Low & Bonar Update: Over Reaction – Solid Yield Premium
The share price fell by almost 33.0% in Q4 2017 on the back of two trading updates and the departure of the CEO. Superficially, this appears consistent with reactions to similar announcements elsewhere in the market. However, we believe that the fall is an over-reaction and prefer to base our valuation on fundamentals. Specifically, relating the share price move to our downgrades to earnings implies a substantial de-rating which is not borne out by either the prospects for the bulk of the Group nor its ability to manage cash flow. On this last point, we continue to expect further progress in debt reduction, underpinning modest increases in the dividend across the timeframe. This is at odds with the current yield and is the basis for our theoretical value of 92p per share.Low & Bonar manufactures and supplies performance materials commonly referred to as technical textiles. Co.'s business units are: Building and Industrial, which supplies technical textile solutions for applications in air and water filtration, building and roofing; Civil Engineering, which supplies woven and non-woven geotextiles and construction fibers used in infrastructure projects, including road and rail building, land reclamation and coastal defense; Coated Technical Textiles, which supplies a range of technical coated fabrics; and Interiors and Transportation, which supplies technical fabrics used in transportation, interior carpeting, resilient tiles and decorative products.
Capital Access Group advises companies on effective engagement with investors. Our experienced team offers market-leading access with hard-to-reach investors, including smaller institutions, pension funds and private client fund managers. These under-serviced investors are located not only in London but across the regions of the UK and Europe. We have an unrivalled knowledge of this extensive audience, to whom our published research is distributed, as well as to larger institutions. We offer this service as part of an integrated investor communications strategy to promote a company’s investment story.
Our clients, ranging from AIM to FTSE 100 companies, benefit from our professional, long-term relationships with investors. Not only do we identify and target investors, we contact them directly and relay their views back to clients with analysis, interpretation and advice. This ensures that our clients are in control of their investor engagement. The objective is to improve the reach and engagement with investors, which in turn strengthens the share price.
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