Vp plc is a specialist rental business providing products and services to a diverse range of markets including civil engineering, rail, oil and gas exploration, construction, outdoor events and industry, primarily within the UK, but also overseas.
24 Jul 2019
Profitable growth with downside resilience
Investors look for many things in quality stocks. One key part of the mix is the ability to expand profitably even in choppy waters. We think Vp, an equipment rental specialist, fits the bill as evidenced by its 14.5% ROCE and enviable track record.
Today the company said that it continues to 'make progress'. Adding that 'YTD trading had been broadly in line with expectations' - supported by its core UK infrastructure, construction and housebuilding activities, particularly outside of the 'more subdued' South East and London areas. Similarly, the International division (re oil & gas and test & measurement) has also experienced a 'satisfactory' first 4 months.
As such, we make no changes to our forecasts, but conservatively nudge down the valuation from £11.50 to £10.75/share - reflecting a near 10% de-rating across the plant hire sector over the past 2 months. That said, at 830p the shares offer canny investors attractive long-term value, trading at an unjustified discount to peers.
What's more, despite ongoing Brexit-related uncertainty impacting GDP, we expect conditions across the UK economy to be more favourable in 2020-21, facilitating a bounce back in business & consumer confidence.