Safe harbour amongst COVID-19 storm
it is reassuring to hear a company continuing to deliver solid results, despite the considerable challenges. Today, specialist equipment rental firm Vp said that H2’20 trading had been “satisfactoryâ€.With softness in UK construction, particularly around London & the South East (pre/post the UK General Election) – being partly offset by infrastructure & housebuilding, which “held up wellâ€, reflecting low borrowing costs, good mortgage availability and the popular Help to Buy scheme.
As such, the Board anticipates FY20 adjusted pre-tax profits to be “marginally behind expectations†(revised ED est of £47.2m vs previous consensus at £49.6m) – ending the period with a net debt of £165m (or circa 1.7x EBITDA, pre IFRS16).
What’s more, Vp has been through this type of short, sharp, economic shock before - and come out the other side in far better shape than many of its rivals. We reckon this will happen again, even if near term demand is pushed to the right by site closures, business interruption and social distancing measures.
Besides, there are other levers to pull if things were to significantly deteriorate. Not least, shrinking fleet capex (Est £60m gross in FY20), cutting discretionary spend and accelerating plant hire disposals for either under-utilised or aged equipment.
Consequently at 525p, the stock appears attractively priced, trading on trailing 5.5x PE, 1.2x Price:Book and 3.8x EV/EBITDA multiples - offering substantial potential upside vs our 860p/share valuation (vs £10.75 before).
Herc Holdings is an equipment rental supplier. The company conducts its operations through subsidiaries, including Herc Rentals Inc. Operations are conducted under the Herc Rentals brand in the U.S. and Canada and under the Hertz Equipment Rental brand in other international locations. The company sells used equipment and contractor supplies such as construction consumables, tools, small equipment and safety supplies; provides repair, maintenance and equipment management services and safety training to certain of its customers; provides equipment re-rental services and provides on-site support to its customers; and provides ancillary services such as equipment transport, cleaning, refueling and labor.
Northbridge Industrial Services is engaged in the sales and hire of industrial equipment on a global basis for use in applications in the oil and gas, shipping, construction, and power and utility sectors. Co. has two main reportable segments: Crestchic loadbanks and transformers, which is involved in the manufacture, hire and sale of loadbanks and transformers; and Tasman oil tools and loadcells, which is involved in the hire and sale of oil tools and loadcells.
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