MDT schreef op 25 maart 2014 16:45:
USG (short) – Locking in, after part of risk has disappeared
In our last favourite list update, we added USG People. In a separate report dated
11 March, we downgraded the stock to a SELL. The stock has since come down
from EUR 13.80 to EUR 12.00, which we set as our target at the time of
publication. Although we believe there could be more downside for the share
price, we have decided to lock in the return and take USG People off the list
again. In general, European staffing markets have returned to growth again, and
staffing companies such as Adecco, Randstad but also USG People reported
strong Q4 results. Momentum at USG is improving, although the company
continues to be exposed to strategic issues (the disposal of non-strategic
operations like Germany and France for example) which take more time to resolve. USG People should benefit from better staffing markets in the next few
quarters though. The Professionals business, which represents some 5% of group
revenues, is slowly improving. Nevertheless, margins were negative in Q4 while
the company targets a margin of 10%, so a lot of improvement is needed this year.
Once operating leverage kicks in earnings growth should accelerate, but current
consensus forecasts already expect more than 45% earnings growth which could
prove to be ambitious. To conclude, we believe a decent part of the near-term
downside risk has disappeared, which is why we take the stock off our list.