Canaccord Genuity downgrades Ashtead Technology to ‘hold’

by | Dec 1, 2023

(Sharecast News) – Analysts at Canaccord Genuity downgraded subsea equipment rental group Ashtead Technology to ‘hold’ from ‘buy’ on Friday but hiked its target price on the stock from 475.0p to 615.0p following what it called “the big one”.
Ashtead Technology announced on Thursday that its £53.5m acquisition of ACE Winches, a major mechanical rental business headquartered in Aberdeen, was at an attractive multiple of 3.9x 2023E enterprise value/underlying earnings, well below its own multiple, and unsurprisingly it has seen “a significant bounce” in shares following the transaction.

Canaccord Genuity noted that whilst the acquisition was being funded from an existing revolving credit facility, and debt ratings will remain conservative following the deal, it believes that any further transactions in the near term were likely to be “much smaller”.

“We were previously top end of consensus and our updated numbers are now more in the middle of the range: we are moving earnings per share up 8%/16%/20% for 2023E/24E/25E, with the majority of that coming from the impact of the ACE acquisition. We note that our forecast net debt/EBITDA drops to 1.0x by end 2024, implying the group will be in a similar position in 12 months’ time to today pre- the ACE acquisition,” said the Canadian bank.

“We base our price target on 8.0-8.5x 2024E EV/EBITDA. At our new 615.0p price target the stock would trade at 12.1x/8.5x 2023E/24E EV/EBITDA and 21.1x/16.1x price-to-earnings, which we believe is appropriate given its attractive growth profile, robust balance sheet, potential for further accretive acquisitions later in 2024 and growing track record.”

Reporting by Iain Gilbert at Sharecast.com

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