Shares in British testing, inspection, and certification firm Intertek Group
sheds 1.5 percent, a top five FTSE 100 faller, with the index
up 0.1 percent, as traders cite the impact of a downgrade in rating by Jefferies
International to "underperform" from "hold", mainly made on valuation grounds.
Jefferies points out that Intertek, up 12 percent since November versus an 8
percent advance by the FTSE 100, may be more susceptible to continued weakness
in commodities and a more challenging industry space.
"Recent moves in consensus earnings forecasts have been slightly down and
with no catalyst for upgrades in the near term, the continued re-rating has left
valuations looking vulnerable," the broker says in a note.
Jefferies says that while third-quarter updates from Intertek and its
French peer Bureau Veritas were broadly in line, and Swiss group SGS's
investor days prompted small downgrades, the re-rating has continued,
with all three major testing firms now trading close to prospective price
earnings multiples highs, and close to all time relative highs.
"At these levels we need upgrades for current valuations to be maintained
and we do not consider this likely over the next 3-6 months," the broker says.
Jefferies repeats its "underperform" rating on Bureau Veritas, and "hold" on
SGS, with only minimal changes to forecasts and no changes to price targets for
Bureau Veritas shares are up 0.3 percent in Paris, while, in Zurich, SGS
gains 0.5 percent.
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