"Leading market commentator David Buik tells interactive investor who he thinks the winners will be this year and where the FTSE 100 will finish 2018.Which blue chip shares does Panmure Gordon think will be winners in 2018?They're not as obvious ..."
As suspected, the predicted rise in business is now expected a little later than forecast. Crucially it is still expected, and if the market sees it this way the price will stabilise. Moving forward I intend to hold as it is not overpriced at present.
Tomorrows update should shed some light on the recent price pull back. I fear the news will not be too great and that growth is slower coming than anticipated. (Possibly the management were too bullish in the last update). I am happy to hold and wait as I think the aero business should provide a good area for growth over the coming years and will be free from the Brexit shennanigans.
"Jefferies: more to come from Meggitt in next year
Jefferies has upgraded Meggitt (MGGT) as it expects the global engineering group to prove it has rejuvenated in the next 12 months.
Analyst Sandy Morris upgraded his recommendation from hold to buy and raised his target price from 500p to 600p. The shares rose 2.8% to 511.3p yesterday.
Meggitts rejuvenation has taken a lot more than a good nights sleep, he said. The process will not be complete for some years, but with an unprecedented number of parts and systems won on new aircraft/engine programmes, its efficacy should be apparent within 12 months.
He added that the years of investment ahead of production have required endurance we have bided our time until convinced tangible rewards should be evident within our 12-month horizon."
"Engineer Meggitt got a boost on Wednesday as Bank of America Merrill Lynch upgraded the stock to 'buy' from 'neutral' and lifted the price target to 530p from 490p.
The bank said it sees an attractive cash improvement story through to 2020, driven by gradual margin improvement and stabilisation in fixed/tangible investment.
Merrill said it sees around £304m of free cash flow to equity in 2020, which would correspond to an 8.7% free cash flow yield, which it reckons is attractive versus the civil aerospace peer group average of 7% in 2020.
The bank also pointed to the fact that aftermarket growth is improving, driving the potential for a re-rating.
"Following years of weak and volatile aftermarket growth, Meggitt introduced the Customer Services and Support (CSS) organisation in 2015. Management highlighted that this contributed positively to aftermarket growth for FY16, seeing 5.4% aftermarket growth versus market growth of 3.4%, after making good progress in limiting the headwind from surplus parts and increasing share of Maintenance, Repair and Overhaul activities."
Boa ML said if the new organization can continue to drive strong aftermarket performance, as demonstrated in 2015, versus years of volatility, this could drive a re-rating in the mid-term."
Not too impressed by that. Here's part of what QinetiQ had to say about it:-
"Acquisition of a highly cash generative and growing business"
From Meggitt's point of view:-
"This transaction is consistent with Meggitt's strategy to focus on businesses of scale in attractive markets where our leading positions offer greater potential for growth and operational efficiencies."
I hope so, but we'll have to wait and see what they do with the money, other than to reduce the pension deficit.
" It's been a grim couple of days for Britain's exporting engineers. A weak pound has proved a super tailwind since the Brexit vote, but yesterday we heard that LSE:LRD:Laird had run into problems with NASDAQ:AAPL:Apple, and now two of our most ..."
"Meggitt is now facing additional headwinds in its Civil OE business in addition to the loss of market share and falling margins evident in its H1/16 results in its newly acquired advance composites businesses. Bombardiers warning on CSeries deliveries on Tuesday suggests that we may have underestimated the supply chain problems affecting PurePower. This could not only impact Meggitts ability to deliver its low single digit organic growth target for the 2016, but may also impact margins due to delays, complexity of the technologies and product modifications. We have also taken this opportunity to restate our forecasts based on forthcoming accounting changes in 2018 whereby programme participation costs are no longer expected be capitalised. This reduces our 2016-18 EPS forecasts by 8-11%."
"P Morgan Cazenove has removed aerospace and defence group Meggitt (LON:MGGT) from its list of stocks to avoid and upgraded its recommendation to 'neutral' (from 'underweight') on news of activist shareholder involvement.
The City heavyweight said: "This morning a well-known activist investor declared it had acquired a stake of just over 5% in MGGT. We upgrade the stock to Neutral and increase our multiples-based Dec 16 price target to 445p from 395p, reflecting the higher possibility of either: (1) internal changes in MGGT's strategy; or (2) M&A activity."
So that's 2 who think it's overvalued, and 1 who thinks it's about right. Wotever. What am I saying, I should be thinking about whether it's worth doing a spot of trading, never mind "wotever"!
I don't believe that Singer and co. think that Meggitt is massively undervalued as it is; so presumably they see value elsewhere. I'd say that they would like to see it broken up. How that happens I've little idea. May be they want to attract private equity to do that.
That being the case, I don't see the sp changing much from where it is now - in the short term.
Actually, that's prompted me to look at its net assets.
Btw, don't read too much into what i write, I'm merely an ancient mariner. See ya.
"It seems odd picking LSE:MGGT:Meggitt as Share of the week. A third-quarter profits warning late last month pounded the defence contractor and plane parts engineer, and within a day more than 26% of its value had been wiped out. But it's a ..."
Warren Buffett's recent $37bn (£24bn) purchase of aerospace parts supplier Precision Castparts highlights the allure of UK peer Meggitt (MGGT). And directors have recently been buying shares, too, as the components and sub-systems manufacturer boosts investment to capitalise on strong end markets. With last month's first-half results emphasising Meggitt's attractions and bid speculation growing, we think the shares look too cheap on 13 times forecast earnings.</b></i>
Date Director Type Volume / price Trade value
02 Nov 2015 Guy Berruyer Buy 10,000 @ 355.43p £35,543.00
30 Oct 2015 Doug Webb Buy 30,000 @ 352.67p £105,801.00
30 Oct 2015 Stephen Young Buy 100,000 @ 352.67p £352,670.00
30 Oct 2015 Sir Nigel Rudd Buy 57,000 @ 348.76p £198,793.20
In addition Capital Group Companies Inc now holds over 16% of the equity. Their stated policy is to look to the medium to long term but, it is a name that sticks with me when a significant holding is built up to influence change.
I have added to my recent purchase on the back of these purchases.(sp 369p)
"Aerospace and defence engineer Meggitt rallied after Barclays reiterated its 'overweight' rating on the shares, saying the stock was "too cheap to ignore".
Meggitt's shares plunged last week after warning that full-year profits will miss its £369m forecast, due to fewer contracts and increasing programme deferrals.
"Rarely do we find A&D companies which are simply too cheap, but post last week's warning Meggitt is firmly in that bracket," Barclays analysts Phil Buller and James Zaremba wrote in a note to investors on Tuesday.
"At 10x FY16 P/E, 9x EV/EBITA with a comfortably affordable dividend yielding circa 4.5%, the shares trade at a 25% discount to their own historical averages vs. the sector in spite of a 6% EPS CAGR and unmatched cash progression."
The analysts added they were concerned about the near-term visibility and capital deployment discipline but it seemed more than in the price.
They lowered Meggitt's price target to 420p from 610p.
"In short, we see this as a compelling entry point with limited further downside. 420p price target implies 19% upside."
Fog, as an engineer mesen, I couldn't agree more, although you would have thought with so many bean counters (conservative by nature) Meggitt wouldn't have overextended at all.
There must have been some ambitious engineering decision behind all these acquisitions or am I being naive and they were all done because someone had mates on the boards of the acquired companies?
I'm also watching BBA, but I'd be careful given the enormous debt load they have just taken on and the fact that 1 in 8 private jets is up for sale (that's their main market to service).
Also if you look back at BBA's last 5 years revenue/profit/debt increase it's not that pretty.
I did invest in Senior at 240 -- aah well, there's always the long term as they say
Games -- There's also the fact that in the long term we are all ............
Thanks for that games, I had missed the earlier purchase. I have done ok following his various moves over the years, and Pilkington springs to mind. As for this situation, I get the feeling that this is a quality company which has over extended itself at the wrong time. I would like to see an engineer as an executive director as there seems to be too many accountants for my liking.Would not surprise me to see some board changes and a revised plan put forward to institutions in order to get their support for a rights issue. Hopefully, this will allow time for the demand cycle to change and enable the Companies growth side to improve. Who knows but,perhaps, watch this space.
I notice that he recently bought some BBA shares as well. Am giving these some thought.
I see he's just been appointed to the board of BBA and bought a chunk of stock there as well, and for his wife and for some trust.
Rudd's the ultimate, hive it off and sell it merchant so you can bet he's angling for some deal at BBA, although they just bought a company in the US hiking up debt, not sure about Meggitt and what his intentions are.
"Shrinking defence budgets and weak energy markets are putting the industries' engineers under strain. With fewer contracts and increasing programme deferrals hitting LSE:MGGT:Meggitt's margins, the aerospace parts maker has warned that full-year ..."
I bought a few for my ISA this morning at 355p. I admit that the current outlook is not bright but, what interests me is, the fact that Rudd joined the board in April and he bought his stake ( about 90k worth in August at over £1 per share above current levels. (sp 362p)
"Not too chuffed with their casual attitude to debt."
Lupo, just looking at this for the first time and after today's profit warning.
What was your concern with the debt here? Looking at their last set of numbers it seems to be at about £620M and annual profits at £177M after tax, or about 3.5 years.
Although the latter figure may be shrinking now after today's warning.
This has hit Senior and all the other engineers today as well.
Not too chuffed with their casual attitude to debt. Orders not great, and I'm not too impressed with the outlook. Other than that, they belatedly seem to be getting on with improving quality and performance.
Despite the 5% ish rise so far, i'd say it'sabout right. Offloaded most of mine at 565p back in March
"The Mike Ashley & Warren Buffet Tesco Watch! Â We had a request we re-instate our Mr Ashley watch, tracking the value of the blokes 'investment in Tesco' made at a time we were suggesting buying running shoes... We'd binned the concept as 'nah ..."
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