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Edison issues outlook on Carclo

03 October 2017 09:49

Edison Investment Research has issued an outlook on Carclo.

Edison said: 'Carclo is focusing investment on its two larger established businesses - Technical Plastics (CTP) and LED Technologies (LED).

'Here a differentiated offer and long-term relationships with customers provide good earnings visibility and higher probability of a sustainable return. This strategy delivered strong revenue and profits growth during FY17.

'Despite a temporary setback at CTP during H118, which was balanced by outperformance at LED, growth appears set to continue, underpinned by contracts with blue-chip customers.

'We use a P/E-based, sum-of-the-parts methodology with three sets of sample peers drawn from the medical device manufacturing (P/E of 16.1x), automotive (mean P/E of 16.4x) and aerospace (mean P/E 20.9x) sectors to reflect the diversity of Carclo's operations.

'This gives an indicative valuation range of 182-193p (previously 181-191p), which is equivalent to an implied EV/EBITDA range of 8.2x-8.6x (vs peer group blended year one EV/EBITDA of 8.7x).

'The share price has dropped by around 13% since the AGM statement advised of short-term setbacks in the Technical Plastics division.

'Positive newsflow confirming the recovery in CTP should be supportive of the stock, helping to close the valuation gap.'

At 9:49am: (LON:CAR) Carclo PLC share price was +4.25p at 137.5p

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