IMI

Engineering giant IMI (LSE: IMI) disappointed the market in end-of-week trading with its latest set of numbers, and traders responded by sending shares 2% lower from Thursday’s close. The business reported that revenues slipped 5% during January-March, a result that forced operating profit down 15% to £116m.

Worryingly IMI advised that revenues are likely to fall by a similar percentage during the final six months of 2015, adding that difficulties in the fluids market mean that “some projects which are scheduled to ship this year could still shift into 2016, which may impact full year performance.” With the engineer also facing significant currency headwinds I believe the top line should remain under the cosh for some time.

The City currently expects IMI to record a 7% earnings decline in 2015, putting the business on a P/E multiple of 14.7 times. Although this drops within the parameter of 15 times or below than indicates decent value, given the enduring problems in several of its critical end sectors, I believe IMI could be due for further heavy share weakness should the newsflow begin to worsen, a very likely scenario.

Kaz Minerals

With commodity prices continuing to sink, I reckon copper miner Kaz Minerals (LSE: KAZ) is a high-risk selection for those seeking any sort of earnings growth. Unfortunately for the London digger this view is also shared by the wider market, and a 3.3% decline in Friday trading means that the stock has shed some 40% of its value since mid-May alone.

Kaz Minerals announced yesterday that it was on track to meet its copper production guidance of 80,000-85,000 tonnes during 2015, but was forced to reduce its gold output forecast from 42,000-47,000 ounces to 34,000-38,000 ounces on the back of lower ore grades. This hardly does the Kazakh-focussed firm any favours considering that revenues already remain under pressure — the yellow metal remains perched perilously above recent five-year lows around $1,080 per ounce.

With a worsening supply/demand balance also affecting key product copper, a factor that looks set to drive red metal prices to fresh multi-year troughs below $5,200 per tonne, I reckon Kaz Minerals is nailed-on to remain under significant pressure. Indeed, the miner is expected to punch a fourth consecutive earnings dip in 2015 with a 97% decline. And I do not see the bottom line improving any time soon as global copper output increases and the Chinese economy moderates.

Alent

Still, chemicals and materials supplier Alent (LSE: ALNT) was able to give the market some reason for cheer and the business was recently dealing 0.3% higher in Friday trade. The Woking firm advised that net sales increased 1.9% during January-June, to £205.2m, thanks to solid pricing as a positive product mix from its higher-margin operations offset weakness in its end markets.

And promisingly Alent — which has agreed to a £1.35bn takeover from Platform Specialty Products — added that “we continue to expect an improvement in the second half of the year reflecting the normal seasonal cycle in electronics and new product launches from our customers.” Against this bubbly backcloth the City expects Alent to record earnings growth of 7% and 9% in 2015 and 2016 correspondingly, figures that push an earnings ratio of 17.9 times for this year to 16.5 times for 2016.

With the cash balance also improving at the firm, the number crunchers expect Alent to increase last year’s 9p-per-share dividend to 9.6p in 2015 and 10.3p next year. As a result the soldering material-manufacturer wields handy yields of 2% and 2% for these periods.

The post Should You Buy IMI plc, Kaz Minerals plc And Alent PLC? appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended IMI. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Platform Specialty is a chemicals industry consolidation vehicle — a cash shell, in other words — which is going around acquiring undervalued businesses in the chemical industry, and rolling them into one group. 

The industry consolidator is willing to pay a hefty premium for its targets. Today’s offer for Alent is 49% above Alent’s Friday closing price of 338p. Alent’s shareholders will have the option to receive to receive shares in the new company in lieu of cash, up to 21.9% of the new entity’s issued share capital. 

And taking a portion of the offer in stock might be a sensible decision for Alent’s shareholders. Platform Specialty is well placed for long-term growth. 

Cost saving synergies

As a standalone company, City analysts had expected Alent to report earnings per share growth of around 10% per annum during 2016 and again in 2017. A combination of cost savings, revenue growth and margin expansion were expected to help Alent to grow pre-tax profit by 44% during the next two years.

As part of the larger Platform Specialty group, Alent should be able to achieve significant cost efficiencies, widening margins further. Platform reckons the combined group can achieve annual pre-tax cost synergies of at least $50m.

What’s more, Platform already owns MacDermid Inc., a specialty chemicals company that is a direct competitor of Alent’s US-based Enthone division that produces coatings for mobile phones and cars.

So, there’s more to this deal than just simple cost-saving synergies. Platform Specialty is removing a key competitor from the market and increasing production simultaneously.  However, as the deal will create a company that has a certain amount of control over key markets, it will require antitrust approval.

Rapid growth

Platform Specialty’s strategy is to buy companies that are leaders in niche businesses and require little capital investment. These companies usually generate a large amount of cash, which can be used for future bolt-on acquisitions to further boost growth. 

Indeed, over the past 12 months Platform Specialty has been on an acquisition spree, rolling up several smaller peers into its group structure.

This bolt-on strategy is set to achieve results. According to Wall Street analysts, before today’s announcement Platform Specialty’s earnings per share were on track to jump 83% during 2016 and 24% during 2017. The acquisition of Alent should only boost this growth.

Using Wall Street estimates, Platform Specialty’s shares that trade on the New York Stock Exchange are currently trading at a 2017 P/E of 11.7. 

The bottom line

All in all, Platform Specialty’s offer to buy Alent looks to be a great deal for shareholders. Shareholders are receiving a hefty premium for their shares, and the enlarged Platform Specialty will be well placed to generate rapid growth in the short-term as synergies flow through, and the company dominates key markets. 

The post Alent PLC Jumps Over 40% On £1.4bn Offer From Platform Specialty Products Corp appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
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• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

However, now could prove to be a great time to buy stocks that offer a degree of risk, but at a very appealing share price. That’s because it is during the more challenging periods, such as the outlook today, that the best bargains can be on offer.

For example, house builder, Barratt Developments

(LSE: BDEV), today announced that it was expecting a 45% increase in its pretax profits in the current year. That would represent a superb performance and show that the UK housing market continues to move from strength to strength, with Barratt’s considerable exposure to the London property market helping it to outpace some of its more regional-focused peers.

Furthermore, Barratt stated that the fall in the share prices of house builders yesterday following the changes to mortgage interest relief for buy-to-let landlords was overdone. Looking ahead, Barratt believes that the outlook for the UK housing market is very robust and yet its shares trade on a price to earnings growth (PEG) ratio of just 0.7, which indicates that capital gains could be on the cards.

Similarly, the banking sector remains very undervalued – perhaps even more so as a result of contagion fears regarding the Greek debt crisis. As such, Santander (LSE: BNC) (NYSE: SAN.US) continues to offer excellent value for money, with its future financial standing having been bolstered by a successful placing and its performance likely to benefit from its diverse product offering.

As such, Santander is expected to grow its bottom line at a double-digit rate over the next couple of years, which puts it on a PEG ratio of 1, which is great value for such a large, diversified and stable bank. And, while further problems in the Eurozone could put pressure on its share price, it remains a great buy for long term investors who are less concerned with volatility than most of their peers.

Meanwhile, there is also great value on offer within the chemicals sector. For example, Alent (LSE: ALNT) trades on a price to earnings (P/E) ratio of just 12.3 and yet is forecast to increase its bottom line at the same pace as the wider market. In fact, its net profit is set to rise by around 8% per annum during the next two years and, with it offering a well-covered dividend, there is scope for it to become a very appealing income stock. In fact, Alent pays out just 36% of its profit as a dividend and yet still yields 2.9%, which means that over the medium term it has scope to become a 4%+ yield play.

So, while the risk appetite of investors may be dwindling as volatility and fear rise, the likes of Santander, Alent and Barratt show that there are capital gains on offer at very appealing prices.

The post Looking For Capital Gains? Invest In Banco Santander SA, Barratt Developments Plc And Alent PLC appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.