Morgan Stanley examines the recent speculation that the sale of Right2Drive could be a catalyst for consolidation.
The broker suspects that, while Steadfast Group ((SGF)) could realise higher potential synergies compared with McMillan Shakespeare ((MMS)), any deal would be dilutive for the former and neutral for the latter.
It would also be a big step for Smartgroup ((SIQ)). Therefore, the broker assesses McMillan Shakespeare remains a best positioned on a relative basis.
Morgan Stanley stresses that none of the companies have made any public comment and the scenario is hypothetical. Overweight rating and $1.70 target retained. Industry view: In-line.
Sector: Diversified Financials.
Target price is $1.70.Current Price is $1.40. Difference: $0.30 – (brackets indicate current price is over target). If ECX meets the Morgan Stanley target it will return approximately 18% (excluding dividends, fees and charges – negative figures indicate an expected loss).