Posted something similar last week on another financial site-
the current SP now looks more interesting, and ESNT is at least worth watching.
I found the SP close to £6 hard to reconcile with an early stage recovery/growth play,
which I also mentioned at the time,
clicked a Buy here on a medium term basis, 2-3 years approx.
There has been some comment Paul Forman may not have achieved a great deal at Coates PLC, and my own take is that is very harsh. At Coates he drove forward profitability
and in particular cash flow. Ironically his tenure largely missed the subsequent significant re-rating as the market belatedly reappraised COA.
"....... it was once part of Bunzl distributor of everything from paper napkins to rubber gloves until it was demerged in 2005, and used to go by the name of Filtrona until the branding experts were let loose..............
Since Forman took the helm in early 2017, Essentra shares have risen by as much as a quarter but are now trading at less than when he arrived, giving the business a £1.1bn market value. There are some old hands on the board including Terry Twigger, the former Meggitt aerospace boss. The turnaround is being closely monitored by chairman Paul Lester, a veteran of VT Group and Balfour Beatty.
Essentra has three divisions, and trading across them is mixed. Components, which makes low-cost plastic and metal items including plugs, fasteners and flange protectors for the construction, manufacturing and electronics industries, was the only division to grow last year, at 8pc.
The star performer was the pipe protection technologies unit, which serves the oil and gas industry and is benefiting from a rising rig count in America. Company watchers at Peel Hunt, the broker, are upbeat about the divisions prospects given stronger global growth, even though margins have narrowed slightly because of increased investment.
Cigarette filters declined by 3pc as Essentra passed through raw materials savings to customers. The tobacco-loving Chinese market is recovering and Essentra is trying to make progress in speciality markets including heat-not-burn technology.
The problem child is the health and personal care unit, which makes cartons and tamper proofing. Sales fell by 8pc last year and profits dropped by 80pc to £7.2m. It is suffering from inherited poor integration planning and weak customer service. A gift boxes factory in Newport lost £4.5m last year and has been closed.
The hurricanes that last autumn struck Puerto Rico and the US where Essentra has plants will damage profits by up to £2m, net of any insurance recovery, and further soured the mood. However, trading is forecast to turn positive again in the second half of this year after deals were signed with some global healthcare providers.
At the time of annual results in early March, analysts at Deutsche, Essentras joint broker, said they expected low single-digit cuts to consensus earnings forecasts because of a foreign exchange drag, but raised hopes of recovery. The shares yield about 5pc and look attractive, but the dividend is unlikely to grow this year or next as Forman works through the groups problems.
It is one to watch but because the shares are trading at 16 times this years forecast earnings, Essentra is still not cheap despite recent declines.
Questor says: hold
Share price at close: 421.2p"
"Those on the hunt for high yields at the start of 2018 need to tread carefully, as some income promises will inevitably not be kept.High dividend yields look attractive on paper, but should be treated with a healthy dose of scepticism. As share ..."
"Essentra blown off track by hurricane, says Peel Hunt
Plastic products maker Essentra (ESNT) has calculated the cost of damage from hurricane Maria at its Puerto Rico sites which will hurt full-year results by more than expected, says Peel Hunt.
Analyst Charles Hall retained his add recommendation and target price of 585p on the stock, which was trading up 1.7%, or 8.75p, at 511p after a third quarter trading statement.
This showed like-for-like growth was modestly positive at 1-2%, compared to -4% in the first half of the year. However, the bill of repairing hurricane damage was higher than expected.
The company has quantified the hurricanes impact at £1.7 million to £2.5 million before insurance recovery thus far, which is likely to result in a slightly higher full-year impact than our initial forecast of £3 million, said Hall.
As a result we are reducing our 2017 forecast by £1 million, but make no change to 2018. The underlying performance continues to improve, albeit this years numbers are being held back by the hurricane impact. "
"Hurricane impact at Essentra will be short term, says Peel Hunt
Recent hurricanes have affected the Houston and Puerto Rico operations of plastic products maker Essentra (ESNT) but Peel Hunt expects the impact to be short term.
Analyst Charles Hall retained his add recommendation and target price of 585p on the stock, which was trading down 2%, or 10p, at 495p at the time of writing.
Hall said the extent of the damage was relatively limited, with the main issues being around loss of power and employee welfare.
The company expects the impact to be £500,000-£1 million in Houston and the costs in Puerto Rico are running at £500,000-£750,000 per week, albeit a significant part will be covered by insurance, he said.
The company will be looking at contingency plans although this will depend on customers decisions. We assume the issues will take a number of weeks to resolve and so are reducing our 2017 estimates by £3 million to £76.4 million but make no changes to future years. "
"Packaging and filter products producer Essentra was on the front foot on Monday as Deutsche Bank bumped its rating up to 'buy' from 'hold' and hiked the price target to 600p from 425p.
Deutsche said it did not have enough conviction to turn positive on the stock after the profit warning in January, but chief executive Paul Forman has now spent more than 50 days in the role and his message remains that the issues are mainly self-inflicted and can be reversed.
DB noted the Porous disposal is said to be on track and so leverage is robust.
"Following the strong re-rating, better entry points might be possible but we believe Essentra offers a classic medium-term self-help story and upgrade to buy."
However, the bank cut its forecasts to reflect a more gradual recovery. It reduced its estimate for 2018 earnings before interest, tax and amortisation to £102m from £111m.
"We believe in a bounce-back at HPC packaging: first margins improving as double costing falls out (2018E-beyond); followed by revenue growth, which, in our view, can take longer (H2-18E, 2019E). Investors in the story should also keep in mind the trends in the other businesses comprising the Group, most of which also had a weak 2016, thus recovery should not be taken for granted."
Earlier this month, Essentra posted better-than-expected full-year earnings and maintained its dividend payout, but guided towards lower sales and profits in 2017."
Did anyone else watch this on Friday? Paul F seems to know his audience, although a bit flippant he answered most of the questions and painted a story of internal failure which he believed could easily be rectified. Price movement seems to reflect his optimism
I listened to this (now not available as it had a 7-day expiry) and thoughts are:
1 - new CEO stopped short (just) of openly criticising outgoing CEO.
2 - quite clearly cultural issues and lack of investment in people and infrastructure (IT was mentioned)
3 - new CEO says its a fundamentally sound business with self-help on basics being needed
4 - no comment (that I can recall at least) on balance sheet. If trading slips I'm not sure how much headroom they have although hinted at disposals / structuring which should benefit
I own some stock, got in after the second profits warning last year, and therefore want to believe that this is a long play upside. With a bit of tidying up and TLC has the potential to show decent upside over 2-3 years. New(ish) Chair has the experience to deliver. Not 100% sure about new CEO track record (Coates and L&B did not obviously thrive under him) but certainly talked a lot of sense.
"Jefferies downgraded its rating on Essentra to 'hold' as the cigarette filters and plastic packaging manufacturer's "self inflicted wounds" need time to repair.
The profit warning on 22 January outlined perfectly that new chief executive Paul Forman "has a sizeable job on his hands".
"The group needs to undergo significant change and while there is recovery potential, remedial work is needed, the recovery will take time to come through and will come from a lower-than-expected starting point."
Forman has outlined the areas of the group that need major work to repair and drive improvement.
"There is much work to do to get the group back to full health, and it will take time for the recovery to come through in earnest," Jefferies said.
"A fundamental change in culture is needed, but most the issues faced are self-inflicted, not structural in nature."
Analysts cut their full year PBT and EPS forecasts by 4%, but for the next two years take a more cautious view of the HPCP recovery and lower margin assumptions compared to other analysts and so raised their target to 450p from 445p "to reflect recovery multiples". "
"Citigroup downgraded Essentra to 'neutral' from 'buy' and cut the price target to 430p from 500p following the company's third profit warning in the space of a year on Monday.
The maker of cigarette filters and plastic packaging cautioned that it expects profit to be below expectations due to operational issues at its health and personal care packaging unit.
For the 2016 calendar year, it expects operating profit to be at the bottom of or modestly below its previous guidance of £137m-£142m. The company said that due to continuing operational issues in the Health & Personal Care Packaging unit, there was a further "significant" decline in revenue and profitability during the last two months of 2016, and there is no expectation of a near-term improvement in 2017.
Citigroup cut its earnings per share forecast for FY16 by 4%, for FY17 by 22% and FY18 by 21% as it incorporates further margin erosion. The bank now expects profit to drop to £12.9m in the second half of 2016 from £22.1m in the first half.
Citi said that in FY17, further measures will need to be taken to stabilise costs at underperforming sites and improve service levels to re-ignite sales. While these measures are being taken, it expects H&PC margins will remain depressed, declining to 6.5% in FY17 from 13.6% in FY15."
"Following successive earnings downgrades in 2016, the shares are trading at a steep valuation discount to both historic averages and the broader FTSE 250.
"Despite the valuation support, Essentra is experiencing operational challenges, which we assume will limit earnings recovery in FY17e. We do not expect near-term catalysts to emerge until the company re-defines its strategic direction under new CEO, Paul Forman, who began 1 January 2017."
I tucked into some more at £4. The pharma packaging business looks to be in a mess with too rapid integration causing all sorts of problems. The sale of Porous materials will complete fairly shortly. The strategic review is bound to either identify divisions for sale or putting the whole group up for sale. I'll be amazed if this hasn't been gobbled up by a big industrial conglomerate like Berkshire Hathaway by the end of the year.
Important message from the Financial Conduct Authority:
Posting inside information that is not public knowledge, or information that is false or misleading, may constitute market abuse.
This could lead to an unlimited fine and up to seven years in prison.
If you have any information, concerns or queries about market abuse, click here.
The content of the messages posted represents the opinions of the author, and does not represent the opinions of Interactive Investor Trading Limited or its affiliates and has not been approved or issued by Interactive Investor Trading Limited.
You should be aware that the other participants of the above discussion group are strangers to you and may make statements which may be misleading, deceptive or wrong.
Please remember that the value of investments or income from them may go down as well as up and that the past performance of an investment is not a guide to its performance in the future.
The discussion boards on this site are intended to be an information sharing forum and is not intended to address your particular requirements.
Whilst information provided on them can help with your investment research you need to consider carefully whether you should make (or refraining from making) investment or other decisions based on what you see without doing further research on investments you are interested in.
Participating in this forum cannot be a substitute for obtaining advice from an appropriate expert independent adviser who takes into account your circumstances and specific investment needs in selected investments that are appropriate for you.