Fenner Plc, the world’s largest conveyor-belt maker, rose to a six-month high after UBS AG said the stock had been valued at 25 percent less than the average of other U.K. engineering firms covered by the bank.
The shares gained 5.2 percent to 407.4 pence in London, the highest price since March 20 and the biggest gain since April 24. That extended Fenner’s advance in the last 10 days to 19 percent. The volume of shares traded was 42 percent higher than the three-month daily average.
“After a poor first half, we believe the shares have been unfairly punished and continue to discount further misses,” Robbie Capp, an analyst at UBS, said in a note to clients initiating coverage with a buy recommendation and a price prediction of 460 pence. “Whilst the end-market outlook is muted,” Capp said, “the stock is still cheap on our numbers.”
Fenner trades at a discount to similar companies because “the market is too focused on the plight of” capital expenditure by mining companies, Capp said. Mining production and the continuing need for conveyor belts will benefit Fenner more than possible capital expenditure slowdowns might hurt the company, according to the analyst.
Fenner anticipates a return to growth in the fiscal year that started Sept. 1, the company said in a statement three days ago. Full-year results for last year are set to be in line with forecasts, with trading conditions “broadly unchanged” since mid-July. Fenner, based near Hull, England, is scheduled to report earnings on Nov. 13.
Its conveyor belt unit could achieve annual growth of about 8 percent in more normal market conditions, Capp said. The analyst’s price target still values Fenner at a 10 percent discount to comparable companies based on multiples using estimated earnings before interest, taxes and amortization.
Among other analysts who report recommendations to Bloomberg, five advise buying the shares while nine have a hold recommendation.