RBC Capital continues to see 'significant' upside for Rentokil

(Sharecast News) - RBC Capital Markets said on Monday that it continues to see "significant" upside for Rentokil Initial shares, "although clearly there is still lots to do, with peak branch integration still 12 months away". The bank said Rentokil has remained a very volatile stock.

It updated its EPS forecasts for forex (-1 to -2%), and said it expects in-line first-half results with acceleration of US organic growth through this year.

"We note the Trian investment, but believe it changes little - key for the share price is delivery on NA organic growth and the TMX integration," RBC said.

In the short term, the bank said it sees re-rating potential as NA growth accelerates and as confidence in the story rebuilds.

"Longer term, we continue to believe RTO is very well positioned within a defensive, good growth industry...we expect management to execute on the TMX integration, and we see re-rating potential as organic growth, cashflow, return on invested capital and leverage improve and the risk profile reduces," it said.

In addition, RBC noted the "lowly" implied valuation of the NA business within the price today.

RBC kept its 'outperform' rating and 590p price target on the stock.

At 1045 BST, the shares were up 0.4% at 449p.