Volatile stock markets can throw up opportunities to buy shares in decent enterprises at lower prices. I’m ready to pounce on these two FTSE 250 firms if weakness affects their share prices.
Infrastructure investment
On 6 August, HICL Infrastructure (LSE: HICL) updated the market, reassuring shareholders that trading has been “in line with expectations.”
I reckon the infrastructure investment company has the makings of a solid long-term hold for me in the sector and would be keen to add the share to my portfolio. If the price gets knocked back in any further general volatility we may see in the markets, all the better, and I’ll be ready to pounce.
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In the recent update, the firm was specific about its dividend guidance and aims to pay 8.25p this year and 8.45p for the trading year to March 2020. With the share price close to 165p, the anticipated dividend yield is just over 5%.
HICL has a decent record of dividend growth, which is backed up by the firm’s investments in 118 infrastructure projects located in the UK, France, Ireland, the Netherlands, Canada, and the USA. Typically, the firm invests in companies and projects that design, build, operate and maintain such things as hospitals, schools, government buildings, police and fire stations and motorways.
Around 71% of the portfolio is in public-private partnerships (PPP), 21% in demand-based assets such as toll roads, and 8% is in regulated assets such as utility providers. I reckon there’s a fair bit of consistency in those assets that could shelter operations from the worst effects of any general macroeconomic weakness we might see down the line. Meanwhile, the price-to-book value runs close to one, which strikes me as fair value.
Modular mobile power solutions
After a few years of declining earnings, Aggreko (LSE: AGK) looks as if it is on course to see advances in earnings this year and in 2020. The dividend has been flat for a few years, but City analysts following the firm anticipate the payment edging up from where we are now.
Even the modular power system provider’s share price has been drifting up from its lows.
In the recent half-year report, chief executive Chris Weston said the firm is on track to deliver full-year earnings in line with expectations, which means a rise in single-digit percentages. In 2020, City analysts have pencilled in a double-digit rise.
The brisk trading seen around 2012 (when London hosted the Olympics) may be behind the firm, but steady trading ahead seems to be on the cards. Weston explained that the firm’s focus on execution in its key sectors, investments in its systems and cost efficiencies have combined to deliver “improved” profitability. He’s confident the company can achieve a return on capital employed in the “mid-teens” in 2020.
Meanwhile, with the share price close to 791p, the forward-looking earnings multiple for 2020 runs just below 13 and the anticipated dividend yield is a little over 3.5%. If the share price gets knocked down in the current wave of general market volatility, I think Aggreko will look interesting.
