RBC ups Mitie price target and free cash flow estimates

28th May 2015 13:21

RBC Capital Markets raised its price target for Mitie Group to 350p from 310p."With a cleaner business and no more one-offs, we expect free cash flow to be more in line with earnings per share going forward," said RBC.It said that given the discount to peers, re-rating potential remains high if management can deliver.Commenting on the company's full-year results released earlier this month, RBC noted that full-year earnings before interest, tax and amortisation were slightly above forecasts, at £128.6m versus a consensus estimate of £126.8m.It highlighted management's relatively upbeat outlook and said the order book remains robust.RBC nudged up its 2016 EPS estimate to 25.4p from 25.2p and its 2017 estimate to 27.5p from 27.3p. It also lifted its EBITA forecasts, with the 2016 estimate now at £133.3m from £132.8m and 2017 at £142.3m from £141.6m."We have increased our FCF forecasts to reflect more confidence that the increased focus from management on FCF is paying off, along with the fact that the riskier businesses have now been exited and associated one-offs are finished," said RBC, which rates the stock at 'outperform'.