GNS7 Jul 2011 09:54
Genus‘s trading statement Monday morning was not exactly one to set pulses racing, but the animal genetics company’s strong cash generation prompted Panmure Gordon to up its price target for the stock.
Panmure leaves its profit forecasts for Genus unchanged, but is reducing its year end net debt forecast and increasing its price target from 1025p to 1070p. That equates to a price/earnings ratio of 21 times for calendar year 2012.
Panmure still has a ‘buy’ recommendation on the stock.
“Genus is through its heavy investment phase and cash generation has turned more positive,” Panmure notes.
“We are trimming our year end net debt forecast from GBP74.5m to GBP70.5m.”
The technical picture supports the fundamentals, according to Richard Curr, head of Dealing at Prime Markets.
The advisory certificates for deposit (CFDs) broker notes that “shares in Genus have been in a rising trend channel since September 2010, with its base currently at 974p. While the price action remains above the 50-day moving average at 1,000p, shares are expected to push back past the year high at 1,049p and in line with the channel direction reach new year highs at 1,079p in the coming 2-4 weeks.”
Curr highlights the concerns about the imminent departure of highly respected chief executive, Richard Wood, but says Wood’s successor, Karim Bitar from Eli Lilly, looks like just the man to drive the next phase of international growth.
“The company has exceptional track record of growth, and even near to year highs, Prime Markets believes Genus shares are worth picking up on any weakness in the run up to the full year results at the end of September,” the broker concluded.
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