It's probably not what business secretary Vince Cable wants to hear, but another City bank has come out and said that Royal Mail shares were
As the controversy over the company's flotation last year rumbles on amid accusations the taxpayer was shortchanged, analysts Matthew O'Keeffe and Arash Roshan Zamir at Berenberg Research have begun coverage with a buy recommendation and 700p price target. Remember, the government sold Royal Mail shares to the public at 330p each and they are currently at 568p, up 8p, and close to their all time high of 571p. Berenberg said:
The Royal Mail Group bears all the hallmarks of a classic UK privatisation. The shares were sold on the cheap last year (and they remain very cheap). The company today is hugely inefficient in both operational and financial terms.
The allocation of capital is also questionable: we estimate that the three major sites in London which have been recognised as surplus to requirements could be worth £1bn: a sum equivalent to 70% of net assets in 2013. The results over the next few years could be significantly better than currently expected if Royal Mail were to take more forceful measures to improve efficiency and allocate capital better.
But even on the basis of current expectations, the shares look cheap in comparison with peers. We initiate coverage of the shares with a 700p price target and with a buy recommendation.
