Elementis plc a ‘buy’ again for Jefferies International over debt reduction
The investment bank’s analysts were surprised by the harsh share price reaction after recent better than feared interim results
() has been upgraded to ‘buy’ from ‘hold’ by Jefferies International, with its share price target maintained at 95p, after the group’s recent interim results proved better than feared.
Despite US$23mln of seasonal working capital outflows and US$7mln of cash one-offs, the specialty chemicals firm’s net debt at the end of the first half remained flat compared to 2019, which Jefferies’ believes suggests the potential for meaningful reduction in the second half – its analysts estimate by US$45mln.
READ: Elementis sales tumble 15% in April after solid first quarter
Elementis did not provide any full-year guidance due to the coronavirus (COVID-19) pandemic uncertainties but did highlight a “modest sequential demand improvement” in June and July from a trough in May, as countries begin to emerge from lockdown and industrial production improves.
“We found Elementis’ share price reaction – down 11% on the day and 21% lower a week later – unexpected,” the US investment bank’s analysts commented.
“COVID-19 headwinds notwithstanding, the key tenets of the investment case – improving newsflow around the Mondo and SummitReheis acquisitions, cost savings, medium-term financial targets – remain intact in the medium- to long-term,” they added.
Elementis shares were up 10% to 72.4p in late morning on Tuesday.
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