Broker snap: UBS upgrades Northgate to neutral

13th Jul 2011 12:23

UBS has upgraded commercial vehicle hire company Northgate from sell to neutral after increasing its earnings forecasts for the next three years.For the broker, the biggest surprise in Northgate's full-year results (released on 30 June) was the significant decline in its Spanish construction exposure, which fell from 55% to 37%. While this suggests a 40% fall in revenue overall, non-construction revenue jumped by 20%."Whilst we maintain our negative view on Spanish construction, the company has clearly been more successful in growing the non-construction parts of the business and as such we expect a much more modest fleet contraction in FY12 (6% vs 15% previously)," said analyst Alex Hugh.As such, UBS ups its earnings per share (EPS) estimates in 2012, 2013 and 2014, by 17%, 22% and 14%, respectively.Additionally, the broke notes that continued costs savings "and some conservatism on residuals going forward" could provide upwards pressure to forecasts.The target price is in turn raised to 350p, from 280p previously.BC