Broker snap: FirstGroup undervalued

4th Nov 2009 10:55

Results from bus and train firm FirstGroup were marginally better than expected, in the view of Panmure Gordon, which has reiterated its 'buy' recommendation on the shares.'The company has secured financing through to 2012 and good cash flows should allow net debt to fall steadily in the coming years,' Gert Zonneveld believes. 'Even though FirstGroup is not immune to an economic slowdown, it is important to remember that it a well balanced portfolio with about 50% of its revenues secured under medium term contracts.'The broker believes the shares are 'attractively valued', trading on a price/earnings ratio (PER) of 9.1, based on estimated earnings for fiscal 09/10, and a PER of 7.8 based on earnings forecasts for fiscal 10/11. The projected dividend yield of 5.5%, based on anticipated dividend payments for 09/10, also underpins the share price.