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Brokers start coverage with differing opinions on pest control to hygiene services firm Rentokil Initial

Analysts at Goldman Sachs have initiated coverage on Rentokil with a ‘buy’ rating and a 12 month price target of 400p
Rentokil employee
But fellow US bank Jefferies International started coverage with a ‘hold’ rating and 335p price target

Brokers had some differing opinions today on blue chip pest control to hygiene services firm Rentokil Initial PLC (LON:RTO), although the more positive view held sway. 

Analysts at Goldman Sachs have initiated coverage on Rentokil with a ‘buy’ rating and a 12-month price target of 400p, saying they see a 16-24% equity IRR (internal rate of return) over the next four years.

READ: Rentokil Initial reports solid growth in third-quarter revenue boosted by its pest control unit

In a note to clients, the US banking giant’s analysts said: “While Rentokil has rerated in recent years, we believe this is justified by its improved mix (more high-growth pest control business) and successful M&A track record.”

But fellow US bank Jefferies International is less bullish, with its analysts starting coverage of the FTSE 100 listed firm with a ‘hold’ rating and 335p price target.

They noted: “Rentokil's stock has rallied c. 415% since 2012; however, we believe that a tighter balance sheet, rising M&A valuations, and opaque margin progression warrant a pause in the rally.”

The Jefferies analysts added: “We forecast Rentokil will grow revenues within its 5%–8% guidance range in FY18, with no apparent catalyst for multiple expansion.”

In late morning trading, Goldman’s view seemed to hold sway, with Rentokil shares up 1.4%, or 4.4p at 319.5p.

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Rentokil Initial Timeline

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