Morgan Stanley Says Hudson Ltd Catalysts Remain Elusive

Hudson Ltd HUD, a duty-paid and duty-free travel retail company, recently offered 39.42 million shares in an IPO, pricing the shares at $19 on Feb. 1.

The Analyst

Morgan Stanley analyst Kimberly Greenberger initiated coverage of Hudson Ltd with an Equal-weight rating and a $18 price target.

The Thesis

Airport retailing provides Hudson with natural protection from e-commerce, given the captive customer and need-based purchasing, Greenberger said in a note. The company is also shielded from competition due to the high barriers to entry and a protective moat around the industry, the analyst said.

Three parties, namely airport agencies, minority-owned small business JV partners and parent company DUFRY AG DUFRY could benefit from the success of Hudson, Greenberger said. However, once these stakeholders are paid, there is little profit or cash flow left to pay its shareholders, with EBITDA and EBIT margins likely to be 10 percent and 4 percent, respectively, the analyst added.

Morgan Stanley sees like-for-like sales, organic sales growth and EBITDA, excluding non-controlling interest, as key value drivers for Hudson.

"We initiate Equal-weight with a positive bias as we see +7% upside to our $18 price target and a 1:5:1 positive risk/reward skew," the firm said. "However, identifiable catalysts remain elusive."

The Price Action

Hudson shares were down about 4.8 percent from the day of its listing on Feb. 1.

At time of writing, shares were down 1.7 percent at $16.47.

Related Links:

Wedbush: Restorbio's Therapy For Aging-Related Diseases Has Best-In-Class Potential

PlayAGS Has The Blueprint For Success, Deutsche Bank Says In Bullish Initiation

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
date
ticker
name
Price Target
Upside/Downside
Recommendation
Firm
Posted In: Analyst ColorInitiationAnalyst RatingsKimberly GreenbergerMorgan Stanley
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!