Wednesday tips round-up: Aggreko, Rotork

6th Aug 2014 10:37

Temporary power provider Aggreko's fortunes seem to have turned a corner but its shares are not inexpensive at the moment, writes The Times's Tempus. Sales at its power projects division increased by 14% at the half year stage as demand from several countries recovered after recent weakness. Well, if one strips out adverse currency effects, that is. Nonetheless, the company did raise its guidance for capital expenditures this year by £20m to reach £235m, signalling confidence in the outlook on the part of management. The company must also overcome weakness in Japan as that country recovers from the Fukushima nuclear disaster. As well, Aggreko's new boss, Chris Weston, has yet to come on board from Centrica. More significantly, no further cash returns for investors are imminent. Trading on 22 times' earnings the stock does not look cheap, Tempus concludes.Industrial valve manufacturer Rotork's order book is continuing to grow briskly but the shares' valuation looks over stretched, the Daily Telegraph's Questor column believes. The company, which mainly makes valves used in refining of oil and gas, continues to invest heavily in the growth opportunities it has identified, hence recent investments in its Leeds plant and the acquisition of Korean valve maker YTC. Those moves, however, led to a sharp reduction in the firm's cash position. Nonetheless, Rotork achieved a record order intake during the first half. It rose 3% to £302.7m as demand in the Far East and Latin America remained strong. Another large order was also secured in Mexico. As well, the US market should enjoy a better second half after the cold start to the year. Be that as it may, to pay 21 times' earnings for a company which has been growing its earnings per share at a single digit rate and which offers a dividend yield of 1.9% seems just too much. Sell, Questor says. Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.AB