Broker snap: Rotork reassures on revenue

26th Nov 2010 13:23

Despite upping the target price for engineering firm Rotork, Panmure Gooden does not think it is steep enough to justify a change from its 'hold' rating."Comfort levels concerning revenue and margin growth are on the up for Rotork and, accordingly, we increase earnings estimates through to 2012E", says analyst Oliver Wynne-James.Following a meeting with Rotork, the broker says it is more comfortable over its revenue prospects and raises estimates by 1%, 3% and 7% for 2010, 2011, and 2012 respectively.Net cash forecasts have been maintained despite the earnings increases, as the broker has increased its capital expenditure assumption and "given some resource back to working capital"."We increase the target enterprise value to sale rating from 2.7 to 2.9 to reflect the margin improvement and the upside from investing its cash", Wynne-James says.While the target price is increased to 1,670p from 1,530p, the broker cannot build a valuation case to change the 'hold' recommendation.