Rentokil: Shares Remain Appealing With North America Turnaround Not as Yet Apparent

We make no change to our GBX 620/USD 40.30 fair value estimate following wide-moat Rentokil Initial’s third-quarter trading update. Rentokil is yet to pull off the turnaround of its beleaguered North American pest control business. Organic growth for the North American pest control business remained depressed in the third quarter, rising a modest 1.4%. Still, we think investors were assuaged by signs that turnaround measures are showing signs of promise, sending Rentokil shares some 9% higher in early trading. Rentokil shares screen attractively, with the stock price still reflecting low confidence that the performance of the North American pest control business can be ultimately restored—an overly pessimistic perspective, in our view.