Investec reiterates 'buy' on Spectris, lifts target price
Investec has reiterated its ‘buy’ call on instrumentation and controls firm Spectris after the acquisition this week of Canadian company Engineering Seismology Group (ESG).
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Spectris said on Thursday that it has acquired ESG, a microseismic monitoring equipment and analysis company primarily working in the oil, gas and mining sectors.
“Spectris has made a start on the development of a further platform business with the £36m purchase of ESG,” said Investec analyst Michael Blogg.
He said that ESG “looks primed to offer growth at high margins, albeit from a modestly-sized base”.
Blogg estimated that Spectris paid around two teams revenues for the business, which has been achieving sales growth in the double-digits and operating margins in the “low 20 percents”.
He said that the deal will be around 1% enhancing to earnings per share.
“Spectris’ model is intact and, while its markets embrace both robust and soft areas of demand, we trust the management team to continue generating cash and shareholder value,” Blogg said.
The analyst has lifted his target price for the stock from 2,280p to 2,490p, saying: “Our valuation increases, mainly due to a recent upward re-rating among its US peers.”
The stock was trading 0.4% higher at 1,993p by 12:37 on Friday.