By Esha Vaish
(Reuters) - British builder Carillion (L:CLLN), which booked an 845 million pound writedown and parted company with its CEO last month, could face further pain due to high levels of cash owed by customers, two brokerages said on Tuesday, slashing their share price targets.
Investec analysts said they had resumed coverage of Carillion resume coverage with a 50 pence rating, down from 300p earlier.
Carillion's shares were trading at 53.95p at 1315 GMT, down 5.2 percent on the day.
The writedown has prompted speculation among analysts that Carillion would be forced to raise fresh funds via a share sale or other means to shore up its balance sheet.
The Investec analysts said their base case assumed that Carillion would pursue a discounted 500 million pound equity issue.
"Our benchmarking analysis suggests Carillion could face further problems," they said, assigning a "sell" rating on the stock having previously rated it a "hold".
The construction sector has underperformed the wider market by 9 percent each year since 2007, Investec said, hurt in part by multi-year, fixed-price contracts with wafer-thin margins.
Carillion's troubles have been compounded by its debt pile and pension obligations, trouble collection cash from clients and slower demand following Britain's June 2016 vote to exit the European Union.
Analysts at UBS cut their Carillion share price target to 47p from 78p on Tuesday and held their "sell" rating citing potential pressure on service margins.
Carillion's July writedown stemmed from receivables - payments owed by clients - but UBS analysts said 27 percent of the builder's receivables remained to be analysed.
"We still believe any restructuring could result in significant dilution to current shareholders," they said.
The company still had receivables of 400 million pounds on its books, 75 percent above the sector average, according to Investec.
A Carillion spokeswoman declined to comment.