Discussion in 'Stocks' started by Tellon, May 2, 2013.

  1. Tellon


    Molins PLC (LSE:MLIN)

    We have a combination of value plays, a low price-earnings-ratio (P/E 3.8), it has a high yield (3.56%) and with the recent price drop off it’s now trading just below book value (7%). If you then add in a nice lump of cash, 21.6 million or 46% of market cap, I think we have an over reacting market giving us a very cheap company with limited downside risk.

    Looking at recent announcements, 25th April, They attempted to initiate a Share Buyback program, although this was subsequently cancelled, they see the current opportunity also.

    There is some debt to look at but at only a 1/5th of market cap and with what looks to be around 1.04% interest this will not cause any concerns in the near term.

    Molins has three main sectors of business, in the packaging and tobacco machinery divisions the order book was strong coming into 2013. The interim management statement adds to this, reporting order intake being ahead of the same period last year.

    The last division, which specialises in tobacco testing was waiting for the FDA to confirm its plan to require testing for 93 HPHC’s (Harmful and Potentially Harmful Constituents) this year. This did not happen, the FDA instead agreed to require only 20 HPHC’s be tested and all of which are well established and widely available. This impacts on 25% of Molins current revenue, but with two-thirds of the current market share this should not impact profits, especially as the new lab has been paid for from 2012’s figures. The additional HPHC’s are still going to become required testing, but currently not till 2014. This is the news that has caused the recent sell off and given us the opportunity to pick up this company for 50c on the $1.