Broker snap: Aggreko fairly valued

25th Aug 2009 11:01

Temporary power supplier Aggreko continues to perform well, based on its interim profits announced on Tuesday, but brokers are reluctant to recommend buying the shares after the share price's recent good run.Charles Stanley believes the shares are high enough for the moment. 'After a year of very strong growth in 2008, helped by the contract to provide power for the Olympics, Aggreko will do well to generate further growth this year,' Charles Stanley analyst Geoff Allum believes.The shares remain worth holding, however, in Allum's view, as the company's international power projects division 'offers a relatively safe stream of earnings.' Although African countries such as Tanzania, Kenya and Uganda would prefer to build power stations rather than rely on Aggreko's temporary power units, 'such is the demand for power worldwide, ... these countries are unlikely to be able to get one built for many years,' Allum suggests.Charles Stanley has a price target of 630p for the stock.Like Charles Stanley, broker KBC Peel Hunt has a 'hold' recommendation for Aggreko shares, though its price target is lower at 600p. 'We are likely to raise estimates by around 5% to reflect currency,' said KBC analyst Andrew Nussey. Aggreko earns around 70% of its revenue in dollars.'In light of the strong management, excellent global positions and inherent cash generation capabilities, we feel we are nearing in on buying territory. However, despite the reassuring statement there are few catalysts to medium term rerating until a clearer picture emerges in the local businesses,' Nussey concludes.Panmure Gordon also rates the shares as a 'hold', and has increased its price target to 571p from 514p. 'Conversion of enquiries to contracts remains tough given a lack of apparent funding, though there appears no loss in market share/opportunity,' the broker said.