independent financial advisers) should be able to serve more clients and consequently more assets as some workflows are automated.

It also noted: "IHP builds its own technology, with increasing straight through processing and nimbleness that its competitors, who largely rely on FNZ/ GBST third-party technology, cannot match."

IntegraFin Holdings