Sugar and starches maker Tate & Lyle (LON:TATE) could make a sweet investment, according to broker Investec.
The broker now rates the stock a ‘buy’, having previously had a ‘hold’ recommendation, with a new target price of 850p from 700p.
Analyst Martin Deboo likes the look of the FTSE 100 company’s evolving Specialty Food Ingredients (SFI) strategy, which was launched in May 2010.
However, the upgrade is not without reservations.
He believes the market is fragmented, while the failure to capture National Starch – now in the hands of rival Ingredion – is still a setback in his opinion.
Deboo reckons more M&A activity is needed, but deals seem to be proving pricey.
He is also cautious about the SFI model, which is becoming somewhat ubiquitous.
“The SFI throne has many pretenders, the strategy is far from unique and we think that Tate are coming from behind in foods, as opposed to soft drinks,” said Deboo.
“Much depends, therefore on strategic clarity and quality of execution from here.”
The analyst said he will be looking clear up uncertainties regarding the SFI plan at Tate’s strategy seminar in Chicago on December 6.
“Questions to answer, then, in the Windy City,” Deboo concluded.
Register here to be notified of future Tate & Lyle articles.
Zurück
