Jefferies favours Serco over ISS, Securitas amid sector risks

Securitas AB

12/09/2023 09:41

** Jefferies remains selective on European business and
employment services, citing easing price tailwinds, potential
slowdown in growth and risks associated with key players in the
sector
    ** "We expect price tailwinds to ease into FY24 and a less
supportive price/wage environment for underlying margins," it
says 
    ** Jefferies notes that activity data and job ads suggest
slowing trends in key markets like the US and UK, which could
add to the challenges of slowing growth
    ** It also points out that the recent warning from ABM
Industries, a US provider of facility services and solutions,
shows risks to return to office trends, that could impact
facility management companies 
    ** The broker maintains ISS  ISS.CO  and Securitas
 SECUb.ST  as "underperform," as despite some derating it still
sees better risk-reward elsewhere
    ** Given downside risk to consensus earnings for FY23-24 and
higher exposure to potential weak office outlook, it cuts target
price for ISS by nearly 20% to DKK 105
    ** The brokerage remains bullish on Serco  SRP.L  where it
sees a "hidden value"
    ** It keeps "buy" on the stock, highlighting Serco's
de-risked balance sheets, hidden value in US defense activities,
and attractive valuation despite sustained upgrades

 (Reporting By Jesus Calero)
 ((jesus.calero@thomsonreuters.com))