Companies: WHY   

With offer talks having been terminated, analysts Mike Allen and Paul Jones of Panmure Gordon have reduced their price target for consultant White Young Green from 352p to 234p and labelled its shares a ‘sell’.

Arguing that ‘there are better ways to play the smaller end of the engineering consultancy market, in either Scott Wilson or WSP’, they outline several factors that might concern investors going forwards. As well as the group’s above-average levels of debt – net debt at the recent year-end is expected to be up to £73m – they note that the group lacks the degree of geographic diversity enjoyed by those aforementioned peers. Moreover, they suggest White Young Green could suffer if there is a slowdown in UK and Irish public sector spending.

That being said, White Young Green, which raised pre-tax profits by 31% to £9m at the half-year, continues to trade strongly and secure ‘a broad range of work across a variety of market sectors and geographies’. Recent project wins include an £11.8m appointment by the European Commission to lead an EU-funded infrastructure initiative in the Western Balkans and £4.5m of work with Network Rail, as well as a number of UK education sector appointments.

Given recent price weakness and Panmure Gordon’s EPS forecasts for June 2008 and 2009 of 29.3p and 35.3p, the shares trade on lowly prospective multiples of 8.9 and 7.4. While we like White Young Green’s track record, we agree that it is worth reducing your exposure to the company, first recommended by Growth Company Investor at 193.5p, in order to switch into more diverse situations such as WSP and Scott Wilson.

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White Young Green	LSE	£42.35m	81.50p	-1.50p
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