1st Oct 2014 10:45
LONDON (Alliance News) - Numis and FinnCap both think Avingtrans shares are looking attractive in the wake of the company's earnings statement Wednesday, saying the company's recent acquisitions, continued restructuring and potential further acquisitions point to more growth.
FinnCap has raised its recommendation on the stock to Buy, from Hold, based on its current price target of 155 pence and the fall in Avingtrans shares over the summer.
It said the full-year results - revenue was up by a third to a record GBP60.3 million and pretax profit nearly doubled to GBP2.5 million, from GBP1.3 million - were in line with expectations.
"The blip in first quarter aerospace volumes appears minor, while significant profitability improvements from the group's recent restructuring of acquisitions point to good upside potential and the shares trade at a discount to aerospace peers, FinnCap wrote in a note to clients.
"Its market position and recent acquisitions underpin confidence in further good growth and continued restructuring should ensure the group evolves into a less cyclical, higher margin
business with enhanced quality of earnings," Numis wrote in its note.
The brokerage is keeping a Buy rating on the stock, saying it thinks Avingtrans shares will be re-rated and it expects further acquisitions to incrementally enhance the investment case.
FinnCap did reduce its earnings forecasts for the company this year based on its outlook, but still expects steady growth. It forecasts revenue of GBP73.3 million in the current year rising to GBP77.9 million in fiscal 2016, and adjusted pretax profit of GBP3.9 million this year rising to GBP4.7 million this year. Avingtrans reported adjusted pretax profit of GBP3.5 million for fiscal 2014.
Numis forecasts revenue of GBP73.4 million in the current financial year, rising to GBP78.0 million in fiscal 2016, and adjusted pretax profit of GBP3.9 million in fiscal 2015 rising to GBP4.6 million the year after.
Avingtrans Chief Financial Officer Stephen King told Alliance News its fiscal 2014 earnings per share had been flattered by an abnormal tax credit, partly due to the drop in the UK corporation tax rate, and the company expects a return to a more normal tax rate in the current.
FinnCap and Numis have both reflected this in their forecasts, with Numis expecting fully diluted adjusted EPS to drop to 12.1 pence this year, before recovering to 13.6p in fiscal 2016. The figure was 13.7p in fiscal 2014. FinnCap forecasts 12.0p in fiscal 2015 and 12.5p in fiscal 2016.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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