(Sharecast News) - Aggreko's annual results showed the company making progress but the coronavirus outbreak poses a short-term risk, Barclays said as the bank trimmed its share price target.
The temporary power company's results featured improved profitability and strong cash flow and showed it recovering after a period of poor trading, Barclays' analysts said. Aggreko has also made progress on its hybrid product to move away from diesel to solar and battery power.
"There is a sense the company is on top of the factors within its control, a statement that could not be made for much of the last few years," Barclays' Paul Checketts and his colleagues said.
Aggreko is also attractive based on the share price and a sum of the parts valuation. But Barclays reduced its share price target by 5% to 780p, reduced its earnings estimate for 2020 by 10% and held its rating at 'equal weight'.
"We retain our EW rating ... due to the potential impact of coronavirus in the near term and in the long term by the linked challenges of still having c40% of the fleet in the problematic utility segment and c80% of the fleet being diesel," Barclays said. "Aggreko is at risk [from coronavirus] due to its global footprint, the cyclical nature of parts of its demand and its events business."
Aggreko said at its results that it was sticking to its profit guidance if the Tokyo Olympics, for which it has a $200m contract, are not cancelled because of the coronavirus outbreak.
The Barclays analysts said the potential impact of cancellation was about 14% of group profit - less than headline numbers suggest - because much of the work has been done and the games could be delayed rather than cancelled.
9 Dec 2022 10:27
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