Servcorp: Upgraded Earnings Outlook, Strategic Middle East Expansion and Attractive Valuation Support Buy Rating

Servcorp Limited, the Real Estate sector company, was revisited by a Wall Street analyst yesterday. Analyst Caleb Weng from PAC Partners maintained a Buy rating on the stock and has a A$11.67 price target.

Caleb Weng has given his Buy rating due to a combination of factors tied to Servcorp’s upgraded earnings outlook and attractive valuation metrics. He highlights that management has raised profit guidance on the back of sustained operational momentum, better revenue efficiency, and robust free cash flow generation across the global network, with free cash flow now expected to exceed $100m and dividends to be at least 32 cents per share. Weng expects this earnings growth trajectory to persist as recently opened floors mature, virtual office demand stabilizes at higher levels, and strong operating leverage drives high incremental margins from additional clients.

Weng also points to the company’s strategic expansion in Saudi Arabia and the broader Middle East, where Servcorp benefits from first-mover advantages and sees scope to materially increase its floor count over the next few years, supporting outsized regional earnings. Performance in Japan remains solid, with early signs of improvement in Australia and the US, supported by structural tailwinds as businesses increasingly adopt flexible, “Real-Estate-as-a-Service” solutions and hybrid work arrangements. When combined with Servcorp’s undemanding valuation—reflected in a double‑digit free cash flow yield and single‑digit ex‑cash P/E—these elements underpin his conviction that the shares offer compelling upside, justifying his Buy recommendation and higher price target.

Weng covers the Technology sector, focusing on stocks such as Raiz Invest Ltd., EPX, and Credit Clear Limited. According to TipRanks, Weng has an average return of 27.1% and a 65.38% success rate on recommended stocks.