It may seem a brave call after all the chaos surrounding National Express, but Royal Bank of Scotland analysts have just issued a buy note on the business.
To recap, the government is set to take the east coast mainline back into public ownership after the transport group said it could not meet the £1.4bn franchise payments. There is now the possibility the company could also be stripped of its other rail operations, including the east anglia line.
But RBS analyst Joe Spooner said the market was likely to ignore concerns about the other franchises for the moment, now the uncertainty over the east coast situation was resolved. He predicted a rights issue of about £415m and possible bid interest in the business, not just from FirstGroup - which had already made an approach - but perhaps Stagecoach, too. Spooner has raised his price target from 300p to 330p, saying the risk/reward profile had swung in favour of a buy. He said:
"Repairing the balance sheet is likely to become the group's focus from here. We would expect any rights issue to raise £415m. More upside would open up if any Department for Transport attempt to cross-default National Express east anglia failed, or if preliminary bid interest from FirstGroup were to firm. We also believe Stagecoach could make an acquisition case too.
"Although not without risk, we believe there is appeal for investors prepared to view National Express as a special situation."
Someone seems be be buying the tale - National Express shares have climbed 6.25p to 273.5p.
