Broker snap: Gatic puts Alumasc in a hole

15th Jul 2011 14:30

Building and engineering products company Alumasc fell by around one-seventh on the morning it warned that the final quarter of its financial year has experienced a deterioration in margins, putting the final dividend in doubt.Not surprisingly, finnCap is putting its forecasts under review. "We downgraded our rating on Alumasc from Buy to Hold in April, with a price target of 165p; on lower forecasts, we feel a more appropriate level likely to be around 120p," the broker said. "The shares will suffer today on this disappointing statement, which appears at odds with the majority of recent trading updates," it added.Peel Hunt is keeping the faith, however. "Slower growth is now expected in precision components and building products in fiscal 2012, but we are still forecasting progress for the group," Peel Hunt analyst Robin Hardy said. "Fiscal 2011 has suffered a hit on costs at Gatic [the manhole covers division], and we are lowering forecasts for both periods. The dividend, while uncovered in fiscal 2011, is still cash-fundable," Hardy noted. The broker is sticking by its forecast of a 10p full-year dividend.