Companies: AMEC    COST    ENN    SDY   

'Much to impress in construction'

Specialist construction and engineering business Costain is one of a number of construction-sector firms to have impressed KBC analyst Mike Foster in recent weeks.

Although the company has released little news to the market since mid-April, Foster has upgraded his view of the shares from hold to buy, reasoning that 'this is a growth story relative to its peer group'. Currently forecasting an £18.5 million profit before tax from £755 million of sales for the year to December, Foster adds that 'Costain is proving to be a contractor with superior top line growth and cash on a lower rating'.

Currently trading at 39.25p per share, he has a target price of 48p on current estimates.

Also listed in the construction and building materials sector, both Ennstone and Speedy Hire have excited Foster too.

With regard to sand and gravel quarrying business Ennstone, he notes that 'trading is slightly ahead of expectations' and has 'nudged up' profit before tax forecasts for the full year by £100,000 to £8.4 million 'based on good momentum going in to H2'. As for Speedy Hire, Foster reckons the shares – now trading off a prospective p/e of 9.4 and expected to yield a near three per cent dividend – are 'significantly undervalued'.

Despite its jointly-owned Fluor AMEC business recently receiving three reconstruction contracts in Iraq worth a combined $1.6 billion, however, Foster is less upbeat in relation to project management and services business AMEC. Citing a paucity of future revenue visibility and an estimated £242 million of debt, he urges corporate clients to sell.