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There is ‘compelling value’ at bus and rail company Go-Ahead (GOG) as the current share price is not factoring in a worst case scenario, says Jefferies.
Analyst Joe Spooner retained his ‘buy’ recommendation and target price of £25 following third quarter results, despite the group being hit by persistent strikes in its Southern franchise, which is owned by Go-Ahead’s Govia Thameslink Railway (GTR) subsidiary.
‘That Go-Ahead is trading in-line with management hopes and group full year expectations for both bus and rail units are unchanged, should swing focus to valuation,’ said Spooner.
‘We think the current share price reflects a scenario worse than both GTR failing and Go-Ahead winning no more rail franchises. We also think the 5.5% dividend yield is paid from bus free cashflow, further signalling value here.’
The shares were trading up 5.3%, or 92p, at £18.21 at the time of writing.