Market report: G4S safer than you think after Brexit, says Credit Suisse

Catching falling knives is a dangerous game for investors at the best of times, but even trickier when the dust is yet to settle from the Brexit fallout.

The City’s number-crunchers have begun to pick stocks they believe have been sold off too hastily in the market turmoil and G4S emerged as a new favourite of Credit Suisse.

The broker upgraded the embattled security firm to outperform, helping the shares surge 15p, or 9%, to 179p as it argued that the case to pile into the shares is based on more than just an earnings boost from sterling’s slump.

Almost three years on from the FTSE 250 company’s £350 million cash call, investors are still concerned that the company will come begging for more, with net debt still a steep £1.8 billion at the end of last year.

But Credit Suisse analyst Andy Grobler says selling four of its businesses for £300 million as part of its assets sell-off, improving working capital and a more stable business should mean no need to dilute shareholders further.

“We expect the balance sheet to de-lever in the coming years, which means the dividend would be covered and there would be no requirement, in our view, to ask the equity market for additional funding.”

G4S shares are now on an equal footing with where they were before Friday’s referendum result.

Primark owner Associated British Foods, 170p richer at 2520p, was Berenberg’s tip following the meltdown.

The German boutique bank upgraded the FTSE 100 group to Buy, arguing that despite a sales slowdown at Primark stores, the shares are at their cheapest relative to profits for three years.

ABF and G4S were among the best performers on a day when trading screens flashed green and optimism returned to the City, lifting the FTSE 100 index 133.62 points to 6115.82.

Investors stocked up on shares that have taken a beating since Friday, with Prudential recovering 110.5p to 1215.5p, and Aviva up 23.5p to 369.7p, buoyed by a reassuring post-Brexit update from Legal & General, 12.96p higher at 177.96p.

Among the small-caps, shareholders of Sepura were still feeling the effects of the walkie-talkie maker’s painful £65 million rights issue at 35p a share, half the market price.

The shares tanked yesterday on the news and fell a further 11.08p to 42.92p today.