Vp is a specialist rental business providing equipment and services to a wide range of markets including civil engineering, rail, oil and gas exploration, construction, outdoor events and industry, primarily within the UK, but also overseas (Estimated at 12% of sales).
Is Britain at risk of talking itself into a recession? Following last month's EU Referendum, the media has been awash with predictions of a collapse in house prices and business confidence. Sure, there is likely to be some form of temporary impact, especially in prime central London property - but with UK assets now circa 10% cheaper for foreign investors thanks to Sterling's recent devaluation and interest rates nailed at 0.5%, then we just don't see a prolonged slump in demand.
Furthermore, quality firms like Vp, delivering niche services into the infrastructure and construction sectors, are still ticking along nicely. Indeed yesterday the company said in a brief trading update that it had experienced no noticeable slowdown since the BREXIT vote and was on track to meet FY17 expectations.
As such, we reiterate our FY17 adjusted EBITA and EPS estimates of £35m and 67p respectively, along with the 760p/share price target. Additionally at 675p, we think the stock looks cheap, representing a near 10% discount to peer EV/EBITA multiples. This seems unwarranted given Vp's healthy capital returns, downside resilience, strong balance sheet and attractive growth prospects.
