Stock Market News
Kepler downgrades Tate & Lyle to 'reduce', looks to lock in profits
Kepler Cheuvreux downgraded Tate & Lyle to 'reduce' from 'buy' and cut the price target to 620p from 630p as it looked to lock in profits since its upgrade of the stock.
The bank cited doubts about Tate's ability to beat peak-year 2017/18 in terms of operating performance as the main reason for its change of stance.
"Although we expect the current year to be quite similar EBIT-wise, we see big downside risks to the Sucralose and commodities businesses (together circa 30% EBIT) from 2019/20E onwards. We think the market misunderstands the dynamics there, and we are 10% below consensus EBIT numbers for 2019/20E and 15% for 2020/21E."
Kepler said that at 15x estimate 2019/20 price-to-earnings, the stock is no longer cheap.
"A price-to-earnings comparison with main peer Ingredion shows a 20-25%+ premium for Tate & Lyle. Based on our estimates, investors are already willing to pay for the potential of M&A/buybacks. Given the focus on operational performance in Tate's remuneration policies, we do not believe a big buyback is likely.
"On M&A, we have our reservations regarding potential for value creation, given the transaction multiples seen in the sector."
At 1030 BST, the shares were down 2.4% to 662.80p.
The bank cited doubts about Tate's ability to beat peak-year 2017/18 in terms of operating performance as the main reason for its change of stance.
"Although we expect the current year to be quite similar EBIT-wise, we see big downside risks to the Sucralose and commodities businesses (together circa 30% EBIT) from 2019/20E onwards. We think the market misunderstands the dynamics there, and we are 10% below consensus EBIT numbers for 2019/20E and 15% for 2020/21E."
Kepler said that at 15x estimate 2019/20 price-to-earnings, the stock is no longer cheap.
"A price-to-earnings comparison with main peer Ingredion shows a 20-25%+ premium for Tate & Lyle. Based on our estimates, investors are already willing to pay for the potential of M&A/buybacks. Given the focus on operational performance in Tate's remuneration policies, we do not believe a big buyback is likely.
"On M&A, we have our reservations regarding potential for value creation, given the transaction multiples seen in the sector."
At 1030 BST, the shares were down 2.4% to 662.80p.
Related share prices |
---|
Tate & Lyle (TATE) share price |
Stock News headlines are gathered from financial news sources around the web. Views and opinions on each item are from their respective authors and website. They are not opinions of LiveCharts.co.uk
Get a free widget for your website with our latest headlines.
You can now add our live prices and new headlines to your website.The news widget features quotes for Oil prices, spot Gold price and Indices plus a choice of news channel for healines.
Top Shares pages
- Share price quotes
- Share charts
- Share watch list
- Company Results Calendar
- Top Large UK Shares
- UK Market Sectors
- Stock market news
- Company news
- Share tips
- A-Z company search
More share features
POPULAR Share Prices
- Royal Mail share price
- Lloyds share price
- HSBC share price
- Barclays share price
- Prudential share price
- Santander share price
- NEXT share price
- Diageo share price
- BP share price
- Vodafone share price
- British Airways
- Centrica share price
- Tesco share price
- Taylor Wimpey Share Price
- National Grid
- GKP Share Price
- Marks and Spencer
- Rolls Royce
- Rio Tinto
- THG Share Price
- Aviva Share Price
- Boil Share price
- Easyjet Share Price
- Genedrive Share Price
- SSE Share Price
- IAG Share Price
- Boohoo share price
- HE1 share price
- AVCT share price
- BOOM share price