Stockbroker Merrion Capital has upgraded building materials group Kingspan to a "buy" rating as the Grenfell Tower tragedy reinforces the importance of "quality fire-resistant products, in which Kingspan is the market leader".
Despite cautious guidance in the company's first-quarter trading update, Merrion believes prices of building products in Ireland will increase as a result of a shortage due to demand.
The building materials group released a statement on Monday saying it had completed a €500 million committed revolving credit facility. The group said the facility provided increased committed capital on more favourable terms and pricing.
Merrion said the underperfomance of Kingspan’s shares provided investors with a good entry point if they planned to hold the stock on a long-term basis.
“After the recent correction, we feel that Kingspan’s downside is supported by valuation and creates a decent entry point for long-term investors,” wrote Darren McKinley, senior equity analyst at Merrion.
In the first quarter, Merrion had firm indicated a preference for Smurfit Kappa over Kingspan but now sees merit in changing its preference to Kingspan after Smurfit Kappa's outperformance.
