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Broker snap: Synergy's earnings multiple too high
Mon, 01 Dec, 2008
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Broker snap: Synergy's earnings multiple too high
Tue, 14 Oct 2008, 10:52:00
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Related Market Prices
Name
Value
Percent
Change
Synergy Healthcare
411.25p
-0.00%
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Burgeoning start-up costs for decontamination units and higher than expected energy and transportation costs are squeezing margins at <b>Synergy Healthcare</b> more than anticipated.<br /><br />group net operating margins for the six months ended 28 September are forecast to be about 1% lower than the planned 14.5%, due to a lag between improvements in pricing and the surge in energy costs, Synergy said on Tuesday morning. <br /><br />Stockbroker Teather, already at the low end of market consensus with its estimates, has responded by downgrading its pre-tax profit estimates for the sterilisation and infection control firm in 2009 to £27.9m from £29.9m.<br /><br />Teathers estimates full year 2009 earnings per share for Synergy at 38p, which on last night's closing price gives a project price/earnings ratio of 18. <br /><br />"While we continue to believe that the company remains one of the strongest businesses in the sector, with an excellent forward order book, good revenues visibility and lower than expected debt (£154m against our £210m forecast), we are unwilling to chase above historic trading multiples for the sector in the current risk averse market environment," said Teathers analyst Elizabeth Klein.<br /><br />Accordingly, Teathers has downgraded its recommendation on the stock from "buy" to "hold".
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