Wednesday, 9 December 2015

Ashtead - still a rental grower

Back in early September I wrote positively about the UK listed plant hire business Ashtead noting:

'In short - and despite fears in the market - I see Ashtead as that rare sort of beast: a good value growth stock.  Yes a weaker US economy would not be good news but ironically the immediate impact would be stronger cash flow and utilisation levels, metrics the bears on the stock want to see improve. I still think a 1200p target is a reasonable expectation'

And since then?  Well the share has pushed up well from the early September lows including a good performance today.

Well you can see why...the key metrics are all pointing in the right direction and they nudged up hopes sufficiently to warrant the following comment:

With both divisions performing well, strong end markets and our strategy clearly working, we now anticipate a full year result ahead of our previous expectations and the Board looks forward to the medium term with confidence"

Looking at the results in more detail there was a good continuation with some of the trends identified in the prior report. Decent growth...

...and an inherently positive rental industry penetration trends... an industry where the big are getting bigger: 

Within Ashtead's own business I note that they are continuing to grow their profile...

...whilst keeping physical utilisation rates up...

...and leverage rates are going down:

Other comments from the call included:

Said one more difficult comp quarter to go

Oil/gas falling to 2% revenues, 98% ‘going well’

Confident about US growth potential, UK post May/election slowdown been an oversupply during the summer but ‘all of that is coming back slowly…it is really a matter of timing’ 

Net net with a 33% increase in the interim dividend pushing the yield to around 1.7% the current sub x10 EV/ebit still suggests to me share price progression potential.  As aforementioned I talked about 1200p+ a share last time and that still seems to me quite reasonable before any need for a re-review.  I remain long.  

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