12-fold hike in pre-tax profits expected
There should be more to come from Epwin (EPWN:AIM) even after a strong run by since January that puts the shares 41% ahead for the year-to-date.
Given the strength of its operating metrics and the size of its market share in the RMI (Renovation Maintenance Improvement) space, we believe Epwin is well placed to grow its operating profits and cash and to be able to capitalise on future market growth when pent-up demand eventually feeds through.
Epwin is divided into three divisions: building products, building components and windows systems. The company’s main PVC products are window profile, complete window systems, doors, roofline (soffits, facias, barge boards and fixings) and rainwater products (gutters, downpipes and related fixings).
When the £183.1 million cap reported results for the six months to the end of June, investors were advised to anticipate that the cyclical nature of the group’s markets would mean the second half of the year would be stronger than the first half year. Epwin therefore remains remain confident that full year profits will be in line with expectations.
While the Solihull-headquartered manufacturer of extrusions, mouldings and fabricated low maintenance building products is no longer as undervalued as when it was featured as Play of the Week (see Shares, 23 April 2015), it is still rated on a reasonable price-to-earnings ratio of 12 and offers an attractive 4.6% prospective yield.
Edison’s Toby Thorrington reckons Epwin’s ‘financial flexibility should allow it to continue to invest in operations, seek bolt-on acquisitions and, at the same time, facilitate dividend growth for shareholders’. We share the bullish view.
