Broker snap: Time to lock in some profit at Kier

12th Nov 2010 12:02

Prospects in the medium term look good for Kier Group, says Panmure Gordon, but closer issues in housing are likely to limit share price growth. The housebuilder and contractor reported a good start to the current year "broadly in-line" with management expectations.Healthy order books, strong cash flow and good margins continues to benefit its Construction division. "Its position on a number of frameworks provides good revenue visibility; currently all of estimated 2011 revenue is secure, as is 51% of 2012", said analyst Andy Brown.While Support Services is in-line with "enhanced medium-term opportunities" after the spending review, Housing expects a "potential hiatus in social housing spend, as the sector comes to terms with new funding mechanisms, while private housing has made a slow start", Brown says.Panmure's forecasts have been retained with 2011 pre-tax profit (PTP) estimated to be £60m, earnings per share (EPS) to be 117p, while market consensus sees PTP being £59m and EPS 114p.The broker's valuation sees a price earnings ratio of 9.8 for the 2010 calendar year rising to 10.5, which is in line with the sector average. "The dividend yield is an attractive 5.1%"."It is now appropriate to lock in some profit", says Brown, downgrading from a 'buy' to 'hold', with a target price of 1,160p.