Nomura has reiterated its buy recommendation and 1,240p target price for engineering and project management services outfit AMEC, hailing the firm's solid first quarter and strong outlook for future acquisitions.

AMEC's year-to-date performance has been in line with expectations, according to Nomura. The broker highlights the unchanged backlog (from December 2011) at £3.7bn "underpinned by strong activity across all segments with a focus on increased market share in the Middle East, accelerated activity in nuclear asset support and harvesting of strategic relationships with key IOCs including BP, Exxon and Shell."

Meanwhile, the broker brings attention to the Chief Executive's comments that the 2011 acquisitions are integrating well and says that similar comments were made following the MACTEC purchase in May.

"We believe that the company will consider bolt-on acquisitions as well as transformational opportunities and expect something to materialise over the coming three to six months," the broker said.

Furthermore, the valuation is "compelling" with the stock trading at 11.5 times 2013 earnings, well below the historical average of a 18.5 multiple (2005-2011). The sector is currently trading at 12.5 times 2013 earnings on average; AMEC is trading below this despite a sector-leading earnings per share (EPS) outlook.

BC

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