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Why Kentz Corporation Limited Shares Spiked Higher

Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares in Kentz (LSE: KENZ) lifted over 10% in early trade this morning, following an announcement regarding the proposed acquisition of Valerus Field Solutions, a US-based integrated oil and gas surface facility solutions provider “which provides a full suite of products and services from the well head to the pipeline as well as an integrated services capability”.

So what: The potential $435m acquisition would provide Kentz with significant growth possibilities in the Americas — Valerus is already “strongly positioned” in the US onshore oil and gas market, as well as shale gas, which represents a new market for Kentz, while Valerus also has an “established presence” in the Latin American markets of Brazil, Mexico, Colombia and Venezuela.

As well as “increased exposure to high value, high margin contracts further up the value chain”, management believe the proposed acquisition should lead to increased opportunities by providing services to the outsourced portion of Valerus’s projects.

Now what: This appears to be a positive move for Kentz, with Valerus consistently reporting strong year-on-year revenue growth, with the trend set to continue. Investors will be pleased to hear that the acquisition is “expected to be earnings enhancing” in the first full financial year of ownership, all of which has contributed to this morning’s spike in Kentz’s share price.

But our team of top analysts have highlighted a different share that they believe has yet to fulfill its growth potential, and produced a special report in which we evaluate its finances, risks and growth prospects going forward. 

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> Sam does not own shares in Kentz.