Broker tips: Immunodiagnostic, Dechra, May Gurney

1st Dec 2010 13:03

Immunodiagnostic Systems (iSYS) has had a good run but Panmure Gordon observes that the stock has almost reached its target price, and so downgrades the shares.The diagnostic testing kits supplier reported strong interim results Tuesday, significantly better than the broker's forecasts with earnings per share of 19.5p compared with the broker's estimate of 17.6p.The manual vitamin D testing revenues grew 35% to £13.5m and the growth is "consistent with market growth", the broker says, "as vitamin D testing continues to grow at a strong pace whilst there seems no end in sight of the emergence of more scientific data to link vitamin D to a myriad of diseases".Due to the low tax charge in the first half of 2011, the broker upgrades 2011 forecasts by 8%. However, due to increased competition to iSYS Panmure downgrades 2012 and 2013 estimates by 1% and 5% respectively.The target price of 1,000p has been retained which, with the share price trading close to that level, makes the shares now a 'hold' rather than a 'buy' in Panmure Gordon's view. Dechra Pharmaceuticals' latest acquisition has prompted finnCap to increase its expectations as the veterinary products group brings more products into its portfolio, offering the opportunity to expand its market.Dechra has bought the private veterinary pharmaceutical company Genitrix for £5.4m, with an additional contingent £0.8m which is linked to sales targets.Genitrix recorded revenues of £2.4m in its last financial year, "which will obviously augment Dechras' top line," says analyst Keith Redpath.While there will be some minimal restructuring costs, the broker expects the acquisition to add about £0.5m to operating profit in the year ending June 2012. "This will fall through to increased earnings per share, making the deal earnings-enhancing", Redpath adds.Additionally, Dechra hopes to put new products (from Genitrix) through EU approval processes, expanding its opportunities in Europe.The broker is currently reviewing its forecasts but expects to upgrade them. For the time being its 620p target price and 'buy' recommendation are retained.Numis says the outlook is positive for May Gurney as the cash-strong group moves to a progressive dividend policy.Raising the interim dividend by 16% "will be well received", says the broker, as the infrastructure maintenance specialist increases it to 2.08p.Adjusted pre-tax profit of £12m and diluted earnings per share of 12.1p is in line with the broker's forecast, as is net cash of £33.2m."May Gurney is a well regarded blue collar operator, has net cash, accounts conservatively, generates cash, is illustrating rigour and realism in its budgeting and management of forecast expectations, and has attractive market positions", says analyst Francesca Raleigh."It has been realistic on pressures to come in Highways...and there are good growth prospects in Utilities...and Environmental", adds Raleigh.A target price of 279p is confirmed, along with a 'buy' recommendation.