Annoyingly I’ve missed out on Ashtead blitzing it this morning. Having marched all this way it was never likely to miss out on cracking 300p/shr, which it’s done with style. US revenues were up 20% YOY in its Sunbelt business, while EBITDA rose by 36% YOY during Q1. Momentum in the business is clearly strong, leading AHT to already anticipate full year numbers as “materially ahead of its previous expectations.”
Although I missed out on AHT, I think it presents an opportunity in United Rentals (URI US, mkt cap $3.0bn). On a USD basis, both companies’ share prices have closely tracked each other during the past four years. But this began to break down shortly after URI bought RSC Holdings for $4.2bn in April last. This possibly reflects investor apprehension over integration of the two companies, or uncertainty over the outlook for US construction, or both. On the latter concern, given that AHT is going gangbusters, I suspect URI is also trading well. AHT’s current share price and empirical regularity would suggest that URI should be closer to $47/shr; 47% higher than Friday’s close at $32/shr. If this disparity reflects just integration concerns, then to me that discount seems overdone. So I splashed out on some URI at the open paying $33.65/shr. I think this could be a quick performer.
|United Rentals share price compared to Ashtead, USD adjusted
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