Fenner's valuation 'still too rich', 'sell' says Investec

11th Mar 2014 10:56

Investec has lowered its target price for Fenner from 380p to 375p and maintained a 'sell' recommendation, saying that the company took a 'cautious' tone in its second-quarter update.Fenner, which makes industrial belting and other polymeric materials, reiterated that first-half results will be below last year's as a result of tough comparatives owing to very strong trading in Australia the year before.However, a bigger-than-normal underlying skew towards the second half means that the company now expects "modest growth" for the full year on a constant currency basis."In its first-half pre-close, Fenner reports a mood of caution mixed with signs of improvement, with the benefit deferred for various reasons, including currency headwind. We are cutting our estimates again (by 4-5%), implying no underlying growth in FY14E, but consensus estimates were higher than ours," said Analysts Michael Blogg and Chris Dyett."We consider that the valuation is still too rich for a low-teens margin business with rising net debt and a recent history of downgrades, and a 5p cut to our [...] target price does not change our 'sell' stance."Numis Securities maintained its 'add' rating for Fenner but downgraded its forecasts after the company noted a number of sales deferrals into the second half or next financial year. Meanwhile, finnCap has downgraded its recommendation from 'buy' to 'hold', saying that the stock "appears fully up with events under current conditions with a mixed outlook continuing".The stock was down 5.9% at 420p by 10:55.BC