Newton-le-Willows based Speedy Hire (SDY.L) was founded in 1977, and provides tool and equipment hire services to construction, manufacturing, industrial, and related industries. It offers a range of tool and equipment for hire, which include access towers, light plant, fencing, heating and cooling equipment, portable accommodation, pumps, generators and compressors, lifting equipment, safety equipment, rail equipment, heavy duty hammer drill, headroom hoist, and power pipe cutter, as well as instruments for surveying, civil engineering, and construction applications. SDY provides various asset services, including product specialization, testing and inspection, fuel management, survey service centre, on-sites, and hire direct, as well as a range of advisory services. It operates from over 200 depots across the UK and Ireland.
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On November 14th 2017, SDY published half-year results, which revealed pre-tax profits up 11% to £6m, EBITDA up 11.2% to £33.8m on revenues (excluding disposals) up 6.9% to £183.2m. Net debt fell to £63.1m (31 March 2017: £71.4m), and SDY reported a strong balance sheet and leverage 0.95 times EBITDA (2016: 1.47 times). As a result the dividend was raised by 51.5% to 0.50 pence per share. During the period, the UK and Ireland business were restructured to better align with the customer proposition and provide improved opportunities for cross-selling and operational efficiencies. CEO Russell Down said the board “are confident of delivering a result for the year above current expectations and that the Group has a strong future ahead of it.”
The improving picture at SDY had been flagged to VectorVest subscribers as far back as Nov 2016, when the shares rose sharply from 40p to hit a May 2017 year high of 59p. The subsequent retracement triggered a further VectorVest flag at the end of Sept 2017, at which point the GRT (Earnings Growth Rate) metric started to rise again, to stand at 27% currently. This is considered to be an excellent rating – GRT reflects a company’s 1-3 year forecasted earnings growth rate in % per year. Although the RS (Relative Safety) risk rating stands at just 0.98 for SDY on a scale of 0.00 to 2.00, the RV (Relative Value) rating, an indicator of long-term price appreciation potential stands at 1.41 – again excellent on a scale of 0.00 to 2.00. Finally VectorVest values SDY at 64.11p per share, indicating nearly 20% upside from the current 55p.
The chart of SDY.L is shown below in my usual format. The share is trading below the VectorVest valuation and is on a Buy recommendation. The share has found solid support at around 50p on numerous occasions and looks set to break upwards towards the VectorVest valuation and beyond.
Summary: The strong half year results announced by SDY last week provides validation of the group’s efforts to restructure and improve efficiencies. The strong improvement in GRT flagged on the VectorVest platform gave subscribers a window of opportunity to pick the stock up at a modest valuation, while the 51% hike in the dividend is a clear and confident signal from the SDY board of more growth to come.
Dr David Paul
November 22 2017
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