European business services: JPM sticks with structural winners in 2022
14/12/2021 08:40
** For 2022, JP Morgan sticks with structural winners among
business services companies, which in general tend to be
late-cycle and defensive, and hence sees pockets of further
volume recovery
** The sector is labour-intensive, it says, and the current
environment "is arguably trickier" than before the pandemic, but
coupled with price inflation, companies can do price increases
** In terms of rising wage pressure, JPM notes large
employers like Securitas SECUb.ST are most at risk while
staffing names Adecco ADEN.S and Randstad RAND.AS tend to
benefit from labour inflation
** Citing "customer relationship management space", the
brokerage chooses Teleperformance TEPRF.PA , which it
reinstates at "overweight", and Majorel MAJ.AS as top picks
** Among expensive quality names, JPM prefers Experian
EXPN.L over Rentokil Initial RTO.L on its material long-term
upside from a growing total addressable market
** "We expect the price component of organic growth to be
elevated in 2022, albeit we expect the impact on profit to vary
depending on the companies' pricing power," it adds
** Resuming coverage with "overweight", JPM says it still
likes Spie SPIE.PA , which has the best ESG exposure and is
small inexpensive enough to grow and re-rate or be acquired
** SGS SGSN.S has emerged as the best-in-class operator
during the pandemic, but the broker highlights Applus Services
APPS.MC as "the likeliest takeover candidate for 2022"
** JPM sees market share gains and more M&A into 2022, but
downgrades Intertrust INTER.AS to "neutral" from "overweight"
as the most levered name is in the process of being acquired
(Reporting by Juliette Portala)
((juliette.portala@tr.com))