Bryan Garnier : Pennon Group - The benefits of inflation!

(BUY, FV 800p) 
News published on March Thursday 21, 2013
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Inflation forecasts in the UK have risen by 60 basis points since January 2013. Regulated water treatment companies in the UK not only offer excellent protection against inflation (indexation) but are also beneficiaries of it (increase in ROC). In recent months, the main catalyst for the Pennon share has been the cyclical nature of Viridor, the waste management division (25% of EBIT). This has helped mask changes in inflation forecasts. We are reiterating our BUY recommendation on Pennon with a Fair Value of 800p per share in order to also benefit from investor renewed interest in protection against inflation.  

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