Trifast – fasten onto this group’s shares before the next price rise
In less than a month’s time we should be seeing the interim results from this Uckfield, Sussex-based group.
The six months to end September this year will show a recovery in the company’s fortunes, offering investors an opportunity of some early appreciation in its share price.
So, what does it do
It is one of the leading specialists in the design, engineering, manufacturing and distribution of high-quality industrial fastenings.
Fasteners are hardware devices that mechanically join two components together.
They cover a wide range of screws, including wood, machine, sheet metal and mating screws, as well as a selection of bolts, including carriage, lag, eye, shoulder, elevator and U-bolts, to name just a few.
Almost all of these fasteners are categorised according to things like their head styles, washer types, drive types and nut types.
These basic products are so very necessary to manufacturing plants across the world – whether making electronics, domestic machines, fridges, telephones, motor cars, sheet metal, medical equipment or whatever industry.
Essential part of the ‘assembly sector’
A group slogan is ‘Our fastenings enable innovation today to build a better tomorrow’ which is a good description of its business ethic.
The company supplies some 5,000 customers in around 75 countries.
Its customers are spread across a wide range of industrial sectors.
The group employs around 1,300 people and operates from 34 business locations within the UK, Europe, Asia, and the US including seven high-volume, high-quality and cost-effective manufacturing sites and three technical and innovation centres across the world.
A full-service provider
The company delivers comprehensive support as a full-service provider to its customers from concept design through to technical engineering consultancy, manufacturing, supply management and global logistics.
It is an important supplier to the end-users on either a ‘just-in-time’ or a ‘vmi’ basis.
In manufacturing, speed to market and costs of production can make or break a company. Just in time (JIT) manufacturing is a workflow methodology aimed at reducing flow times within production systems, as well as response times from suppliers and to customers.
Vendor managed inventory (VMI) is a business model where the buyer of a product provides information to a vendor of that product and the vendor takes full responsibility for maintaining an agreed inventory of the material, usually at the buyer's consumption location.
On an international sales split basis, on its 2021 group sales of £188.16m, some £72.15m went to European clients (38.3%), the UK made up £64.12m (34.1%), Asia saw £42.30m (22.5%), while the US took £9.60m (5.1%).
There are some 136.4m shares in issue.
Larger holders include Castlefield Investment Partners (14.5%), Schroder Investment Management (9.18%), AXA Investment Managers (9.15%), Sanford DeLand Asset Management (9.06%), Hargreaves Lansdown Asset Management (6.18%), Canaccord Genuity Wealth (6.07%), Michael Timms (5.15%), Threadneedle Asset Management (3.84%), Liontrust Investment Partners (3.65%), and Franklin Templeton Institutional (3.38%).
Recent Trading Update
On Thursday of last week (21) the group issued an interim Trading Update which stated that after a strong rebound in Q1 it had continued to see solid year-on-year growth into Q2.
The interim results will be declared on Tuesday 23 November.
The company expects to report first-half revenues up around 30% on the previous year and ahead of the 2019 pre-Covid-19 comparative period.
Furthermore, it declared that it was continuing to experience strong underlying demand in all its key markets.
Going forward, despite various shortages and the like, the group is enjoying good momentum in its recent contract wins and its new order pipeline, sufficient to give it the confidence of achieving its end March 2022 expectations.
Analyst Andrew Simms at the group’s broker Arden Partners rates its shares as a ‘buy’ with a price objective of 190p, compared to the current price of 126.25p.
His estimates for the current year are for sales of £216.5m (£188.2m) and adjusted pre-tax profits of £13.3m (£11.0m), with earnings of 7.4p (6.6p) covering a dividend of 1.8p (1.6p) per share.
Stepping into the 2023 trading year he goes for £232.1m of sales, with £16.8m profits, 9.4p of earnings and a 2.3p dividend per share.
It would be pleasing to see a bullish statement with the interims in late November, that would certainly perk the shares up in price.
In the Spring of 2018, the shares were a strong feature, rising to around 261p.
Eighteen months ago, at the start of the pandemic, they fell away to 95p before recovering up to the 170p level in early April this year.
Now at just 126.25p they do offer investors a good upside potential, especially if Andrew Simms is proved right.
It was extremely interesting to note that yesterday some 4.1m shares in the group were turned over, around 13 times the average daily dealing volume.
I like this company and its product and service on offer, it really is at the very ‘nuts and bolts’ end of industry.
It is acquisitive and is financially strong enough to speed on its growth both organically and by acquisition.
I firmly retain my own price aim for the shares.
(Profile 26.05.20 @ 113.5p set a Target Price of 175p)