This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
Shares in outsourcing company Kier Group (KIE) engaged in some hefty moves on the morning of 4 July after the company reported decent H1 earnings along with a mixed outlook. The Brexit vote has had a negligible effect on the company’s performance to date, with turgid order books and a diversified business helping to offset risk. However, management did indicate it sees uncertainty in the market over the medium term and this is a word investors do not like one bit (even less that ‘turgid’ probably)! With investors usually more interested in the future than the past, and a poor UK Construction PMI (worst June print since 2009) inflating those concerns, this has weighed on the Kier Group share price to the tune of 3%.
Nonetheless, mid-way through Monday’s trading session we’ve seen 3 brokers revise their target prices upwards. 6 brokers are currently saying ‘buy’ while 1 is saying ‘hold.’ There are currently no sell ratings on the stock. The spread between the current share price of 1026p and the average 12-month broker target price of 1456p has started to narrow, having last week been at its widest since Dec 2014. Should the share price now continue to converge with the average target price, there could be a potential 42% upside up for grabs on these shares.
When looking for an entry point, bulls will hope for support to kick in around 1000p. Bears will see additional downside to 6-year lows of 900p.
Kier Group’s exposure to the property market makes the company a ballsy play in the current climate, and it could well be that the negotiations on Britain’s exit from the EU are set to take years to complete – if indeed they even begin. Brokers’ bullishness could therefore stem from observations of a still robust property market and expectations of an extended period of time between the UK’s Brexit vote and the invocation of Article 50 – period of relative certainty. Once Brexit-proper (as opposed to simply ‘post Brexit vote)’ is official, the uncertainty will really kick in.
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Augustin Eden, Analyst (4 July)
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