Thursday, 5 March 2015

Temporary power remains a sector I want to be exposed to (Aggreko)

I last wrote about the temporary power company Aggreko just over six months ago (link here) concluding that the 1500-1600p level was an interesting one to be picking up stock.

Today's numbers - as nicely captured by the graphic below - had good and bad points... great surprises for a company with such a focus on the emerging markets (with all the requisite FX translation and country-level volatility currently):

Still it was pretty balanced and hence the underlying (pre that inevitable FX negative translation impact) trading profit move was fairly flat: 

Divisionally I liked the good level of diversification outside of the core utilities business...

...and I particularly liked the continued good fleet utilisation which indicates an underlying level of good business efficiency.  I also note - as per an earlier slide - a level of debt below x1 ebitda.  

The business is clearly bumping along the bottom - hence the flat operating profit guidance for this year.  That still puts the company on a x14s forward EV/ebit ratio with a just under 4% free cash flow yield.  Not ultra cheap (that would be 1300-1400p) but something below 1600p remains a solid level to put a first / further investments in (and each 100p down).  

Ultimately - as discussed in previous notes - the world is short of power and needs these solutions.  Aggreko is a leader in what they do and even though the new CEO has still to unburden himself of his full range of strategic thoughts. Buy on weakness below 1600p and augment each new 100p down.  

No comments:

Post a Comment