Adding Adecco (ADEN VX; Buy, CP CHF62.0; TP CHF73.0)
We like Adecco, a leading company in the European staffing industry which is
currently trading towards the lower end of mid-cycle multiples relative to the broader
industrial sector. Currently the stock is trading at a c26% discount to its historical
relative multiple. In a slow economic growth environment, given their strong cash flow
and capital discipline, staffers are cheaper relative to others than in previous cycles.
Moreover, key leading indicators for the staffing industry continue to support in a slow
growth cycle. If inflation stays muted, low financial gearing and net positive cash on
their balance sheet should help staffing companies sustain their current dividend
levels, making them an attractive investment opportunity.
Removing Essilor (EI FP; Buy, CP EUR101.8; TP EUR137.0)
We still have a Buy rating on Essilor but remove it from the portfolio because we
believe that Adecco offers a more attractive investment opportunity.