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25 February 2009
Industrial Gases (Chemicals) / UNDERWEIGHT
Stability in a still uncertain world
Industrial gases remains one of our preferred places to shelter within global
chemicals as further economic woes hit most companies within the wider sector.
This has been highlighted by the sector’s strong performance through 2008 and
by the 2009 outlook statements of companies which have reported to date. In
the mid-term technology changes, particularly in the energy, healthcare and
environmental sectors, should continue to drive strong investment. We expect
preference for the sector to continue as investors look for ‘defensive growth’ at a
The sector has outperformed global chemicals by 15% over the past 12 months.
However valuations have come down substantially, with P/Es down on average
27% over 12 months. Through 2008 investors put faith in the traditional
industrial gas companies of Air Liquide (Neutral, TP €
€ 63, from €
€ 81) and Praxair
(Neutral, TP US$72, from US$68) with their proven track records. Through 2009
we believe investors should switch to the higher beta, ‘newer’ industrial gas
companies Linde and Air Pr