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Why Emeco Holdings Limited (ASX:EHL) shares have zoomed up 373%

Shares in mining equipment rental business Emeco Holdings Limited (ASX: EHL) are up 1.4% to 35c per share at the time of writing – a 373% increase on its share price at this time last year and a 52-week high for the stock.

The $80 million acquisition of rental supplier Matilda Equipment has seen Morgans raise its earnings forecasts on Emeco as the company appears to go from strength-to-strength.

A shareholder presentation earlier this month saw Emeco reinforce its focus on “transformational acquisitions” with efforts into “operational excellence” to enhance its market position.

Emeco acquired Force Equipment just before striking the Matilda deal – both of which it believes will increase Emeco’s core capabilities and generate cash.

The acquisitions should see Emeco take advantage of improved market conditions heading into 2019 with strong underlying momentum on existing project scope expansions and possible new project wins.

Emeco is up against some other strong players in the capital goods space including GWA Group Ltd (ASX: GWA) and Reece Ltd (ASX: REH) – both of which meet market demand in the building materials space with GWA shares up 0.8% to $3.51 in early morning trade and Reece down 0.4% to $12.47.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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