Morgan Stanley cuts RM target price valuation "too generous"

[TrueBlueTerrier]

Morgan Stanley cuts Royal Mail target price, says valuation "too generous"

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Morgan Stanley has noted "continued operational risk" at Royal Mail, as it maintained its 'underweight' rating on the postal delivery group.

The bank cut its target price for the shares from 350p to 340p on Tuesday, dragging the shares down 3.6% to 431.8p by 10:36.

Morgan Stanley said that its recent concerns about a slowdown in revenue growth are "playing out as expected" at Royal Mail.

Ahead of the next financial year ending March 2016, the bank warned that declines in letter mail volumes could pick up due to weaker macro growth in 2015 and two fewer working days, while parcel revenue growth is still challenging due to intense competition in the industry.

It also said that cost-base improvements are "limited" due to higher non-cash pension expenses, fewer working days and the 'rolling off' of cost-savings initiatives from the previous year.

Meanwhile, the General Logistics Systems (GLS) business operating in Europe is trading solidly, but currency movements and recent investment will have a negative impact, Morgan Stanley said.

Given these pressures, the bank reckons that Royal Mail's valuation - shares trade on a 6.6% free cash flow yield for this year, in line with peers - is "too generous".

[oypostie]

Ahead of the next financial year ending March 2016, the bank warned that declines in letter mail volumes could pick up due to weaker macro growth in 2015 and two fewer working days

but then again that is all likely to be cancelled out by all the extra elelection mail

[beezet]

And the savings on diesel

[SW17]

Plus VR's, lapsing.....all irrelevant, i'm sure they try and drive the price down so they can buy on the cheap - all bs

[DGP1]

Morgan Stanley...........didn't they get money from the government to stop them from collapsing because they didn't understand how the markets worked??

[wacko74]

Plus VR's, lapsing.....all irrelevant, i'm sure they try and drive the price down so they can buy on the cheap - all bs

That's exactly what all these supposed ''independent'' financial advisers do... manipulate share prices for their own ends and agendas creating self fulfilling prophecies, talking them up when they want to sell and talking them down when they want to buy, I can't understand why so much attention is paid to their recommendations.