Sharp eyed investors would have noticed the recent mixed messages from the UK’s June Construction PMI report, whereby positive output across infrastructure and commercial was offset by weakness in house building due to rising borrowing costs. Equally though, input cost inflation and supply chain bottlenecks were said to be reducing, which should help alleviate margin pressure.
Similarly in today’s ‘on track’ trading statement, Chairman Jeremy Pilkington commented that Vp had also “experienced varying levels of demand across a range of markets.” With water, transmission and rail being “supportive”, in contrast to housebuilding, where activity had stabilised at a level 10% below LY.
Elsewhere Vp’s international divisions (re AirPac & TR Ltd) continue to make good progress. Meaning that overall the Board expects FY’24 to be in line with consensus estimates.
As such, we reiterate our £10.90/share valuation and FY’24 forecasts of adjusted PBTA of £42.8m on revenues up 2.8% to £381.7m. Alongside net debt (pre IFRS 16) closing Mar’24 at £123.9m (vs £134.4m LY), equivalent to a comfortable 1.3x EBITDA.
What’s more, we would argue that for investors with a 2-3 year view, there seems to be exceptional value on offer from this specialist equipment rental group, which has previously demonstrated consistent delivery through thick & thin. In fact at 570p, the stock trades on a PER of only 7.1x whilst paying a bumper 7.0% dividend yield. To us, the shares are simply mis-priced.
