Shares digital

Tech company hits value price

by Timon Day

A pair of City analysts appear to be singing from the same hymn sheet over leading materials technology company Cookson. In completely independent moves, both Mark Fielding of Citigroup and Michael Blogg at Arbuthnot downgraded the stock from ‘buy’ to ‘hold’, calling the shares fully up with events. Coincidentally, the pair also have exactly the same target price on the shares of 700p.

After recovering sharply from 500p lows in January, Fielding says the valuation is now ‘more in line with the group’s prospects’ on a forward PE of 11 for 2008 which is about right for both its UK peers and the broader market.

Given the economic uncertainty ‘it is difficult to argue for a significant premium rating for industrial names versus the broader market,’ says Fielding.

Citigroup expects a slowdown in the US this year and Europe from late this year into 2009 but continued robust growth in emerging markets. Cookson has one of the higher proportion of sales into emerging markets among UK engineers at around 30%. This provides a more robust outlook.

The Foseco acquisition seems to be on target to deliver synergy benefits of £6 million this year rising to £16 million in 2009. Currency is a positive tailwind which could benefit profits by some £13 million this year.