Broker snap: UBS downgrades Aggreko to 'buy'

19th Jun 2013 10:52

UBS has cut its recommendation for temperature control and power solutions firm Aggreko from 'buy' to 'neutral' and lowered its target price from 1,975p to 1,850p, saying the company faces headwinds next year."Whilst the longer-term story based on structural growth and sustainable returns remains attractive, AGK now trades on c19x forward price-to-earnings ratio, in line with the three-year average, despite a subdued International Power Projects (IPP) environment and headwinds to FY14 estimates, in our view."The broker has cut its forecasts for 2013 and 2014 by 1.0% and 4.0%, respectively. It said that a weaker IPP environment coupled with translational USD and AUD exposure present headwinds for 2014.Meanwhile, the broker said that the industry pressure on power-rental pricing will be alleviated after the expansion of its Libya contract. However, capacity remains a threat in the absence of an improved order environment "as is to be expected in an asset intensive industry".UBS said that while the business doesn't appear to be solely driven by "commodity economies", this still remains a driver: "Thus less commodity-intensive growth presents a cyclical headwind to the long-term structural trend," the broker said.The stock was down 3.37% at 1,693p by 11:34 on Wednesday.