Broker snap: UBS a little sweeter on Tate & Lyle

29th Jan 2010 09:49

Sugar and sweeteners company Tate & Lyle's third quarter trading update confirmed that the recent sweetener pricing round had not gone well for the suppliers, UBS says.The Swiss bank said that in the face of declining demand, the sweetener processors 'have been prepared to price aggressively to protect volumes.'Nevertheless, UBS has upgraded the stock from 'sell' to 'neutral' following the battering the share price has received lately'.'With the stock's enterprise value having fallen to just over 6x our 'normalised' EBITDA [earnings before interest, tax, depreciation and amortisation] estimate, we no longer judge it expensive,' UBS analyst Alan Erskine said. Erskine said he would retain a cautious stance on the stock until the 2011 earnings picture becomes clearer and new chief executive Javed Ahmed fleshes out his strategic vision for the business. The 9% stake held by activist hedge fund Harbinger also clouds the investment case, Erskine added.Despite upgrading the stock, the price target has been trimmed from 425p to 415p.