Analysts at Berenberg initiated coverage on subsea equipment and solutions group Ashtead Technology at ‘buy’ on Thursday, branding the firm “a market leader in a thriving sector”.
Berenberg thinks that Ashtead has strong customer relationships, forms an important part of the subsea supply chain, provides “differentiated exposure” to the energy transition, and has an “ambitious management team” that is looking to scale the business on a multi-year view.
“We believe that Ashtead Technology can increase revenues at healthy double-digit levels, on an organic constant-currency basis, across our forecast period, supported by a number of macro and micro drivers,” said Berenberg.
The German bank added that while a large proportion of Ashtead Technology’s revenue comes from the rental of equipment to customers, it believes that the company adds “significant value” from its product selection, availability and its application of technological knowhow, as well as from servicing and assembling equipment, rather than just being a pure rental business.
“This model helps to drive strong pricing power, margins and returns,” said Berenberg, which also issued the stock a 405.0p target price.
Analysts at Liberum took a fresh look at retailer Next on Thursday, stating the firm was “a clear winner”, with multiple macro and micro drivers.
Liberum said Next offers exposure to the structural growth that multi-channel platforms were delivering and said there were only two options to play this theme in the UK, with the other being Frasers.
Next is not just a retail and technology play where superior margins will flow from the label and total platform but as a brand owner offers IP opportunity that could see earnings accelerate over time,” said Liberum.
The analysts also highlighted that selling branded IP globally could deliver high margin licensing revenue which would further drive a material re-rating of the group as return on invested capital expands.
“Guidance for FY24E is conservative but it is the outer years where FCF becomes a key valuation driver being > 7% FY24 and beyond,” said Liberum, which stood by its ‘buy’ rating and 7,500.0p target price on the stock. “Excess cash will be returned to shareholders via dividends and buybacks and combined with 6-7% PBT growth in the meantime the shares offer double-digit returns.”
Reporting by Iain Gilbert at Sharecast.com
