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APR Energy lights up Libya

Temporary power provider APR Energy has signed major new contracts in war-ravaged Libya, improving earnings visibility. The market has responded well and we are retiring our sell recommendation.

Temporary power provider APR Energy's (APR) major contract wins in war-ravaged Libya eased market fears over its growth targets, which has caused the shares to rally strongly to 942p and has prompted us to call time on our sell advice.

IC TIP: Hold at 942p

APR has announced a 200 megawatt (MW) expansion of its original 250MW contract in Libya, as the country secures power supplies ahead of the blisteringly hot summer months. The total contract of 450MW, due to begin at the start of July, brings new contract wins this year to 553MW, compared with 569MW of new contracts won during the whole of last year. APR also reported that the order book was up some 28 per cent from the year-end, with enough work booked to keep its fleet busy for about 11 months. Broker Numis believes this underpins adjusted pre-tax profit forecasts of $70.9m (£45m), giving EPS of 48.3p, rising sharply to $96.8m and 65.2p the year after.

The market has decided that reduced earnings risk outweighs contract concentration, as around a third of group capacity is now located in Libya. This contract also locates assets in a country where the security situation is fluid at best. The Libyan army chief of staff recently resigned after clashes in the second city, Benghazi, that left 31 dead and 100 wounded, according to reports.