(News Bulletin 247) – The American bank has revised its recommendation on the operator of the Channel Tunnel, going from “online weighting” to “overweight” and has adjusted its price target upwards.

Getlink stands out this Monday. In a fairly gloomy market which led the SBF 120 to drop 0.9% around 3:45 p.m., the former Eurotunnel Group stood out by gaining 2.4%, one of the strongest increases in the SBF 120.

The operator of the cross-Channel tunnel is carried by Morgan Stanley, which raised its recommendation to “overweight” against “online weighting” previously on the action, with a price target raised to 19 euros against 18.3 euros previously.

For the American establishment, the bricks of an optimistic investment thesis on the action are “slowly falling into place”. Which is “too obvious to ignore,” she adds. The US bank believes that the action is currently cheap, at a time when expectations of results by investors could be revised upwards.

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“Pricing power”

Morgan Stanley is thus more optimistic on the volumes of “leisure” shuttles (it has raised its forecasts for 2023, 2024 and 2025) as well as on the traffic of Eurostar trains, the group’s main customer rail company. “Eurostar has now reached more than 90% of its pre-Covid capacity and its finances should increase quickly”, underlines the establishment.

This could lead the rail operator, which merged in 2022 with Thalys, to relaunch growth initiatives put on hold during the pandemic, with more trains and destinations, thus driving up Getlink’s revenues.

In addition, Getlink has shown robust pricing power on its shuttle service in recent years. Morgan Stanley considers that the group still has scope on this point to raise its prices because the ferry companies – the group’s major competitors – face a double difficulty.

Namely the implementation of laws specific to a minimum wage for seafarers, which could lead to a rise in tariffs of 6% to 8% according to forecasts by Morgan Stanley, as well as their gradual inclusion in the European market for carbon emissions. Opportunities which, in Morgan Stanley’s optimistic scenario, would result in 50 to 60 million euros of additional Ebitda (gross operating income) for Getlink in the medium term, and 1.5 to 2 euros of additional value per stock.

Morgan Stanley thus joins the ranks of optimistic consultancies on value, which already included Goldman Sachs. The American bank had gone into buying the stock in April and also invoked the group’s “pricing power”, supported by the entry of ferry companies into the European emissions payment system. carbon as well as the potential expansion of high-speed rail through the Channel Tunnel, with more rail operators using this route, beyond just Eurostar.