Broker snap: Speedy Hire to recover from hammering

8th Oct 2010 13:11

The share price of tool hire firm Speedy Hire has been hammered after the company revealed a £1.7m bad debt charge, but KBC Peel Hunt thinks the company is well positioned for recovery. Aside from the bad debt, related to the collapse of the social housing group Connaught, Speedy Hire's first half trading was in line with management expectations. Net debt has fallen to £125m from £134.9m in July, but with KBC Peel Hunt pencilling in capital investment this year of £40m it does not expect net debt to change very much in the current financial year; previously it had forecast a reduction to £106m.The broker is maintaining its headline fiscal 2011 estimates, which call for 3% revenue growth. It expects this growth to come from the International and Branded Advisory division, with UK Hire slated to show modest revenue contraction."Self help initiatives (noting the departure of the UK Hire Managing Director), the mix shift to more enduring revenue streams, the flexible elements of the cost base and tight management also provide support to estimates," Peel Hunt analyst Andrew Nussey believes.The broker is sticking with its "buy" recommendation. "For investors looking for an asset backed (2010 Net Asset Value per share is 48p), market leading and cash generative recovery story we recommend buying Speedy Hire," Nussey says. The target price is maintained at 50p.