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Charles Stanley: Redhall (Buy, upgrade from Hold)




Charles Stanley Securities


06 Feb 2014





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Improved balance sheet underpins change to buy rating PBT of £1.6m for FY13 was in-line and we now expect PBT to increase to £2.4m in FY14 as Redhall is now significantly better positioned to benefit from improved market conditions. This follows the completion of a restructuring programme, encouraging visibility, a stable order book and the stabilisation of the balance sheet. Combined, these allow us to be more confident over the prospects for Redhall, especially as it can meet its funding needs through existing facilities and take advantage of the opportunities in the nuclear new-build sector (which are not included in our estimates). While the proceeds of £2m from Vivergo was a disappointment it, at least, allows management to draw a line under this issue and removes a material distractionfor management and uncertainty for investors - an issue which has been on-going since 2011. The current PE rating of 5x for FY14 reflects concerns over the balance sheet, but with these now easing we expect the shares to re-rate. Our price target of 75p, represents 85% upside, at which point the PE rating is still 'just' 8x. We change our recommendation from hold to buy.

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