Melrose Ind Share Price (MRO)

balances risk/reward carefully one for future.... t/over unless they get to big or careless !!!!

Tipped by Questor as one of his shares of 2013.

Melrose was a bit of a market darling growth company until recently - if I recall a fairly recent entrant to FTSE 100. Have they bitten off too much with the recent Elster acquisition (gearing much higher as a result)? Smart metering will be big but UK rollout will be 2014-2019 so decent revenue presumably a year away. But SMS (another smart metering company) look to be making money, so who knows. And even if revenue's not what they'd like, stripping costs out should still produce profit. And of course Elster is only one of their turnaround companies - what I don't know is what % it is of their overall operations - maybe someone else on here can advise ... Also, at what stage would they be in danger of dropping out of the FTSE 100 - that would also knock SP automatically as trackers etc sell them?

much appreciated

The management have a serious track record in turning around business after business. They are pretty good at giving back cash when they don't need it and asking for it when they do. As such they are pretty sensible guys who generally under-call it. Hence they are conservative. They have bought a big one this time, but it is in similar (but not the same) fields to some of their other companies. They have identified more savings than they expected when they bought this one. What spooked the market was some nasty words in the latest briefing. For those who have followed Melrose for some time these nasty words are just the norm/truth you would expect them to say at the early part of a transformation. For an investor you have to be in it for a the medium term, as sudden rebounds are not likely but sp is below recent call for cash.

Do you mind giving me a brief investment rationale?