TSX:EFN - Post Discussion
Post by
retiredcf on Dec 20, 2022 9:02am
RBC
December 19, 2022
Element Fleet Management Corp.
Simply the Pest: Mega fleet win with Rentokil Terminix
TSX: EFN | CAD 18.33 | Outperform | Price Target CAD 26.00
Sentiment: Positive
Details: Element Fleet announced it reached a 5-year agreement with Rentokil Terminix, the North American division of Rentokil Initial plc (RTO-LN, covered by RBC analyst Andrew Brooke), a global pest control and hygiene services company, to provide services and financing to 21,200 vehicles in Rentokil’s U.S. fleet. EFN currently provides management services and financing to 4,700 vehicles in Rentokil’s fleet in the U.S. and will manage and finance an additional 16,500 vehicles under the new agreement following Rentokil's acquisition of Terminix.
The expanded relationship with Rentokil represents EFN’s largest mega fleet win since it pivoted towards growth in 2021 and makes Rentokil one of EFN’s 10 largest customers.
Our take: Positive. The contract win adds +1.1% to EFN's vehicles under management (VUM) and provides further evidence of EFN's positive momentum winning new customers and deepening relationships with existing customers such as managing more vehicles and also cross-selling additional fleet services. It's unclear how quickly EFN will realize the associated financing and fleet services revenues or by how much it will add to EPS, but big picture, we view today's announcement as positive for EFN's share price.
EFN is our #1 high-conviction best idea, in part as we think EFN is a relative (perhaps absolute) winner in a recession, high inflation and/or high interest rate environment with the shares being defensive but also offering significant valuation upside potential when macro conditions improve driven by strong growth potential.
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