7.4p EPS going forward12 Jun 2013 10:08
Excellent new article from Penny Sleuth. 7.4p EPS going forward makes the investment proposition here very attractive for investors with a little patience. Some extracts:
"Businesses need to be adaptable and as one door closed others have opened. For a while Welburn has had his eye on the major markets of China and the USA and now the group has a factory outside Shanghai and another in North Carolina.
It has become established in China by following its major customers, notably Caterpillar which already has 23 factories over there. The US giant, explained Welburn, has a certain way of doing things with which Chinese suppliers were struggling to conform. Having served Caterpillar for several years in the UK, Tricorn is thoroughly familiar with Caterpillar’s modus operandi and this gave it the chance to get into the Chinese market. It has opened a modern factory, which is already being extended in anticipation of expansion. It has delivered its first products, and has had several enquiries from potential new customers.
This could double Tricorn’s revenue
Tricorn’s other opportunity has arisen in the United States, another market that is not only huge but is also looking rather more buoyant than Europe. Here Tricorn has been able to acquire the business and assets of Whitley Products Inc, a company that was founded in 1942 to make screw machine parts for the war effort. It subsequently expanded its product line to include tube fabrication from factories in Plymouth, Indiana, and Franklin, North Carolina but has recently become financially distressed. Tricorn has moved the whole operation down to Franklin, a ten-hour truck drive for the machinery from Plymouth and has secured the jobs of over 100 local staff. It has done so without disruption of supply to Whitley’s customers, which include the giant maker of agricultural machinery, John Deere.
This looks like a great deal for Tricorn. It has paid just £1.95m for assets valued at £2.8m, and now has its hands on a business with an annual turnover of around £20m. To put that into perspective Tricorn, which has a turnover of similar magnitude, has been valued at around £8m over the last few years. Especially impressive has been Tricorn’s ability to make these strategic moves without having to raise fresh finance. It has always had a strong balance sheet, has maintained this throughout the financial crisis, and has paid a rising dividend as well."
"With the benefits of these new initiatives in the USA and China, broker Westhouse thinks that Tricorn’s revenue will almost double over the next three years. By 2016 Westhouse is forecasting a pre-tax profit of £3.1m on sales of £39.4m. It foresees earnings per share of 7.4p, a dividend of 0.9p and a net cash balance of over £1m. "
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