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Public sector outsourcing firm May Gurney has announced its second major water-related contract win of 2010 and broker Charles Stanley is expecting more to come as the AMP5 cycle moves into full swing.

'In our view, there is strong potential for May Gurney to feature in further contract announcements in the water sector, particularly as the AMP5 cycle gets underway and runs through to 2014. We also believe that the bid pipeline remains strong within the group's other sectors, notably the environmental and highways sectors,' Charles Stanley analyst Matthew Earl said.

The broker has a 'buy' recommendation on the shares and a price target of 305p. 'The shares have tailed off over the last few weeks having reached recent highs in early January, which we believe to be unjustified against the attractive features the business provides,' Earl said, adding that a 'strong balance sheet, high cash generation, a net cash position for FY2010 forecast to be £24.3m, and strong management, all, in our view, add to the attractions' of the shares.