Broker snap: De La Rue upgraded as bid speculation continues

20th May 2011 11:49

Numis has upgraded banknotes and passports printer De La Rue to 'add', from 'hold', on potential bid activity and anticipation of some earnings recovery.The broker says that if the group can deliver mid-cycle earnings of £100m/72p per share (Numis estimate) in a "visible time frame" (e.g. year ending March 2014), then - with the right prospects further out - it could justify a 1,000-1,300 share price over the next few years (up from the current share price of around 845p on Friday).Furthermore, recent press comment concerning potential bidder Oberthur suggest that it may potentially have €1bn of extra cash after selling 60% of its smart card business."This would enable it to credibly return to the bid table from July 25th," said analyst Francesca Raleigh. While a 935p-per-share bid was rejected in January, Numis notes that De La Rue investor sentiment at the time suggested that a +1,000p price would have been considered seriously."Oberthur is potentially an attractive suitor as a cash buyer (if it realises the disposal of its smart card interests); its private status enables it to have a longer-term time frame on returns; and it has synergies as a net paper buyer," said Raleigh.A target price of 950p is retained.---BC