Sign up United Kingdom
Proactive Investors - Run By Investors For Investors

Rotork upgraded by HSBC, which sees more orders on back of oil price rise

"Relentless energy demand should act as the catalyst for increased energy infrastructure spend," said the bank
Rotork upgraded by HSBC, which sees more orders on back of oil price rise
HSBC is upbeat on oil and gas energy spend for 2018

Rotork plc  (LON:ROR), the industrial machinery manufacturer, saw shares flow higher on Friday as scribes at HSBC upgraded the share to 'buy' from 'hold'.

The bank reckons orders will improve in 2018, not least due to higher oil prices, and that cost-savings under the new chief executive could be more than the market is expecting.

"Relentless energy demand should act as the catalyst for increased energy infrastructure spend and this could be compounded by an equipment upgrade cycle," said analyst Scott Cagehin.

Oil price rises..

He said that the oil price rise should start to generate higher capital expenditure in the sector too.

"We believe the outlook for Rotork’s upstream oil & gas exposure (16% of total 2016 revenues) is improving," he said.

"We believe that the mid/downstream oil & gas (36% of total 2016 revenues) outlook is also positive."

A new man at the helm..

Last week, Rotork named Kevin Hostetler as its new chief executive following the departure of Peter France in July last year. He will assume the role from March.

READ: Rotork appoints new chief executive to lead return to growth

Hostetler led a three-year turnaround at flow control business FDH Velocitel, a private equity backed telecoms business in the US, and delivered “transformational growth” for shareholders at flow control business IDEX Corp, the firm had said.

Cagehin said that Hostetler's CV suggested he was more than up to leading a successful cost restructuring at the group.

"Although no actual numbers have been provided we believe the programme could be substantial and could drive improving margins whilst providing capital for future growth," said the analyst.

"Potential benefits of such a cost savings plan could be greater than the market is discounting. We expect it could generate positive incremental news through 2018."

Increased earnings forecasts..

HSBC increased its earnings forecasts by 5% for 2018 and by 10% for 2019 and it assumes around £14mln of cost savings in the next two years, which should lead to share price appreciation.

These new forecasts position the broker 3% ahead of 2018 and 8% ahead of 2019 consensus, it said.

It has hiked its target price to 335p, from 250p previously, which, it said, implied 17.4% upside from current levels.

The recommendation upgrade (to buy) comes as the broker  believes there will be more upside driven by mid/downstream oil  and gas market recovery.

Its  target price equates to an enterprise value/EBITDA ratio of a multiple of 15.7.

Rotork shares added 2.47% to 298.8p in London.

View full ROR profile View Profile

Rotork Timeline

Newswire
August 07 2018

Related Articles

1531831763_3U2A9699.jpg
October 03 2018
This month (October) Atlas said it had completed the acquisition of Coastal Windows Ltd
broken cell phones
October 02 2018
Mineworx Technologies offers a cost-effective, environmentally friendly alternative in extracting precious metals for the mining and E-waste sectors

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use