FirstGroup’s exit fee agreement for the TransPennine Express franchise was better than we had assumed. It releases capital that could be used to enhance the planned return of cash to shareholders. There is scope for further cash to be released as other liabilities are settled. We raise our SOTP-based target price to 105p from 100p. We believe the market continues to overlook the long-term importance of resetting the group’s balance sheet and the growth potential in UK public transport. Our recommendation remains BUY.
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