"The company argues this is masking the positive effects of our strategic actions - and its house broker, Arden Partners, reduces earnings per share forecasts by approaching 11%, to 4.4p, for the companys year ending at the end of this month and approaching 20% for next year, to 4.8p. Noting a still sub 10x P/E, it though states we remain positive and believe there is upside to FY19 if the group makes progress passing on pricing through the next 12 months.
However, it also admitted there is limited visibility at this time. Net debt increases to £28m. That equates to approaching 12.5p per share and the half-year balance sheet also showed a still more than £100 million pension liability. As such, I currently remain cautious and continue to avoid."
Volume up big time in recent trading and price creeping up to not far off broker revised targets of 65 & 70p. Question now is will the price over-shoot the target price and if it does, is it an over-shoot of true price/value.....or just an over-shoot of broker 'plucked out of the air' target price?!
I haven't set myself any targets yet, but watching closely to see if we get near 80's in which case I will probably consider selling some, but not all.
The closure was forecast in the November half-year report.
Having checked but found nothing on the Company website, I checked elsewhere. Machinery Market magazine of 16 January, discloses that the decision has been confirmed with the loss of forty plus jobs.
Some work still to do, I appreciate, but the planned consolidation at their Cardiff factory would follow. So another site released for sale or rent, to add to their Mulgrave Australian location.
Beginning to seem that these managers can make things happen. I'm encouraged and the share price seems responsive.
Whats not to like? Sentiment and price action still look good to me as does 68p (Numis is now calling for 70p) but wouldn't be surprised if we first see 44-46p on a backtest of breakout, not that I'll be holding my breadth. Monthly chart looks like a rounded bottom not that I'm calling for 180+. Time and patience! ATB @SinbSinbad
"Shares in Renold (RNO) were marked up on the release of the group's half-year results, which may seem odd when you look at the past comparatives. But the supplier of industrial chains and power transmission products is undertaking a range of measures designed to lower its break-even point, and the numbers suggest that stability could be returning. Underlying revenues of £88m may have been down on the £92m generated in the first half of last year, but showed improvement over the second half (£87m), while adjusted operating profits were broadly flat.
More encouraging is the order outlook for the chain division, due in part to the January acquisition of the tooth chain division of Aventics. The business, which is located in Gronau, Lower Saxony, provides niche industrial applications typically seen in bottling plants and other manufacturing facilities. The integration process has progressed smoothly, with improvements noticeable both in terms of sales and cost synergies.
Renold remains one of the world's biggest producers of transmission, conveyor and leaf chains, yet its share of the global market is relatively small, reflecting industry-wide fragmentation. This presents opportunities to expand through acquisition, which now forms part of the group's re-jigged corporate strategy, as highlighted by the Aventics deal.
Arden Partners expects adjusted profits of £13.2m for the year ending March 2017, leading to EPS of 4.8p, rising to £15.9m and 5.8p in 2018 (from £12.7m and 4.7p in FY2016).
NET ASSET VALUE:
Half-year to 30 Sep
Pre-tax profit (£m)
Earnings per share (p)
Dividend per share (p)
*Negative shareholder funds, including intangible assets of £35m, or 16p a share
There's a discernible improvement in corporate sentiment since the release of a somewhat downcast trading update in September that focused on cost-cutting initiatives. Management is confident it can meet current market expectations for the full year, but Renold remains a work in progress. Hold.
Last IC view: Hold, 37p, 17 Feb 2016 "
Bill1703, I would add in the past 12 months management de-risked their pension liabilities with a buy in or longevity swap and this was done for all those individuals (50%) who had accrued a pension pot greater than £100k. But whether the remaining assets after dumping all their gilt holdings to pay for the insurance is sufficient to meet pension payments iover the long term remains to be seen!
"...perhaps there is a deeper story here -- anyone know what will change? "
Games, I do have some of these - from a long time ago, and quite a bit higher up, sadly. Was a different trading - and pension scheme - environment then!
There has been ongoing restructuring, a bit of a long haul obviously, and operationally I think they are in a much better place than they were maybe 2-3 years ago. But I suppose the key investment question then is twofold - is the pension deficit problem fully reflected in the SP? And even then, is it worth the ongoing uncertainty?
The answer to the first part, for me, is yes - I would say the equity is currently worth more than the market cap plus pension liability. But perhaps not by much... and the answer to the second part is more difficult.
It probably hinges on your view on pension deficits in general. Yes, they are long term cash liabilities - but the actual long term liability could be very different from the current valuation, and deficits are currently seriously inflated by abnormally low rates / bond yields. There is every chance this normalises over time, which could have a big positive impact on valuation, discounted back to today. But who knows when, by how much... and life expectancy could continue to surprise on the upside and put further upward pressure on DB schemes.
I am generally more relaxed than some on deficits - as long as the underlying business is sound. People get spooked by situations like BHS, but that business was in terminal decline. I would probably be looking at RNO, if I didn't already have plenty - and indeed, I am currently looking at a couple of similar situations, where I would argue pension concerns weigh too heavily on the equity valuation.
But equally, I see the argument that there are plenty more stocks to invest it, so why take on the long term uncertainty.
Like what they do, but as an investment it looks impossible.
The underlying debt and pension size/obligations make it almost impossible for the company to progress in what seems a pretty mature industry.
Borrowings at £36M against an average of 5 years net after tax profit £4M (some 9 years) and that excludes the pension obligations which are huge compared to the size of the company, a legacy of an older company no doubt.
Borrowings have risen sharply in 5 years from £14M to £36M -- that's 157% and the business has gone from revenue £210M to £165M -- a decline of some 26%
What are they doing with all the money?
Games -- perhaps there is a deeper story here -- anyone know what will change?
Well that sees me back into both now. Just picked up a decent contract by GTC for RNO at 42.5 the other day. I reckon it has a good economic moat and following restructuring should have a bright and if not steady outlook FWIW. Looking for 80p but happy to see 68p again.
Industrial chain-maker Renold is back in profit after a two-year turnaround and management thinks there is more to come. The Manchester-based manufacturer is the second largest chain specialist in the world, making products that are used in Alton Towers rollercoasters and London Underground escalators. It suffered a sharp downturn during the industrial slowdown that followed the 2008 financial crisis. Mr Purcell believes the recovery will continue with the operating profit margin improving from 8.5% last year to mid-teens within the next five years. He explained that the profits can improve even on limited growth in revenue.
Cash generation improved strongly, bringing net debt down £5.3 million to £19.5 million. The only worry is that debt is held against net assets of £11.6 million, and there is a £61.2 million pension deficit as well.
That said, the shares are trading on 12 times forecast earnings per share of 5.2p, and are a buy for a long-term recovery. Renold at 71.25p+2.75p. Questor Says Buy. "
Shares in Renold (RNO) climbed 6 per cent after the chains and gearbox maker issued an encouraging trading update outlining positive developments to its self-help strategy. The manufacturer of products used in tube escalators and Big Ben's clock tower revealed that margins continue to widen as it reaps the benefits from the closure of its lossmaking Bredbury facility and various other cost-cutting activities..........."
"Industrial chains and gearbox maker LSE:RNO:Renold will report much better-than-expected full-year profits when it unveils results at the end of next month. Earnings forecasts have been upgraded and investors have chased the shares up by around ..."
"Renold, a leading international supplier of industrial chains and related power transmission products, is today issuing a trading update ahead of reporting results for the year ended 31 March 2015, on 26 May 2015.
The Group has continued to deliver margin enhancing initiatives across both operating divisions and reduced transitional costs associated with the Bredbury closure project. Modest underlying(1) sales growth has continued in the Chain division with Torque Transmission also delivering underlying sales growth in the second half.
The Group therefore expects to report adjusted(2) operating profit for the full year above the upper end of current market expectations. Net debt has reduced to approximately £20.0m, due primarily to strong operating cash flows...."
Industrial chain supplier Renold (RNO) has suffered poor returns but a restructure could help restore margins this year.
FinnCap analyst David Buxton retained his buy recommendation and target price of 79p on the shares, which were trading at 58p yesterday.
Our recommendation centres on the virtues of self-help, which should result in earnings per share growth despite flat underlying markets, he said. Renold has previously delivered poor returns. Current management is tackling significant structural problems in the chain division, restoring margins and generating more sustainable free cash flow.
Management is credible and ambitious in its planned actions. The company is part way through its strategy and margin improvements are already being achieved.
Buxton added that continued self-help measures could result in significant earnings per share growth as well as a price/earnings multiple expansion and that the current share price did not fully value the upside potential. "
Vectura Group Plc: finnCap Reiterates the stock with Buy rating and a target price of 202.00p.
Renold Plc: finnCap Retains the stock with Buy rating and a target price of 79.00p.
Quixant Plc: finnCap Reiterates the stock with Corporate rating and a target price of 195.00p.
Photo-Me International Plc: finnCap Retains the stock with Corporate rating and a target price of 165.00p.
M.P. Evans Group Plc: finnCap Reiterates the stock with Buy rating and a target price of 615.00p.
Ithaca Energy Inc: finnCap Reiterates the stock with Buy rating and a target price of 170.00p."
"N+1 Singer re-iterated its "buy" recommendation on manufacturer Renold (RNO) , increasing its target price from 72p to 80p.
The move comes after Renold reported full year results which are indicative of improving profitability under the new management team. Looking ahead, N+1 Singer acknowledges that the group is still at a relatively early stage in its turnaround plan and believes that it is well placed to deliver further earnings upgrades over the coming year.
When organic growth is hard to come by, a proven self-help story like Renold's is attractive. Recovering margins mean profits should grow even on flat sales, but a return to top-line growth is likely this year, much of which should drop through to the bottom line. Net debt should begin to fall quickly, too. That's why a forward PE ratio, based on N+1 forecasts, of 14.3 for the 2014 calander year dropping to 11.6 for 2015 looks stingy, particularly given the UK industrials sector trades on 16.9 and 15.5 times respectively. Buy"
Volume on down days was indeed telling. That said I thought the bullish falling wedge would hold so we may yet be seeing a fakeout with a rapid reversal early next week. That said I'll gamble we may see at least one more push down and place a GTC buy order for 49p -half expect rising support at 48p to be tested. 48p is also the 38.2% Fib retracement for the Nov 2012 low to Feb 2014 high. At a 28% discount to recent highs its worth getting back into IMHO.
I'm now looking for a simple ABC (A=C) correction which would target 51-52p and put the SP back in the Dec/Jan consolidation zone. My chart says strong support at 55 and 42p with rising intermediate support at 53.5. As you say Vol is key. RR has already made me another 10% and I fancy that as the better long term hold but I might yet sell some IUKD (an ETF) and place a GTC at 52 for RNO as I would expect 68p to get retested very quickly as soon as this selling cycle is over but perhaps not before we see EOY (or 2H) results for 2013 which I expect to be released around 01May. I still think 65-68p is fair value until we see those results!
Testing 59 Sinbab? Not much volume though, but it will be interesting to see if it holds up. I'm still looking at early 50's to consider a buy, but like you I'm not sure of the real value. I don't want to undo the decent gains I made on the way up by buying back in too early and then seeing it go down further. Ah, every investors dilemma!
Funny you should ask. I had a GTC buy order in for 59 which failed due to lack of funds because I spent the money earlier yesterday on RR. I have rising weekly support at about 58 and I expect yesterdays low to be retested but not necessarily to break, this could take a few days to work all the selling out so I'm in no rush to re-enter. The problem I have is knowing whether RNO is worth more than 68p.
I tend to think that as sure as night follows day there must be a correction at some point soon. When I can see where true support lies I may well jump back in. 68p seemed as good a place as any for the price to take a pause but who knows, it could just keep going up.
Well done Sinbab for getting to your target and selling as you said. I'm also out totally today as I can't figure this one out any more. I wish I had the balls to have held it all till now rather than trimming over the last few months, but I can't complain as this investment has been good to me anyway. It will be interesting to hear what their update says and if the SP will hold.
Having followed this one all the way up from 27p, with a few dips in the road along the way, I chickened out with my 30,000 holding first thing today. I figured that a 10k plus profit in the hand was worth two in the bush. Good luck to all those who are still holding but I fear whatever turnround may be being made may not support the share price at these levels in the short term. We will see if I am right shortly, I trust.
...i continue to hold but feel the oxygen is getting rather thin at these levels!...
large buys are reassuring though and the numbers continue to improve, so i will stick my head in the sand again for now and await further news...
I,m looking for a 63-64p target by Feb2014, perhaps stretching to 68p. Then I'll consider taking my near 3-fold profits depending on the next round of rns releases. 68p being a target for the double bottom formed on the monthly chart (Mar/Apr2009 & Nov2012) where 68p also happens to be gap fill with closing price on 29Sept2008.
Im trimming back further today at 154% gain as I cant stand the thought of seeing it go back down, but then I already have regrets of trimming some of my holding back in October! For me its just a guessing game which in time I find out if I have won or not! Having now reached N+1 Singers target of 53 Im afraid its another halving of my current holding. Of course I'm always looking to buy back on dips, but they haven't been coming for Renold for a while now.
Good luck all
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