Trading in line with expectations
​Molins is a technology-led service provider of high speed packaging (59% of group sales) and cigarette making machines, as well as process/quality control instrumentation (Cerulean). In terms of markets, the tobacco industry accounts for around 45% of group revenues, with >90% of sales generated from outside the UK, and a third coming from aftermarket services.
Despite being profitable, cash generative and paying a 5.5% dividend yield, the shares at 50p languish at a 53% discount to net tangible assets (NTA, of 107p), and are only 12% above Dec'15 NCTA of 44.5p/share (adjusted for net debt). Sure, the latter excludes the £6.6m US pension deficit (net of tax), albeit neither does it factor in the substantial upside (perhaps worth >50p/share on its own) in the event planning permission is granted on circa 10 acres of spare land located in Buckinghamshire.
Furthermore, today the group confirmed that current trading is in line with expectations, with Q1'16 results being at a similar level to last year. Although market conditions undoubtedly remain tough, we are hopeful that demand for Molins' high speed packaging, tobacco and testing machines will recover as the global economy picks up steam.
The stock trades on forward EV/EBIT and PE multiples of 4.6x and 4.7x respectively, representing a significant discount to other precision engineers and our sum-of-the-parts price target of 120p/share.
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