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UPDATE: Bank Of America Initiates Coverage On DST Systems On Positive Outlook

Dwight Einhorn

In a report published Monday, Bank of America analyst David Ridley-Lane initiated coverage on DST Systems (NYSE: DST) with a Buy rating and $102.00 price target.

In the report, Bank of America noted, “DST Systems provides information processing and services for the financial services and health care end markets. We forecast a 3% revenue CAGR (2013-2016E). DST's platforms provide operating leverage on growth, and we forecast a 5% adjusted operating income CAGR. We forecast adj. EBITDA of $496mn in 2014 and $513mn in 2015.

"We base our $102 price objective on 7.5x our 2015 EBITDA estimate and treat DST's non-core investments as cash. Our target multiple is a discount to DST's 10-year median multiple of 8.3x and the current 9.2x 2015 multiple of peers (BR, SEIC, FIS, FISV) to reflect subaccounting headwinds in the Financial Services segment.”

DST Systems closed on Friday at $92.15.

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