Broker snap: De La Rue upgraded by Investec to 'buy'

26th Nov 2013 10:44

Investec has upgraded its rating for banknote printer De La Rue from 'hold' to 'buy' following recent weakness in the share price with the stock offering a five per cent dividend yield.The broker said that there weren't any surprises in the interim results released on Tuesday following a detailed pre-closing trading update in October."Clearly there are challenges ahead, but the underlying business continues to improve, just not as quickly as we previously expected due to market headwinds," said analyst Thomas Rands.First-half revenues fell 5% to £234m, but benefits from the cost savings programme helped operating profits increase 19% to £38.5m."The Improvement Plan cost savings are on track to deliver £40m [this year], as expected, with another £10m in the 2H. Further operational efficiency improvements remain. We leave our forecasts unchanged," Rands added.Investec estimates revenue of £536.1m in the year to March 31st 2014, representing 11% growth from the £483.7m reported the year before. Earnings per share are expected to jump 56% from 38p to 59.1p.The target price for the stock has been lifted from 885p to 890p, reflecting the 10-year average price-to-earnings ratio of 15.1.The stock was up 11.29% at 931.5p by mid-morning, up 94.5p on the day.BC