Markets hate uncertainty. So much so that it can shake even experienced investors out of their positions, alongside shunting new money on to the sidelines. Sure this bunkertype mentality is understandable, yet equally excessive ‘fear’ creates opportunity for those prepared to look through the short-term fog. Take Vp, an equipment rental specialist, operating in the UK (92% sales) and overseas. Here sentiment is being buffeted by worries about a ‘no-deal Brexit’, general slowdown in UK construction and the possibility of a fine (estimated at £0m-£9m) relating to its Groundforce unit. The latter is being investigated by the Competition and Markets Authority for potential anti-competitive behaviour - albeit, we suspect ultimately any monetary penalty will be immaterial in the context of the business’ £333m marketcap.
What’s more, Vp continues to “make progress”. Saying this morning that “YTD trading had been broadly in line with expectations”. Supported by its core UK infrastructure, construction and housebuilding activities, particularly outside of the ‘more subdued’ South East and London areas. Similarly, the International division (re oil & gas and test & measurement) has also experienced a “satisfactory” first 4 months.
Consequently, we make no changes to our forecasts, but conservatively nudge down the valuation from £11.50 to £10.75/share – reflecting a near 10% de-rating across the plant hire sector over the past 2 months. That said, at 830p the shares offer canny investors attractive long-term value, trading at an unjustified discount to peers.