Broker tips: Ashtead, JTC

(Sharecast News) - Analysts at Berenberg initiated coverage on industrial and speciality equipment rental group Ashtead with a 'buy' rating and 7,000.0p target price on Thursday, calling it the highest-quality company in the rentals sector. Berenberg stated that in the medium term, Ashtead has significant exposure to structural growth drivers, and opportunities for less-cyclical growth. It also said the company was currently trading at a rare discount to United Rentals and in line with its historical median, despite a positive outlook and lower cyclicality of growth.

"In our view, this offers an opportunity to invest in what we deem to be the highest-quality company in the rentals sector," said the German bank. "We value Ashtead using a DCF model with a WACC of 8%, and set a price target of £70.00. The stock currently trades on 8x FY24 EBITDA, in line with its historical median."

Over the longer term, Berenberg said Ashtead has positioned itself well to take market share and capitalise on opportunities such as mega projects and data centre construction, which it thinks makes the business less cyclical than it had been in the past.

RBC Capital Markets lifted its price target on JTC on Thursday as it reiterated its 'sector perform' rating on the stock as it updated its forecasts for the first-half results, forex and the Citi Trust acquisition, assuming it completes at the end of H125.

The Canadian bank said its 2024 earnings per share estimate estimate has come down 3% for forex, a slight H1 miss and marginally higher interest.

RBC's 2025 EPS estimate is broadly unchanged and the forecast for 2026 EPS moves up 8% as a result of the Citi Trust deal, driving an increase in the target price to 1,100.0p from 980.0p.

"In our view, JTC is well positioned given its unique ownership model and jurisdictional reach. We continue to believe consolidation will be a major theme and expect JTC to continue to play its part," said RBC. "That said, the stock has performed well, the pace of M&A is likely to slow down with gearing at circa 2x post Citi Trust and recent M&A needs to be bedded in."

RBC said it sees limited valuation upside at present and sees better options elsewhere in the sector at this point for new money, although it continues to be "happy holders".