In a downbeat market, one of the day's bigger risers is an unfamiliar one.
Balfour Beatty has been in the doldrums following profit warnings, a failed bid from Carillion and general market malaise. But the company's share price decline could have been overdone, according to Deutsche Bank. The bank has raised its recommendation from hold to buy and its target price from 245p to 270p. Analyst Manu Rimpela said:
After several profit warnings in the Construction division, two chief executives (it currently has no chief executive) and a failed approach by Carillion, the shares have been one of the weakest performers in the sector, down 24% year to date.
Given the lack of visibility and clear strategy, it would be daring to argue for a sudden, sharp Construction recovery. However, the current share price implies zero value for Construction (excluding joint ventures), which is overly negative. The announced sale of Parsons Brinkerhoff addresses both the balance sheet concerns and together with the stable PPP-assets portfolio anchors the valuation. This combined with the overly negative market sentiment provides an opportunity.
The positive comments have helped lift Balfour 5.4p or nearly 2.5% to 225.6p.
