Numis bumps Cape up to a buy

A recent pull-back in the shares of Cape may have thrown up a 'window of opportunity' for investors in Cape, Numis said.

At the company's last Annual Shareholders' Meeting, management reiterated its expectations for the industrial services provider's full-year 2016 performance.

The company, which is focused on the energy and natural resources sectors, did however expect some contraction in margins. Cape did not disclose exact figures but said it expected a recovery in the second half thanks to a ramp-up in contracts already on the order books and some refocusing of its operations in the UK.

Nonetheless, analyst Thomas Martin opted not to make any changes to his annual forecasts for the outfit.

Martin also pointed out how the shares were now trading at a 2017 price-to-earnings multiple of 9.9 and sporting a 6% dividend yield, versus its sector average of 12.6.

As a result, he bumped up his recommendation on the stock from 'add' to 'buy' and stood by his target price of 270p.

The UK market was continuing to see higher-than-expected costs at Fawley - in part because the projects is larger than anticipated - and lower than expected utilisation for specialist services in the North Sea.

However, the firm said the situation at Fawley would settle down and while specialist work could be deferred it would eventually need to be completed to ensure asset integrity.

Continued strength in KSA and increased project activity in Oman and Kuwait were also expected to drive a recovery in margins in the second half.

Cape also said it would be reviewing its market position across Asia in response to expected activity levels.

Order intake during the first three months of the year also saw full replacement of revenues, with the order book flat at year-end levels.