Analysts at Seymour Pierce have this morning raised their target price on shares of temporary power solutions provider Aggreko, while reiterating their "buy" stance on the company´s shares.

This followed a visit to the company´s new bespoke manufacturing facility in Dumbarton, Scotland. In their opinion, the £22m purpose built site, which became fully operational in August 2012, highlights how Aggreko's manufacturing expertise is a key source of competitive advantage in so far as it allows the outfit to react quickly to new opportunities.

This broker also calls attention to the company´s sheer scale vis-à-vis some of its suppliers. More specifically, the firm is the single largest global buyer of 1MW class engines: last year it accounted for around five per cent of global 1MW diesel generator purchases and around 25% of 1MW gas engines. Its scale means that its cost/MW is significantly lower than its peers (approximately 20% to 60% in some cases).

Not to be lost on readers is the fact that the engine generally represents between 40% to 50% of the total cost of the genset.

Seymour Pierce concludes its research note by pointing out that "shares are trading on a prospective Price/Earnings multiple of 22 times its estimated fiscal year 2012 earnings, which we believe is not demanding for a company expected to deliver double digit growth over the foreseeable future".

"We remain Buyers of the shares with an increased £27 target price (previously £25). In our view Aggreko has a robust business model to tap into unrivalled growth opportunities. In its IPP business the gap between supply and demand for power is unlikely to abate anytime soon," it added.

By 11:57 shares of Aggreko are rising by 0.97% to the 2,406p mark.

AB

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