Ticker: VP. Exchange: LSE www.vpplc.com

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.    

Record results & 'well ahead of last year'

Politicians could learn a lot from successful UK corporates, who are having to navigate through this self-induced Brexit chaos. Take equipment rental specialist, Vp. Clearly the core UK tool hire operation is not totally immune to what’s happening externally. That said, at this stage the group continues to compensate for the uncertainty via experienced leadership, excellent teamwork and thorough contingency planning.

Indeed this morning in a FY19 trading update, the firm said that revenues, adjusted PBT (ED est. +15.8% to £47.0m) and EPS (+17.4% to 96p) were all “well ahead of last year and in line with expectations”. Driven by “stable demand from its core infrastructure, construction and housebuilding” sectors – further boosted by synergies from the £69.2m purchase of Brandon Hire in Nov’17. In fact once fully integrated (est Sept’19), we reckon this acquisition should achieve a 15% ROI, equating to >£4m of annualised savings. 

Elsewhere, Airpac Bukom continued to experience “challenging” conditions in offshore oil and gas, although this was more than offset by robust results from TR, the test & measurement business in AsiaPac. 
Consequently bearing all this in mind, we make no change to our forecasts, but lift the valuation to £11.50/share (from £11.00) based on the natural roll-forward of the discount rate.

In our view, Vp is undervalued in absolute terms, particularly considering its superior mix of specialist assets, high ROCE, efficient operations, earnings quality and downside resilience. 

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