Shares in Capita shed 3 percent, a top FTSE 100 faller,after the outsourcing firm's investor day on Monday failed to excite, accordingto traders, and leads Seymour Pierce to downgrade its rating for the stock to"hold" from "buy".
"The presentation did bring home the message that Capita has an increasinglydiversified revenue base and acquisitions have been instrumental in helpingCapita spread its wings. However, we were disappointed to hear thatinternational expansion does not feature greatly in the company's plans,"Seymour Pierce says in a note.
The broker adds that, following an 8 percent outperformance by the stockversus the FTSE 100 index over the past month, Capita shares are within reach ofits 770 pence target price and, as there was not enough new news in thepresentation to warrant an increase in that target, it has downgraded its ratingto "hold".
Espirito Santo Investment Bank, meanwhile, says that "the event providedvaluable insight into some of Capita's divisions and approach to growth, but itdid not change our cautious stance on the business."
"While the risk to current year forecasts is low and Capita will likelyreturn to some organic growth, the group has expanded its balance sheet to fundgrowth and we believe it requires a lower rating than the group has otherwisehistorically derived," Espirito adds, repeating its "sell" stance on Capita.
Capita's earnings quality score -- a measure of the sustainability of futureearnings based on previous results -- increased to 49 from 27 out of 100 afterits June 2012 filing, according to Thomson Reuters Starmine data, which comparesfavourably with its nearest British peer, Serco Group , which saw itsearnings quality score decrease to 22 from 31 after its June filing.
Shares in blue chip Serco are also weak, down 1.4 percent. Reuters messaging rm://firstname.lastname@example.org
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