- Kier Group
- 09 February 2024 15:28:18
Source: Sharecast
Berenberg started Keller off with a 1,250.0p target price and a 'buy' rating, stating the group was now "refocused and on solid ground".
"After years of the business being increasingly global, in recent years Keller has been reducing its geographic footprint and has focussed on deepening its product set and capabilities – rather than concentrating on adding breadth to the business," said Berenberg.
"By its nature, the company's margins are low – albeit higher than most general contractors – and somewhat volatile at times; however, we think that its North American exposure is a key differentiator, while its cash generation provides it with strategic options and the stock is cheap."
As far as Kier, Berenberg initiated coverage with a 210.0p target price and another 'buy' rating, telling clients that the "heavy lifting" was now done.
The German bank saiid that after "a troubling few years", what now remains is a core focus on the infrastructure, construction, highways, property and utilities businesses, leaving "a much simpler and more disciplined group".
"The crux of the investment case is that the initial stages of the turnaround have shown promise and cash generation has improved markedly. We estimate that in FY June 2025 the business should deliver adjusted EBIT north of £150.0m and FCF (after interest, capex, exceptionals and so on) just below £100.0m," said the analyststs.
"Using average net debt, that would leave the stock trading on 5.3x EBIT with a 16.4% FCF yield – that is, delivering to the existing plan consistently should warrant a material rerating."
Reporting by Iain Gilbert at Sharecast.com