Analysts at Credit Suisse have this morning issued a very upbeat research note on pest control and cleaning services company Rentokil.

In their opinion the company´s Citylink parcels delivery business unit is now through the worst and set for a return to profitability in the second half of the year.

However, the company´s strongpoint is its pest control business, which the broker describes as a "high margin, cash generative and stable business." In fact, Credit Suisse estimates that on a standalone basis the division is worth 54p, which equates to 85% of the current share RTO price despite only reflecting 23% of revenues and 42% of earnings before interest, taxes and amortization (2012 estimate).

As well, different factors are expected to combine and lift margins to a normalized level of 10.4% by 2014 versus 8.9% last year. Markets, on the other hand, seem to be discounting that such an improvement will take between 11 and 17 years to achieve.

As of 10:14AM shares of Rentokil are rising by 3.1% to 66.6p.

AB

Related share prices
Rentokil Initial (RTO) share price