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(Sharecast News) - RBC Capital Markets upped its price target on Rentokil on Tuesday to 590p from 575p and maintained its 'outperform' rating.
The bank said full-year results were slightly ahead, its forecasts for 24/25 are unchanged and management has outlined a "credible plan" to reinvigorate organic growth in North America.
"We also believe management has derisked the integration impact somewhat with the extension of the synergy timeline to 2026, whilst the upgrade to the overall synergy number is a positive," RBC said. "We continue to see upside, despite the pop in the shares, and back management to execute on its plans."
RBC noted that following the bounce in the share price, the stock now trades on 21x 24 estimated price-to-earnings, still at a 10-15% discount to the other defensive growth names in the sector, despite stronger profit growth potential if it can execute the synergy plan.
"We have rolled forward our discount cash flow, which results in a small increase in our target price to 590p," it said.
"On a SOP basis this valuation assumes a valuation for Pest Control at the top end of the defensive growth names in the sector, albeit at a 35% discount to Rollins."
