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APR Energy dwarfed by opportunities, says Citi

Published: 11:32 04 Sep 2012 BST

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Temporary power company APR Energy’s (LON: APR) opportunities dwarf the size of the company, according to heavyweight broker Citi.

APR, which specialises in emergency power solutions, has identified a bid pipeline of 5 gigawatts (GW), while its current fleet can only supply 1.3 GW.

“We view APR as a structural growth stock, offering investors exposure to attractive end-markets. APR has embarked on an ambitious investment program to become a global power rental player,” said analyst Marc Van’t Sant, who kicks off coverage with a ‘buy’ rating and 955 pence target price for APR.

“This transformation process carries plenty of execution risk, but rewards could potentially be significant if management is able to expand and profitably deploy its new fleet.”

The analyst views temporary power as one of the most compelling structural growth stories in his Business Services sector, with market growth of more than 10 per cent a year.

Although Aggreko (LON:AGK) is the leading power rental company globally, generating higher returns and margins than APR, Van’t Sant reckons this margin gap should narrow in the coming years.

“We feel management has made good progress with 2012 contract wins of 369MW, narrowing the gap with Aggreko, helped by the roll-out of its global infrastructure,” the analyst concluded.

Shares lifted 15.5 pence to 780.5 pence.

 

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