Brokers' views: finnCap

FinnCap analyst Mark Paddon has initiated coverage on engineering group Chamberlin with a buy stance and 80p price target – substantially north of the current 68.5p. Paddon believes the £5.1 million cap, operating through foundry and engineering divisions and having previously felt sharp recessionary pain, is now ‘well poised to exploit recovering demand and growth opportunities’, having been transformed by a series of management initiatives.

Under a new team led by CEO Tim Hair, AIM-quoted Chamberlin has been restructured and refocused, with Paddon highlighting ‘significant catch-up capital investment programmes to improve operational efficiency’ and the formulation of ‘a clear strategic plan for organic growth as well as acquisitive growth, as Chamberlin develops into a broader-based industrial business’.

Improved demand
‘Each of the group’s businesses is seeing improved demand profiles to varying degrees,’ insists Paddon, ‘as the global economic environment improves.’ In particular, he highlights the foundry arm, specialising in complex iron castings across a broad range of sectors and which ‘looks to have strong growth prospects given its strong market position in the high-growth turbocharger market’.

Following recent encouraging finals, showing reduced revenue of £28.5 million but a strong second-half turnaround, Paddon forecasts a swing from losses of £1.1 million to pre-tax profits of £500,000 this year, on sales expected to build to £33.5 million. However, ‘the final results statement hints at potentially stronger trading than our forecast profile implies’, scribbles Paddon, adding that ‘we suspect forecast risk is now on the upside’.