Berenberg raises target on Breedon following CEMEX acquistion

Berenberg raised its price target on the group from 85.0p to 105.0p, stating that the addition of CEMEX's 100 active operations spread across the UK - including 28 active quarries, 49 active RMC plants, 14 active asphalt plants, four active building product plants and a cement terminal - would increase Breedon's domestic market share while also offering a "complementary footprint" to attractive regions.

"In our view, the assets acquired by Breedon are complementary to the group's current footprint, increasing exposure to the north-east, Scotland, Wales, Norfolk, the East Midlands and Yorkshire," said the broker.

"In particular, we are excited about the mid-term potential in the north-east if the UK government does increase public sector investment as speculated."

Moreover, Berenberg pointed out that Breedon's management believes the group will achieve synergies of £2.0m from taking out overheads.

"Even if we assume no top-line growth, if the group can increase margins in line with its UK division, we think EBIT for this acquisition could rise to c£19.0m, 19.0% above current forecasts.

"With the infrastructure pipeline robust and plenty of synergies and operational improvements to come from this acquisition, we remain buyers of Breedon."