Beneath all the investor angst real UK GDP is still forecast to expand 4.1% this year and 1.6% next (source: BoE), with unemployment remaining at c.4%. Sure, City economists have a history of poor crystal-ball gazing. Yet equally, a full-blown recession already appears wrongly factored into the frugal valuations of many homebuilders, building product groups and even specialist equipment rental firms, like Vp.
Furthermore, Vp has reported that trading for the y/e March 2022 was “ahead of expectations” (consensus adjusted PBTA of £36.5m) due to stronger than anticipated demand within UK infrastructure, construction and housebuilding in Q4. Further aided by encouraging uplifts in rail (CP6) & water (AMP7) over the past month (re Groundforce) - alongside continued investment in digital technology & more environmentally friendly solutions.
We are also optimistic about the medium-to-long term trajectory, and have accordingly upgraded our FY22 revenue & adjusted PBTA projections to £362.3m (+2%) vs £38.1m (+4%) respectively. Yet, for now we have prudently held the FY23 estimates & £11.30/share fair valuation - which will be revisited at the prelims in June. The stock (at 850p) looks attractively rated both in absolute terms and vs peers - trading on FY23 multiples (pre IFRS16) of 10.9x PER, 10.2x EV/EBIT and 5.1x EV/EBITDA.
