Broker snap: UBS cuts Carillion target by 40p

12th Sep 2011 12:02

UBS has reduced its target price for FTSE 250 building group Carillion from 390p to 350p after raising its pensions deficit forecast."We have increased our pension deficit forecast, as gross assets invested in equities are c50% of the enterprise value, hence a fall of 10% in the equity markets impacts our valuation by 20p," the Swiss broker said. The remaining 20p reduction in the target price comes the broker's uncertainty about growth in the Support Services division.Nevertheless, forecasts have remained largely unchanged on the back of what UBS called a "resilient first half performance".However, the broker has scaled back its Support Services revenue estimates due a more cautious stance on the economy. "However, we believe higher growth might materialise once local authority contracts are signed (the first contracts are expected in second half of 2011) which could lead us to revise our stance."A neutral rating is kept.Shares were 2.05% down at 320p at 11:53.BC