Comparing rental hire stocks, Lavendon (LVD LN) offers value

One of my favorite blogs is Value and Opportunity, where I am a subscriber. The more I read it the more I realise we share a common approach in valuing stocks (i.e. moats at a reasonable price with a margin of safety), we also share the same taste on blog templates 🙂

The recent post on Silver Chef cought my attention, as I like rental businesses because if they get right the utilization rate, then ROIC is amazing. Comparing Silver Chef with other rental stocks, I think Lavendon and Northgate offer better value, as they are cheaper and yield a better divi. Their stock charts also look oversold.
m11Lavendon is the leader in ladders, specialising in such niche offers better bargain power with customer sand suppliers but also is more cyclical.

Today Lavendon trades at a down to earth P/BV  x0.97, one of the cheapest in sector

Name Ticker Mkt Cap (GBP) Price To Tangible Book Value Per Share P/B ROIC LF EBIT / EV Yld 1Y Tot Ret
Average                   820                  2.96    2.1               7.0 6.1 -18.5
VP PLC VP/ LN                  289                   4.03    2.5              11.4 8.2 10.8
ANDREWS SYKES GROUP PLC ASY LN                  138                   3.17    3.2              20.5 10.7 10.9
LAVENDON GROUP PLC LVD LN                  217                   1.27    1.0                2.4 5.4 -33.6
SPEEDY HIRE PLC SDY LN                  212                   1.22    1.0         (3.4) 1.4 -45.8
HSS HIRE GROUP PLC HSS LN                  170  #N/A N/A    1.1 (2.2) 2.1 -46.1
SILVER CHEF LTD SIV AU                  171                   3.42    3.3                6.7 5.7 11.5
NORTHGATE PLC NTG LN                  526                   1.20    1.2                9.3 8.0 -37.5
ASHTEAD GROUP PLC AHT LN               4,840                   6.41    3.4              11.4 7.4 -18.3

 

Although technical analysis isn’t my forte, Lavendon seems oversold

Lavendon stock chart

Lavendon bloomberg quote : 4% divi, awards patience

Lavendon bloomberg quote

 

Makes decent margins, consensus forecasts single digit growth, Leverage seems reasonable. I don’t know what they plant to do with CAPEX, the GBP71m consensus forecast looks quite high.

Free cashflow yield test: If we were a private equity group, taking Lavendon private, we could pay say GBP 340m at today’s Entrerprice Value and get a nice Free cashflow of 30m (estimated as EBITDA 80m – CAPEX 50m), hence locking a decent 8.8% yield.

Lavendon financial analysis

Lavendon financial analysis

Lavendon stock chart

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