MARKET UNDERVALUES GEC SHARES

GEC is undervalued by the stock market, argues Charles Armitage of investment bank Lehman Brothers. He is looking at a share price this year of 400p and for 1998, 430p. Armitage contends that even if the sale of the French defence electronics complex Thomson-CSF is aborted by the country’s new left-wing government, GEC still has […]

GEC is undervalued by the stock market, argues Charles Armitage of investment bank Lehman Brothers. He is looking at a share price this year of 400p and for 1998, 430p.

Armitage contends that even if the sale of the French defence electronics complex Thomson-CSF is aborted by the country’s new left-wing government, GEC still has potential to expand its Marconi defence interests. The analyst cites GEC’s possible acquisition of Alenia Difesa of Italy, with which it has an `understanding’ for defence work, or of Siemens-Plessey which is for sale and would fit with GEC-Marconi.

Armitage estimates that either business would add $1bn to GEC-Marconi’s $5bn sales book.

Armitage concedes that a risk aspect of the group is the GEC-Alsthom power-generating interests, which are suffering from the industry’s `overcapacity, awful pricing, and low growth’.