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G4S started with ‘hold’ by Deutsche Bank, only non-negative rating in new coverage of security sector

G4S “has a somewhat weaker execution and growth track record, we believe this is baked into valuation and we would be wary of being short given the ongoing take out potential”

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The Deutsche Bank analysts added: “Valuations are generally somewhat stretched across the group, other than for G4S”

Deutsche Bank has initiated coverage on G4S PLC (LON:GFS) with a ‘hold’ rating and a target price of 200p, it’s only non-negative rating in a note initiating coverage on the European security services sector.

The German bank started the UK firm’s European peers Prosegur, Prosegur Cash, and Securitas all with ‘sell’ ratings.

READ: G4S mulls options as Canadian suitor walks away

The Deutsche Bank analysts said: “Valuations are generally somewhat stretched across the group, other than for G4S.”

They added, while G4S “has a somewhat weaker execution and growth track record, we believe this is baked into valuation and we would be wary of being short given the ongoing take out potential.”

Earlier this month, Canadian suitor GardaWorld Security walked away from a potential takeover deal for G4S.

Privately-owned Garda, which had confirmed in April it was considering a possible cash offer for all or part of the FTSE 250-listed business, said that it no longer intended to make an offer for the British company.

In the wake of the takeover rebuff, G4S said it would continue to focus on preparations for a spin-off of its cash transport business.

The company had previously indicated it is mulling a wide range of separation options for the division, which transports and stores money on behalf of its customers, and said it had made “good progress” towards kicking off the process in the second half of 2019.

Analysts have calculated that a sale of the unit could fetch around £1.6bn, though G4S has hinted that it could look to spin off into a listed vehicle on the stock exchange.

G4S shares, having fallen below a two-year low in recent months, got around a 25% leg-up from the Garda approach, but has fallen back since the offer interest ended.

In morning trading on Friday, G4S shares were trading at 215.10p, down 0.6% on Thursday’s close.

Quick facts: G4S

Price: 215.9 GBX

LSE:GFS
Market: LSE
Market Cap: £3.35 billion
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