RE: Sunday Times6 Sep 2022 13:46
Here's the Sunday Times article from 4/9/22 - good read, also picks up on potential of an incoming bid / takeover.
Share Tip : 'National Express is worth a ride' - by Lucy Tobin ..
The pandemic years of staying at home have unleashed pent-up demand on a grateful travel industry, as overstuffed airports and packed motorways have shown this summer. The impending economic gloom is unlikely to smother our collective desire to explore new places and visit far-flung friends and family, but emptier wallets mean many of us will be looking for cheaper ways to get there.
All of which is good news for transport giant National Express. Last year passengers sat on NatEx’s seats for 92 million journeys; the lure of its cheaper bus and coach journeys (relative to rail and plane) could see that surge during a downturn - not to mention ongoing rail strikes that make train travel a nightmare.
The Birmingham-based business won’t offer investors a smooth ride: sharp rises in inflation and the costs of staffing and fuel are squeezing margins and performance. But the stock has already been battered: shares, now about 170p, remain well off the 423p level seen in February 2020 before the reality of Covid was unleashed in the UK, and are down by more than a third this year. The shares look reasonable value, changing hands at about 9 times forecast earnings for 2023, below a 10-year average of 11.
Ruairi Cullinane, analyst at RBC Capital Markets, expects National Express “to be resilient in a weaker macro backdrop” but also flags the UK bus sector in general as set to benefit from “policy and demographics looking more favourable than in the decade following the financial crisis”.
It would be wrong to over-emphasise the British part of the business, though, as some 80 per cent of revenues stem from abroad. These come mostly from the US, where NatEx’s yellow school buses ferry 1.3 million students around each day, but also from Spain, Germany and Morocco.
The outlook away from the UK isn’t entirely rosy - NatEx has already had to raise wages by 12 per cent in the US as it tries to fill a glut of driver vacancies. But almost two thirds of its revenues come from signed contracts that have annual inflation adjustments built in. National Express also has a new business pipeline worth £2.1 billion in annual revenues over the next 18 months, up from £1.5 billion last October.
Another possible boon for investors is the chance of bid action - international buyers have taken a liking to UK transport giants recently, with FirstGroup and Stagecoach both attracting interest. For investors, its journey looks worth embarking on. Buy.
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