Stock in Granada Media rallied this morning following an upgrade from US broker Morgan Stanley Dean Witter. Granada Media will complete its demerger from the Granada Compass hospitality business this Friday.
As a result its free float will increase from 20% to 100% and its FTSE weighting will increase from 0.08% to 0.39% following the demerger. ‘Flowback’ may be an issue as Granada Compass shareholders wanting pure hospitality stock may sell their holding in Granada, according to ABN Amro.
Morgan Stanley believes the split could increase liquidity in the stock of the newly-created Granada and has raised its rating from Neutral to Outperform, with a 430p share price target. By 10:30am today stock had risen 13žp to 388žp.
ABN Amro says it can see longer term value and has an Add recommendation. However, the short term advertising outlook is very tough and will restrain the share price performance. Nevertheless, it believes that Granada is trading on the cheap and has set a target price of 565p.
