Brokers call FTSE 250 support services group Interserve a ‘buy’

16th February 2015

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Brokers are coming out in force to tip support services group Interserve as a ‘buy’.

The FTSE 250 constituent which provides facilities, project and equipment services to organisations such as petrochemical firms as well as the Ministry of Defence, has seen its shares more than double over the past five years and more gains are expected to come.

Presently the analyst consensus, according to broker Hargreaves Lansdown, has the stock firmly in ‘buy’ territory.

Ian Forrest, investment research analyst at The Share Centre, is also backing the group. He asserted that a recent dip in the shares, which have eased by 6% over the past three months, puts them on a relatively low valuation, providing an attractive entry point for investors.

He said: “The company is seeing strong organic growth in its support services division, has a growing order book and pays a very good dividend which is well covered. As a result we are recommending the company as a ‘buy’ for medium risk investors seeking both growth and income.”

Forrest highlighted that the group has reported that its largest acquisition last year, the £250m purchase of Initial Services, is performing well and subsequently raised the dividend by 10%. According to an update in January, ahead of full-year results later this month, trading has continued in line with expectations.

He added: “With strong earnings growth forecast for the next two years, the 2016 p/e is set to fall from 13.1 as it currently stands, to just 7.8. This figure is lower than its peers such as Carillion, WS Atkins and Kier Group. The prospective dividend yield is a very healthy 4.7%, which is well above the market average.”

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