STOCKS NEWS EUROPE-UBS downgrade hits Tate & Lyle shares-traders

Shares in food and sugar group Tate & Lyle (LSE: TATE.L - news) fall towards the bottom of Britain's benchmark FTSE 100 (FTSE: ^FTSE - news) index, with traders attributing the stock's decline to a move by UBS (Berlin: UBRA.BE - news) to cut its rating on the company to "sell" from "neutral" on valuation grounds.

Tate & Lyle shares are down by 3.2 percent at 781 pence in early morning trade - making the stock the second-worst performer on the FTSE 100 behind energy group BG, which is down by 4.3 percent. The FTSE 100 itself is down by 0.1 percent.

"We believe Tate & Lyle's current valuation is too high. It does not adequately reflect the risk that sucralose prices continue to decline as 'generic' competitors improve product quality and access greater scale," UBS writes in a note.

While UBS has moved its rating on Tate & Lyle to "sell", the majority of analysts still rate the stock as a "buy", according to Thomson Reuters StarMine data. StarMine shows that 5 analysts have a "buy" rating on Tate & Lyle, 4 rate it as a "strong buy", while 6 have the stock as a "hold" - with 2 on a "sell" and 1 on a "strong sell" rating.

Data from Thomson Reuters StarMine shows that Tate & Lyle has a lower estimated price-to-earnings (P/E) ratio over the next 12 months than the average for the FTSE 100 and than that of some of its peers.

According to the StarMine "smartestimate" - which favours top-rated analysts - Tate & Lyle has a forecast P/E over the next 12 months of 13.0. This is lower than an average comparative P/E of 12.2 for the FTSE 100 and is also below a comparative P/E of 17.5 for French food group Danone (Paris: FR0000120644 - news) and 17.0 for Nestle (VTX: NESN.VX - news) .

Tate & Lyle shares have risen 2.5 percent since the start of 2013, less than an 11 percent gain on the FTSE 100.

Reuters messaging rm://sudip.kargupta.thomsonreuters.com@reuters.net