UBS upgrades Admiral Group to 'buy'

20th Jul 2016 09:58

(ShareCast News) - Admiral Group shares gained on Wednesday as UBS upgraded the stock to 'buy' from 'neutral' and raised the target price to 2,339p from 1,840p.UBS said it believes the motor insurance company's major growth drivers - International and Home businesses - are currently undervalued. The bank said International and Home could add 12-33% to 2020 group net income."We estimate £50m-£139m of earnings potential based on conservative bottom up assumptions," said UBS analyst James Shuck."This has the potential to boost core earnings growth in UK motor from 3% to 7-12% with a broadly equal contribution from Home, International Insurance and International price comparison."The two businesses are expected to begin delivering from as early as the second quarter, according to UBS, with Home in particular benefiting from a new policy system and rapid growth in price comparison websites.UK car insurers have been the best performing sub-sector in 2016, UBS said, adding that its re-rating is due to defensive characteristics, yield attractions and a rising rate environment."We now expect greater appreciation of the growth opportunity, ultimately driving near term earnings surprises and further multiple expansion."Shares rose 1.42% to 2,074p at 1010 BST.