Broker snap: Jefferies stays optimistic about Aggreko but cuts forecasts

2nd Jan 2013 10:16

Jefferies has slashed its target price for temporary power and temperature control solutions group Aggreko by over a fifth from 2,535p to 2,000p following the group's pre-close update.The company reported on December 17th that full-year revenues in 2012 would be in line with guidance at £1.6bn (up 13% year-on-year), though they are likely to fall in 2013.As a result, Jefferies has reduced its revenue, operating margin and fleet capex predictions for 2013 and 2014 and cut its earnings per share (EPS) forecasts by 18%. These revised EPS estimates now stand 6% below consensus.However, with shares now down 25% over the past three months - the worst performance on the FTSE 100 - the broker has maintained its 'buy' rating on the stock, saying that it remains confident in the medium-term investment case.Jefferies highlights International Energy Agency estimates which predict that global electricity demand will rise 2.2% per year between 2010 and 2035, with more than 80% of the increase occurring in non-OECD countries growing by 4% per annum."We view Aggreko's recent muted IPP order intake as a cyclical slowdown rather than indicative of any longer term structural change in global electricity demand trends or the generator rental competitive landscape."The broker said that the business remains a core support services holding.Shares were up 1.9% at 1,773p by 10:15 on Wednesday.BC