RBC bumps up target price for Rentokil, retains as 'top pick'

Things were still looking up for Rentokil despite the strong run which the shares had enjoyed year-to-date, which had seen them outperform the Footsie by 23%, analysts at RBC said.

Following recent movements in foreign exchange markets and acquistions by the company the broker bumped up its estimates for the company´s earning per share in 2016 and 2017 by 3.0% and 6.0%, respectively.

The rate of growth in organic revenues would be slightly lower over the three months to June than the 6.4% clip reported for the first quarter, analysts Andrew Brooke said in a research report published on 11 June.

Nevertheless, Brooke expected the other main trends at the pest control specialist to be unchanged.

He also expected confirmation that the synergies arising from the purchase of Steritech were on track.

Brooke highlighted five aspects of the company: Its potential for organic growth, signicant potential to continue growing its margins, improving mix, possible corporate actions and the firm´s sensible strategy.

More specifically, the analyst saw potential for Rentokill to improve its margins by more than 300 basis points over the next five years.

The same analyst also believed that there remained "significant scope" for mergers and acquisitions, "which should help drive customer density. In addition, we would not rule out a sale of Workwear at some point."

Following on from all of the above, he lifted his target price from 220p to 240p and said the shares remained a 'top-pick'.