RE: Hertz9 Jun 2016 01:28
5x or 6x EBITDA my point was it would still cost a couple of billion £ which for AHT would more than double their net debt (2015 £1.7bn), exceed their current (& recently renegotiated if my memory serves) debt package, and is also likely to breach, or come very close, to their debt covenant of 4 X EBITDA. So it ain't going to happen, that said wouldn't be surprised if HERC go through rationalisation/efficiency programme that some acquisitions will come AHT's way.
By loan to value I meant net debt to fixed assets, so about 2/3 of their plant and equipment is funded via debt, the ideal would be 1/2 debt and 1/2 equity (for plant hire companies). However, AHT have increased capital investment to ensure that can meet the forecasted prolonged up-cycle in the construction industry (particularly in the US).
AHT is not an easy model to get to grips with and value, plus the share price never behaves as expected (shorted a bit at the moment too!), so fair enough, I too just try and get a feel for underlying growth in revenue/EBITDA/eps, My forecast for this fourth quarter eps is about 16p, so year end in-line with consensus forecasts of 80p, a PE of say 13 is a TP of about 1040. For 2017 would not be surprised to see 25% growth in eps, so 100p, with. PE of 15 to 17 giving a forecast sp of £15-£17. As previously stated though, AHT is never that easy to predict in terms of sp movement. BREXIT (not that I think it will happen) will actually not be too bad for AHT even though do think the markets will take a bashing!, also oil is recovering possibly quicker than expected which may not be too good for AHT for a couple of reasons I can think of (there's probably more), only about 5% of their Rev is from oil/energy sector and if oil goes up $ normally does the opposite and for every 1% drop will reduce AHT's profit before tax by £6m pa.
Basically who knows, not even the so called professionals know (the range in broker forecasts is testament to this!). Wouldn't be too surprised if their last quarter was better than forecast, possibly due to the devastation caused by the wildfires in Canada (not perhaps morally acceptable but one reason I bought into AHT in the first place in 2012 was because of hurricane Sandy).
Not wishing to preach to the converted, or state what's already common knowledge, but it goes without saying that AHT is a very solid and well run business, but it's cyclical and operationally geared, so can be a risky one too!....have to get your timing right.
DD
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