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Broker tips: DWF Group, Countryside

By Iain Gilbert

Date: Friday 27 May 2022

Broker tips: DWF Group, Countryside

(Sharecast News) - Analysts at Berenberg initiated coverage on legal and professional services firm DWF Group at 'buy' on Friday, stating the company was "undervalued and largely misunderstood" by public markets.
Berenberg, which started the stock with a 160.0p target price, said DWF has "a clear organic and inorganic growth strategy", and an understandable route to improve margins in line with those of its peers.

"It is a highly defensive investment - this is a sector that has delivered through-cycle performance (the legal services industry's revenues were flat from 2008 to 2010) and a business where two-thirds of revenues comes from acyclical end-markets (largely insurance and real estate)," said Berenberg.

Despite this, Berenberg noted that DWF trades on a single-digit price-to-earnings multiple, offering a 7.1% dividend yield and a 7.8% free cash flow yield on conservative forecasts, with "potential for outperformance".

"This combination of growth and income offers a highly attractive opportunity and material returns for new shareholders from here," said Berenberg.

"DWF's end-markets are highly fragmented and the group has proven form as a consolidator. We expect FCF of £25.0m to £27.0m in FY22, FY23, and FY24, which will de-lever the balance sheet to comfortably under 1x net debt/EBITDA. Our assessment of end-markets and scenario analysis if DWF acquires 5-15% of FY22E's group EBITDA show EPS upside of up to 20% above our organic forecasts, while remaining within management's targeted leverage range."

Analysts at Deutsche Bank lowered their target price on housebuilder Countryside Partnerships from 342.0p to 260.0p on Friday, stating the group was "striving to get back on track".

Deutsche Bank said recent times had been "very challenging" for Countryside, culminating in a "disappointing" first-quarter trading update as the shares delivered the sector's worst performers since the start of 2021.

"We reduce our pre-tax profit forecasts by circa 30-50%, cut our target price by 24% to 260p and retain our 'hold' rating," said DB.

The German bank also noted that management changes were continuing at Deutsche Bank, with Tim Lawlor's appointment as CFO filling the gap left by Mike Scott's departure to Barratt Developments.

"The company is yet to announce a new CEO, following the departure of Iain McPherson, but has appointed Mike Woolliscroft (CEO Partnerships South) and Phil Chapman (CEO Partnerships Home Counties) as co-heads in the interim," added Deutsche.

Reporting by Iain Gilbert at


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