NUMIS Upgrade11 Dec 2023 13:14
NUMIS have come out with a BUY on SAGA.
SAGA (BUY 200p) – Note published – On the narrow path to equity value upside – Saga's share price is broadly unchanged from the start of the year, albeit there has been a high degree of volatility. The positive to equity value from net debt reduction has been offset by a 6% fall in EV, caused in equal parts by slightly lower EBITDA forecasts and modest EV/EBITDA compression (from 7.3x to 7.0x for the current year). Looking forward, we model equity value accretion of 80% over the next 2 years driven by net debt reduction from operating cash flow. This assumes EV holds steady at the current level (£836m) and is therefore dependent on near-term EBITDA delivery. We see an improving outlook for EBITDA, primarily driven by announced cost saving initiatives, fading insurance headwinds, and growth in travel. This creates a bull scenario whereby EBITDA increases by 22% next year and the EV/EBITDA rating moves into line with the blended average for peers of 8.4x, which would imply a share price of 439p. Current high debt leverage makes the shares intrinsically risky, but strong cash generation is gradually deleveraging the business and the corresponding accretion to equity value provides an element of downside support to offset EBITDA execution risk. We model ND/EBITDA falling from 5.5x at Jan 24 to 2.7x at Jan 27, driven by operating cash flow.
January update is going to be Very Interesting
Could be a Happy New Year !!!
Sign In
Follow the stocks
