Broker snap: Balfour to catch up with sector peers
05 Jan 2009
US bank Citigroup has upgraded its rating on building contractor on the expectation that the share price will play catch-up with sector peers and .
Carillion is up 45% over the last month and Interserve is up 30%, while Balfour Beatty's gain is just 20%. With governments the world over keen to try and kick-start economic activity with heavy spending on infrastructure, Balfour Beatty stands to be a "key beneficiary" from this trend.
Although Citi expects building profits to nearly halve between 2008 and 2010, the bank's calculations suggest that Balfour's dependence on the private sector is falling. "Our detailed analysis suggests that c. 15% of total EBITA is derived from the private sector. We expect this to fall further," Citi said.
The bank has increased its price target from 280p to 400p. "Our valuation does not specifically take account of the growing opportunity in Nuclear new-build (36p per share) or likely involvement in the significant Cross-Rail project," said Citi analyst Joe Brent.
