Market's view on Serco
Published on April 2024
- Blackrock has been identified as actively increasing its stake, indicating the stock might be undervalued.
- The company’s performance in all end markets looks promising over the medium to long term despite difficulties in predicting annual results due to the nature of contractual business.
- Recent financial results and outlook statement have been deemed extremely satisfactory, suggesting potential for re-entry into the FTSE 100.
- Significant growth has been observed since 2017, which has not been reflected in the share price, suggesting undervaluation.
- Speculation around a potential buyout has impacted trading, with insiders reported to be buying on rumours of a deal and selling when it seemed not to happen.
- A US buyout firm reportedly made a £2.5bn takeover approach for Serco, which was not pursued according to sources close to the company.
- Trading has been described as strange or unusual around the time news of the buyout surfaced.
- There is anticipation and speculation among investors regarding a potential takeover, although no concrete rumours have surfaced.
- The company’s recent small acquisition and financial statements are viewed positively, with expectations of further cash conversion upgrades, significant buybacks, and approximately a 20% dividend increase.
- Investors have expressed satisfaction with the interim financial results, particularly the investment of strong cash flows in share buybacks and anticipated further financial gearing by year-end.
- The company has been praised for its tradition of underpromising yet delivering upgrades, which continues to bolster investor confidence.