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Vp shares still looking cheap

RESULTS: A solid set of results followed by a broker upgrade and a chunky dividend increase means we still think the shares in the specialist equipment rental firm are too cheap.

Tough construction markets in the UK and weaker commodity prices are not making it easy for specialist equipment rental firm Vp (VP.), but a focus on more reliable infrastructure income streams, combined with exposure to buoyant housebuilders, ensured the company delivered a solid performance. The shares responded by rising 5 per cent, as adjusted pre-tax profits improved 9 per cent to £17.4m, and investors were given an inflation-beating 8 per cent dividend increase.

IC TIP: Buy at 354p

Vp had already flagged that the completion of a large gas project in Australia, combined with weaker North Sea oil and gas activity, would be a drag and profits fell by £1.6m to £2m at Airpac Bukom Oilfield Services. However, managing director Neil Sothard said that new gas contracts in South East Asia and Australia were beginning to fill the gap. In any case, this weakness was more than offset by a 16 per cent profit uplift to £7.8m at excavation support and specialist pilings operator Groundforce, which was buoyed by demand from water utilities and work on London Crossrail. Tool hire profits surged, too, by 30 per cent to £4.3m, reflecting work with network rail and homebuilders.

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