DAVY VIEW

The more we look at the Cemex deal, the more we like it. The timing is ideal, taking advantage of both end-market weakness and an indebted competitor. There appears significant potential to improve profitability while growing share in regions in which Breedon is under-represented. Strategically, the group is acquiring materials businesses with strong reserve backing (group mineral reserves are now in excess of 1bn tonnes). All the above comes without over-paying or stretching the balance sheet. The stock has done well but we think there is more to go and therefore upgrade our earnings forecasts and raise our price target to 107p.