Canaccord trims target for Synthomer as coronavirus hits demand

Analysts at Canaccord Genuity trimmed their target price for shares of Synthomer due to the expected hit from the Covid-2019 virus and after pushing back the expected completion date for the acquisition of Omnova from 1 January to 1 April.

One small positive for the company from the Chinese coronavirus would be increased short and medium-term demand for the styrene-butadiene rubber that it manufactures, which is used in gloves.

But that effect would be more than swamped by the negative effects of the virus on its other businesses, analyst Alex Brooks said in a research note sent to clients.

Brooks also noted the "mixed" industry commentary as regards the first quarter, pointing out that energy appeared to be "markedly weak".

Its Dispersions arm on the other hand appeared to be "fairly robust".

"We nonetheless see a degree of caution on the 2020 outlook as appropriate and have nudged numbers down accordingly," the analyst said.

Brooks lowered his target for the shares from 460.0p to 450.0p but stayed at a 'buy'.

The analyst also pointed out that at his new target price, the shares were would be trading at roughly 10.3 times' its estimated 2021 EV/EBIT, which was in line with the long-term valuation of the sector.