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G4S could gain from further outsourcing of UK police, believes Panmure

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Panmure has upgraded security group G4S (LON:GFS) to 'buy' from 'hold' saying it believes there is further scope for oursourcing within the UK police force.

The broker has also increased its target price for the stock to 330 pence from 250 pence ahead of final results due to be released next week.

Competitors such as Capita, Serco (LON:SRP) and Babcock (LON:BAB) are also targeting this police market, said analyst Mike Allen, who added: "G4S would be well positioned to win significant contracts in this area of the market given its skill set and recent contract wins with Lincolnshire Police Force."

Across the group, government outsourcing work accounts for around 33 per cent of group revenues, he pointed out, with the UK government accounting for around 10 per cent.

The company is the largest security group in the UK and Ireland and will also provide security and cash solutions to London's Olympic and Paralympic games this year.

The sectors it works in include transport and logistics, private energy and utilities and ports and airports.

Allen said the broker's price target upgrade reflected the re-rating seen elsewhere of late, coupled with signs of increased outsourcing in some of the group's key markets.

"The shares have underperformed its peers of late and, with the rewards beginning to strongly outweigh the potential risks, we switch our recommendation from Hold to Buy ahead of the results next week as a result," he added.

Quick facts: G4S

Price: 202.5 GBX

LSE:GFS
Market: LSE
Market Cap: £3.14 billion
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