UBS lowers UK Synthomer's valuation but raises share price target

17 January 2014 11:41 Source:ICIS News

LONDON (ICIS)--Investment bank UBS on Friday lowered its valuation on Synthomer’s shares from ‘buy’ to ‘neutral’ but upgraded its 12-month share price target for the UK specialty chemicals producer on the back of a recovery in the European construction sector and restocking as feedstock butadiene prices trend up after two years of declines.

The Swiss bank increased Synthomer’s share 12-month price target from £2.55 to £2.80.

“We believe we are in line with consensus expectations for 2013 [Synthomer's] PBT [profit before tax] of £92m. From our discussions with European chemicals companies, acceleration in Europe is not yet evident and with management inclined to be conservative we doubt the guidance will be bullish,” said UBS.

The bank said, nonetheless, 2014 will be a strong year and highlighted its expectations for European cement volumes to increase (from -8% in 2013 to 1% in 2014).

Synthomer, formerly known as Yule Catto, is one of the three main sellers of styrene butadiene rubber (SBR) latex, alongside Germany-based producers BASF and LANXESS, according to UBS.

By Jonathan Lopez