Credit Suisse raises Rentokil target price

Credit Suisse raised its target price on Rentokil to 235p from 225p on Tuesday and reiterated an ‘outperform’ rating for the pest control business.

The Swiss bank lifted its earnings per share estimates on Rentokil for fiscal years 2016-2018 by 3-5%, reflecting foreign exchange benefits, a lower tax rate and lower interest charge.

“We think that a stable set of core businesses (notably Pest Control and Hygiene) and strong cash generation will allow it to continue to reinvest excess cash into M&A, particularly in the Pest Control division,” said Credit Suisse.

Pest Control now accounts for over 50% of revenues, including the recent acquisition on Residex.

Credit Suisse also believes Rentokil could take market share in the North American market as it benefits from its scale and brand relative to the numerous smaller operators and deepens its penetration within the National Accounts market.

“As market share grows we expect the underlying business to continue to grow margins.”

Shares fell 0.37% to 216p at 1117 BST.