Berenberg cuts target price on Scapa despite 'positive' Q1 update

Analysts at Berenberg slashed their target price on diversified healthcare and industrial company Scapa on Tuesday, but said the group's "positive start" to the year should restore some investor confidence.

Berenberg cut its price target on the group from 520p to 300p but said that Scapa's first-quarter figures, released earlier in the day, showed that things were "not all doom and gloom" for the business, which revealed organic growth in both divisions.

The bank said Scapa's first-quarter trading update was "solid", with revenues increasing 34.6% on a continuing FX basis.

Berenberg noted that even when excluding Scapa's recent contract wins with ConvaTec and Systagenix, the group still delivered 3% organic growth in its industrial business and 4% in its healthcare division.

"In the context of the current share price fall, we think this is a good result," said the German bank. "With positive trading and Scapa clearly confident enough about its case versus CVT (it recently decided to pursue legal action), we feel that the risk is skewed to the upside."

However, Berenberg did opt to adjust its numbers to reflect lost ConvaTec revenues of £27m and underlying earnings of £13m, bringing it in line with consensus.

While Berenberg lowered its price target on the company, the analysts said they still believe in Scapa's long-term story and confidently reiterated their 'buy' rating on the stock.

As of 1310 BST, Scapa shares had picked up 1.45% to 168p.