(Sharecast News) - BBA Aviation was under the cosh on Wednesday as Berenberg cut its rating on the shares to 'hold' from 'buy' following the company's first-half results and its disposal of parts distributor Ontic, pointing to a full valuation and limited near-term catalysts.
"With a more than 45% rally in the share price year-to-date, a key catalyst of our investment thesis playing out and signs of increasing margin pressure in the Signature flight support service, we think the risks are finely balanced over the near term," the bank said.
Berenberg said the sale of Ontic should support shares in the medium term, but with only one continuing division remaining, there is limited scope for further value creation from disposals, which was previously a key part of its investment thesis.
It added that while the potential for around $1bn of shareholder returns - about 25% of market cap - in the coming months will support the share price, shares are trading on circa 17x FY 2020E price-to-earnings, which is towards the upper end of its historical range.
Berenberg lifted its price target on the stock to 335p from 330p.
BBA announced in July that it was selling Ontic to private equity firm CVC Capital Partners in a $1.37bn deal, to focus on its airport services business.
At 1110 BST, the shares were down 2.2% at 312.20p.
5 Aug 2015 07:20