Rosebank Industries rallies as Citi, Jefferies reinstate coverage at 'buy'

(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 reinstated 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."

At 1056 BST, the shares were up 3.2% at 356p.