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On Thursday, Deutsche Bank (ETR:DBKGn) analysts increased the price target for CVS Group Plc . (LON:CVSG:LN) (OTC:CVSGF) to £15.00 from £14.00, while maintaining a Buy rating. The revision follows the company’s strategic decision to sell its Crematoria division for £42.4 million, a move prompted by the Competition and Markets Authority’s (CMA) focus on related services.
The sale, executed at 10 times EBITDA, allows CVS Group to reinvest the proceeds into acquisitions in Australia at a lower multiple of approximately 7 times EBITDA. This transaction is expected to reduce investor focus on the company’s leverage, which stands at 1.7 times EBITDA pre-sale compared to a 2 times target.
Reflecting the divestiture, Deutsche Bank now anticipates CVS Group’s fiscal year 2025 EBITDA to be £134.3 million, down from a previous estimate of £138.5 million. Despite a mid-single-digit cut to adjusted earnings per share for continuing operations, the company’s cash flow is expected to improve, and leverage is set to decrease.
CVS Group shares have risen by 50% year-to-date. At around 8 times enterprise value to EBITDA, Deutsche Bank believes that improvements in UK trading, ongoing accretive mergers and acquisitions in Australia, and a potentially favorable outcome from the CMA could support further stock re-rating and bolster their buy case.
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