• Mark Watson-Mitchell

Alumasc – a very quick opportunity to profit

9th August 2021


The market does not always do just as you hoped.


Good news comes out and after a quick price lift a company’s shares can go into a swift fall-off, which makes you question your own reactions.


Of course, you have to remember the old market adage – ‘buy on the rumour and sell on the fact’ – it can be so accurate. Annoyingly so.


Up and down


But then that is what markets are all about – the ability to take advantage of opportunities, whether you are buying or selling.


And it is most important to remember that prices can go up and down.


Ready for the chance


There are always players watching on the sideline just ready to pounce into action.


Equally as important is the advice to always do your own research and await the moment for taking any opportunity.


It does depend upon whether you are a short, medium or longer-term investor as to just how you seize your opportunities.


Armed with your research and knowledge gives you that edge against others in the market.


Time to get some ‘cheap stock’


It is just one such occasion that now gives my readers a quick moment of time to buy some ‘cheap stock’ in an old favourite of mine – Alumasc (LON:ALU).


I have highlighted this company several times over the last seventeen months, feature profiling it in February last year @ 116p and then again, deep in Covid-19 panic time four months later @ 80p.


At the beginning of July this year the shares touched a 288p High.


On Monday of last week they were trading at 258p and then started sliding away to a week’s Low of 210p. They were looking friendless but for what reason, I just could not identify.


Time spent on reconnaissance is seldom wasted


So, I did my homework again and renewed my view that this group’s shares are looking very cheap following the easing back last week.


From the 210p depths on Thursday night the group’s shares ended the week at 230p on the back of nearly 120,000 shares traded, which is almost 50% more than the recent daily average.


It is now your opportunity to ‘top-up’ your holdings if you already have them in your portfolios – and if not well now could be just the right time to jump aboard ahead of the group’s finals being released in just under a month’s time.


The business


The Kettering-based Alumasc Group, designs, manufactures, and sells building products, systems, and solutions in the UK (85.3% of sales), Europe (5.5%), North America (4.2%), the Middle East (1.49%), the Far East (1.59%), and elsewhere internationally (1%). It employs over 450 people.


All of the group’s businesses have strong brands and positions in their individual specialist markets.


Alumasc has a long-standing heritage of excellence in the manufacture and supply of a variety of products dating back to the middle of the twentieth century.


Products and services


It supplies integrated roofing and walling solutions, including solar shading, architectural screening, and balcony and balustrading systems.


It also provides water management solutions to manage and attenuate water. As well as a range of other premium housebuilding products.


Group brands include Timloc, Roof-Pro, SKYLINE, Harmer, Wade, Gatic and Levolux. Its subsidiaries include Alumasc Building Products, Timloc Building Products and Wade International.


Last year, to end June 2020, its water management side represented 44% of sales, its building envelope side was 43.7% and housebuilding products 11.9%.


Almost 80% of the group’s sales are driven by building regulations and specifications through architects and structural engineers because of the performance characteristics its products and services offer.


Over 90% of the group’s sales relate to one or more long-term strategic growth drivers, such as Energy Management, Water Management, Bespoke Architectural solutions, or just due to the Ease of Construction, including off-site construction.


Good corporate strategy


The group’s three main strategic objectives are - to grow its revenues at a faster rate than the UK construction market; to improve its operating margins to enable it to grow profit faster than its revenue; and finally, to generate superior financial returns for its shareholders.


These objectives are being leveraged through the growth in the group’s export sales.


Strong year-end finish continued


In the middle of July the group declared a Trading Update, commenting upon the strong finish to the end June 2021 year with demand and margins holding up well in the final quarter. As a result, revenue for the year is now expected to be approximately £90m, some 18% above the previous year, with underlying profit before tax for the year ahead of the Board's previous expectations.”


The group’s shares hit 288p in reaction.


“Alumasc's cost savings programme, liquidity management, strong balance sheet and improved commercial positioning underpin a robust platform that is well positioned to benefit from the long-term growth drivers in our market.”


Broker’s estimates raises price aim


Analyst David Buxton, Director Research at brokers finnCap, was impressed, concluding that momentum remained strong as the group went into the new year at the start of last month.


The Alumasc Management is apparently expecting another strong year taking it up to end June 2022.


Buxton raised his various estimates for last year and this current year – going for £90m (£76m) of sales and profits of £10.5m (£3.7m), worth 23.5p in earnings per share (8.2p) for 2021 and then a modest £97m of revenue for this year, with profits of £10.8m, giving earnings of 24.1p per share.


Buxton goes for a 7.5p dividend for 2021, then 8p this year.


He raised his price objective from 262p to 315p.


Cheaper than its peers


Doing some comparisons across ten peer companies in the building products sector, like Marshall, Ibstock, Epwin, Norcros, Kingspan, and Polypipe, it becomes apparent that Alumasc, at just 230p, is trading well below the average ratings.


It seems that around 18.2 times price earnings for last year, then 15.3 times current year comes out as the mid-values.


On Buxton’s estimates that would put its shares out on a sector average rating of 423p for 2021 and 370p for this year.


But being more sensible would see the Alumasc share price range between 325p and 350p based upon the finnCap estimates.


I look for increased estimates in next month


I would guess, at this early stage, that within the next six weeks or so such profit targets will be heightened in line with the current booming building products market.


In my view, now is the time to just ‘top-up’ or ‘jump in’ to the group’s shares before the finals are released on Tuesday 7 September.


This is your opportunity.


(Profile 13.02.20 @ 116p set a Target Price of 145p*)

(Profile 08.06.20 @ 80p set a Target Price of 105p*)

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