Brokers' views: Westhouse

Westhouse is, unsurprisingly, bullish about two corporate clients – Hartest Holdings, the maker and seller of scientific instrumentation and distributor of specialist healthcare equipment, and Chinese security play BlueStar SecuTech.

Recent full-year results from Hartest, which special situations analyst Raonull MacKinnon notes is ‘debt free, with good cash conversion’, were ahead of market expectations, with sales of £22.2 million giving earnings of 7.53p and a final dividend of 3.33p increasing the year’s annual total to 4p.

MacKinnon forecasts March 2011 sales of £26 million, growth in pre-tax profits from £1 million to £1.3 million and earnings of 10p, placing the shares, currently 84p, on a prospective p/e of just 8.4 times. Setting a 130p price target for Hartest, he argues that the current rating ‘is modest for a well-managed, cash-generative company that has been subject to a recent offer, and where corporate developments are likely’.

Surveillance star
MacKinnon is similarly upbeat about prospects at BlueStar SecuTech, the dividend-paying provider of digital networked surveillance solutions in China that has reduced its reliance on the financial services sector. Annual financials showcased sales progression from £15.7 million to £19.2 million, with net profits powering ahead by 53 per cent to £3.1 million.

For March 2011, MacKinnon sees profits pushing up to £3.5 million, giving EPS of 4.9p and placing the 26p shares on a forward multiple of 5.3. ‘In our view,’ he writes, ‘enhanced margins linked to the provision of surveillance solutions justify a higher prospective p/e ratio of seven times for 2011, giving a target price of 34p.’