JPMorgan upgrades Spire Healthcare to 'overweight'

(Sharecast News) - JPMorgan Cazenove upgraded private hospital operator Spire Healthcare to 'overweight' from 'neutral' and lifted the price target to 175p from 136p as it said pent-up demand is building in both the private sector and the NHS and that Spire is well-placed to deliver capacity.
The bank said 2020 will be a year to forget for most. "For Spire, it is of no help as a base for forecasting for 2021 and beyond as private pay has been depressed, but NHS revenues have been optically boosted - but only covering costs," JPM said.

"The dynamics into post-Covid-19 (we assume from mid-2021) look to have improved significantly."

JPM pointed to pent-up private and NHS demand and a £10bn in-play to reduce NHS waiting lists.

"Spire will look to solve supply on all three streams in a fashion that should lead to significantly improved margins - from capacity utilisation and mix (within the boundaries of good corporate citizenship)," it said.

In addition, the tail risk of covenant breaches appears to have been removed, JPM said, leaving investors to triangulate where earnings could go, and implications for the valuation.