Aggreko - ticking over

Aggreko: Supplying temporary power through portable (just about) generators is an attractive long term growth business and the end markets are varied. These include countries with under-developed electricity grids, such as parts of Africa, as well as countries with creaking old grid infrastructure (which includes increasing areas of Europe). Even the UK is facing the prospect of unreliable electricity supplies as old coal power stations are retired before new green energy and nuclear stations can take up the slack. There is also a multitude of sporting and entertainment events to support such as football’s World Cup, the Commonwealth Games or the vibrant music festival scene. A concern at present is that the boardroom is in a state of flux, with the highly regarded Rupert Soames having set off to rescue Serco and his wing man Angus Cockburn also heading off to pastures new, with Chris Weston recruited from British Gas to be the new Chief Executive. Profits have reached something of a plateau in the last couple of years with a strong sterling currency not helping reported profits. However, at these interims fleet capital expenditure guidance was increased from £215m to £235m, which can be a good lead indicator for future sales and profit trends. Yet, with profits on that plateau, the PE of around 20x looks full and there is only a skinny yield of 1.5%. There just seems to be a lack of a catalyst for the share price to move much higher at present. So, whilst the long term fundamentals look attractive, it may be that there are better buying days to wait for.

These comments are not a personal recommendation to deal. Any investments can fall as well as rise in value, so you could get back less than you invest. I may have a financial interest in some of the stocks written about.