Broker snap: Peel Hunt sees material increase in Galliford´s target

18th Sep 2012 11:52

Analysts at Peel Hunt have today issued a relatively upbeat note on shares of house-building and construction outfit Galliford. In their own words, "The three-year growth plan has more than delivered, with profit before tax (PBT) of £63m. Driving for a 300 basis-point gain in margins over and above market-driven improvements is the new target and should help deliver profit before tax in fiscal year 2015 of £100m (96p). Dividend policy has been improved again and, on delivery of this result in fiscal year 2015, we forecast dividends per share of 55p. The shares remain cheap on a year three price-to-earnings multiple of less than 7x and a yield of above 8%; our target price of 825p has scope to increase."As concerns the company´s dividend policy, the pay-out´s cover in terms of earnings per share is now forecast to fall towards 1.7x, Peel Hunt says, from a steady 2.0x before. What does this mean? Well, their previous dividend per share forecasts for fiscal year 2013 and fiscal year 2014 were 34p and 38p, but these are revised now to 36p and 43p. The newly introduced fiscal year estimated 2015 dividend per share forecast is for 55p.Lastly, these analysts add that: "when the new strategy to add an extra 300 bps to the margin was first unveiled, we hinted that successful delivery could add another 100p to the target price. This still holds true, and is further supported by the higher dividend element within the income element of the equity valuation. Therefore, while we hold our 825p target price for now, we would expect this to rise materially as we progress through the current financial year."AB