Broker snap: Plentiful scope for Capita

3rd Dec 2009 12:45

Broker KBC Peel Hunt has initiated coverage of outsourcing giant Capita with a 'buy' recommendation and a price target of 800p, stating that 'there are more opportunities than ever facing the business.'The broker reckons the trend towards outsourcing in both the private and public sectors will continue and the recent dip in the share price of Capita represents a buying opportunity.'Just 6% of a £94.2bn potential UK market (according to industry analysts) is currently outsourced, and we believe the recent downturn will drive further development of the BPO [business process outsourcing] market. The public sector also presents a greater than ever need (and demand) for outsourcing,' claims KBC analyst Henry Carver.Carver likes the high visibility of Capita's earnings, with the company's business model based on rolled over contracts. Meanwhile, 'despite the anticipated hiatus in government activity until after the election,' the broker reckons there are plenty of small bolt-on acquisitions available for Capita 'to ensure short-term forecasts should at least be met.'