Jefferies hikes price target on DCC, says 'simplicity can unlock value'

(Sharecast News) - Jefferies hiked its price target on buy-rated DCC on Tuesday after the sales, marketing and support services group announced last week that it was planning to simplify its operations and focus on the energy sector. The price target was lifted to 7,950p from 7,600p.

DCC said last week that it had begun preparations for the sale of DCC Healthcare, which is expected to complete next year. In addition, the company will review strategic options for DCC Technology within the next 24 months.

Jefferies said its sum-of-the-parts valuation suggests more than 40% upside potential to the current share price, and, following discussion with management, it is "increasingly confident that the move to simplify the group will unlock embedded value".

"We believe that the misunderstood and underappreciated energy division now commands attention," it said.

Jefferies noted that Health and Tech added two layers of complexity to DCC and more recently have been a drag on growth and returns.

As a pure play on energy distribution, it believes the company will be able to deliver mid single digit organic EBITA growth and mid-teen post-tax return on invested capital.

At 1330 GMT, the shares were up 2% at 5,700p.