Ashtead Technology (AT.:AIM) 370p

Gain to date: 48%

We said to invest in sub-sea equipment provider Ashtead Technology (AT.:AIM) at 250p in October 2022, suggesting the company could emulate its former parent, tool hire firm Ashtead (AHT).

While it remains some way off the delivering the sort of returns the latter has chalked up over the long-term, it has nonetheless rewarded our faith in spades, with the stock recently trading at a record high.

It benefits in the short-term from serving an oil and gas industry working overtime following Russia’s invasion of Ukraine and how various countries have had to find alternative supplies of energy. In the longer run it will increasingly be exposed to the transition to renewables where it also has a significant footprint.

WHAT HAS HAPPENED SINCE WE SAID TO BUY?

The business has continued to demonstrate significant momentum. On 3 May it reported a 31% increase in revenue for 2022. The company saw revenue from offshore renewables and offshore oil and gas increase by 22% and 35% respectively. Operating profit was up 47% to £20.1 million.

Demand has remained strong in the first part of 2023 and profit is now expected to be materially ahead of previous expectations. Off the back of the results and accompanying guidance, Numis analyst David Brockton boosted his earnings forecasts by 11% for this year and 14% for 2024.

Brockton says: ‘We believe Ashtead Technology offers an excellent growth opportunity, serving a growing offshore international energy market for renewables as well as IMR (inspection, maintenance and repair) and decommissioning activity in oil and gas, enhanced by demand from the energy transition and security of supply.

‘The group also has potential to grow its share as it benefits from a trend from equipment ownership to rental amongst its customers and consolidates a large fragmented international market.’

WHAT SHOULD INVESTORS DO NOW?

Given the significant growth potential on offer, the shares still look a buy, trading on 13.2 times and 12.1 times 2023 and 2024 earnings respectively based on Numis’ updated forecasts.

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