Broker snap: No slowdown expected for Aggreko, says Jefferies

22nd Oct 2012 09:35

Jefferies has cut its target price for Aggreko but maintained its 'buy' rating for the stock, saying that the negative surprises in the group's third-quarter trading update represent a 'speedbump, not a slowdown'.The temporary power and temperature controls company revealed that it had made a $12m increase in bad debt provision and conservative guidance of £150m in first-half fleet capital expenditure. As such, Jefferies has reduced its forecast for full-year pre-tax profit by 5% to £365.2m. Previously, the broker's estimates were 2% ahead of consensus. Its target price for the shares has been shaved from 2,800p to 2,535p.Nevertheless, the broker says that the longer-term investment case "remains intact"."Aggreko is the global leader in rental of temporary power. We believe its three key advantages of: 1) largest global fleet; 2) lowest capital cost per MW; and 3) higher fleet utilisation make it a core support services holding," Jefferies said.Jefferies said that its forecasts suggest that return on invested capital (ROIC) will remain above 20% during 2012-2014, significantly above sector peer APR Energy."Whilst key risks remain macro slowdown, political risk, bad debt and FX, with the shares off 10% in the last month, we reiterate our 'buy' stance," the broker said.By 10:22 on Monday, shares were down 1.68% at 2,101p.BC