BALFOUR BEATTY (=) : US military housing monitorship ends

研报英文原文证据摘录

BALFOUR BEATTY (=) : US military housing monitorship ends

Refinitiv

Investment case, valuation and risks

Balfour Beatty (Neutral, Target Price GBP9)

Investment case

Balfour Beatty is a UK construction and technical support services business that

focuses on infrastructure. It has exposure to nuclear, energy grid, defence and data

centres. We believe the current share price fairly reflects this full house of hot topic

exposures.

Valuation methodology

We set our TP at 900p, based on a fwd. 1-yr PE of 17.5x, which is one standard deviation

above the 10-year mean and the upper limit, justified by the medium-term growth

prospects reflected in our above-consensus forecasts. At 17.5x, the PE premium relative

to peers would be closer to 60% vs 45% today and the 10-y historical average of 40%.

This is justified, in our view, by the group's materially higher growth rates and its position

as one of the very few UK infrastructure providers able to cope with the largest and most

complex projects as well as its competitive positioning in the higher-margin energy

segment. However, our 17.5x target PE multiple suggests this positioning and growth

outlook are already largely discounted by the market.

Risks

To the upside:

- Rapidly falling interest rates would stimulate the infrastructure building market

- UK Pension fund money may flow to Infrastructure funds under the provisions of the

Mansion House Accord making project funding less capital constrained.

- Balfour may win more of the contracts for which it is bidding than we have assumed.

To the downside:

- Construction is a cyclical sector and materially worsening macro-economic conditions

would have a deleterious effect on the business.

- Construction and real estate, even in infrastructure, is interest rate-sensitive and higher