Some good news for troubled guarding group G4S (LON:GFS), which has been upgraded by RBC Capital.
Its recommendation goes to ‘outperform’ from ‘market perform’, while the price target remains at 260p a share, a 9% premium to the current price.
The change of tack followed an assessment of two different scenarios for lowering the company’s net debt, which is estimated to be around £1.4bn.
The first option, RBC said, is to sell businesses with a combined turnover of around £400mln, while the second is a £300mln cash call at 200p a share.
Both are dilutive to earnings per share (in the region of 3-6% the Canadian investment bank estimates), but not prohibitively so.
RBC added: “We conclude that the market's biggest fear appears to be the debt position, but the scenarios suggest improvement potential at a profit and loss cost which is not prohibitive.”