Liberum hikes target price on Tyman following 'very strong' trading update

Liberum hiked its earnings per share estimates by 11-12% on news that the year has started "very strongly" for Tyman, with like-for-like growth of around 14% versus 2019.

The investment bank stated Tyman management had stabilised the business and it was now benefitting from the "strength of its end markets", with a particularly solid performance from the US residential market as both the new build and repair, maintenance and improvement metrics experienced "excellent" activity levels.

While Liberum noted there was "clearly a risk" that as restrictions end and competing alternatives for expenditure open up that appetite for moving or improving starts to wane. It expects that activity will "hold up well" as housebuilding remains "quite subdued" by historic standards.

Looking forward, the analysts said Tyman's Capital Markets Day on 20 May will provide "an excellent opportunity" for management to update on progress on the group’s strategic initiatives, with Liberum expecting to hear more on the firm's strategy to drive margin expansion, deliver growth and create "a more cohesive culture" to enable extraction of synergies.

"Tyman's shares have re-rated significantly as investors have shown an appreciation of improving margins and stabilising market share as well as an understanding of the strength of end markets. Their valuation is now stretched compared to recent history," said Tyman, which reiterated its 'buy' rating on the stock.

"However, Tyman's shares are quite cheap in comparison to the building materials sector. We find this anomalous given its leading market position in the US (with 40% share), high and rising margins and combination of internally driven improvement and exposure to the strongest markets."