Broker snap: RPS undervalued, target price raised

9th May 2011 11:48

With over half of RPS's 2011 profits derived from its Energy division - amidst a high oil price - RBS has raised its target price for the environmental consultant from 235p to 250p, as it continues to view the group as "an undervalued energy services sector play."RPS had a positive first quarter, according to the broker, with signs of a recovery in trading in 2011: "Encouraging trading in recent months suggests that a sustainable recovery is under way in the Energy division, with the sustained high oil price near US$100/barrel stimulating client spend, boosting RPS's operations support and technical studies activities," said RBS.Additionally, the broker notes the Environmental Management division is being helped from "modest" ramp-up of water sector activity, as UK utility clients start to spend under the Water Services Regulation Authority's five-year asset management plane (AMP5).A 'buy' rating is retained.---BC