Investors might take some badly needed encouragement from Epwin (EPWN:AIM) which is up nearly 4% at 136.6p in a session when global markets are finding precious few reasons to be cheerful on the first day of 2016 trading.
Epwin, which manufactures extrusions, mouldings and fabricated low maintenance building products, starts the year with the announcement of its acquisition of Stormking Plastics.
It will pay a total consideration of £27 million for the business, made up of £20.25 million in cash and 5.3 million Epwin Group shares. A further £8 million will be paid subject to Stormking's performance in the 12 months to 28 February 2017.
On the face of it, this looks like another earnings accretive bolt-on to complement the Vannplastic deal in November. Stormking has apparently developed a significant amount of know-how in the formulation and use of GRP (Glass Reinforced Plastic) materials and is developing plans to expand the use of these materials in additional applications and markets where Epwin believes that it is well placed.
In the financial year ended 28 February 2015, Stormking reported turnover of £22.8 million and underlying earnings before interest, taxation, depreciation and amortisation costs, (EBITDA), of £3 million.
Epwin goes on to assure investors that in the current year to February 2016, performance is expected to deliver turnover in the order of £25 million and an underlying EBITDA, of around £4.5 million resulting from increased use of the products and stronger new build sector trading. Management will also be looking at further efficiency opportunities.
Ian Osburn at Cantor Fitzgerald thinks Epwin is cheap and he factors in the Stormking deal being around 11% earnings accretive with the shares on a PE of 9.4; which would, he reckons, put the shares at a 30% multiple discount to its peers.
