Tuesday 4th September 2018
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Methven hasn't received notice from a mystery investor who paid a premium for 6.4 percent of the tapware maker's shares, but takes it as a ringing endorsement of plans to grow profit.
Reuters data show 4.7 million Methven shares were bought at $1.20 apiece today, a premium to yesterday's closing price of $1.10 and the highest they've been since May last year.
First NZ Capital analyst Greg Main kept his 'outperform' rating on the stock last week and raised his target price to $1.30 from $1.25 after the Auckland-based company lifted earnings before interest and tax by 20 percent to $10.7 million, with new distribution arrangements in Asia offering growth for the next two financial years. The stock recently traded at $1.18, up 6.3 percent on the day, and a 13 percent gain since its annual result.
Chief financial officer and company secretary Jannine Mountford said in an email that the company had yet to receive a substantial shareholder notice, which is required when investors own 5 percent of a company.
"It is very pleasing to see such strong endorsement for Methven after last week’s good full-year results performance," Mountford said. "We believe it shows confidence in our strategy and our growth prospects particularly in regard to our international initiatives, where we delivered a strong uplift in both sales and earnings in our latest results."
The manufacturer forecast international sales to accelerate in the 2019 financial year and for the domestic business to recover lost market share. It will give earnings guidance at its annual meeting.
FNZC's Main said he believes the company can deliver earnings growth over the coming years and has several options that could see it beat the research house's forecasts. He projects operating ebit of $12.4 million in 2019 on sales of $113 million, rising to $15.1 million in 2021 when revenue reaches $125 million.
"We assume some growth in China and Asia but await evidence of execution form the distribution agreements MVN has announced to date to factor in a greater proportion of their medium-term potential," he said in the Aug. 29 research note to clients.
Methven's current substantial shareholders include Salt Funds Management, which held 9.8 percent as at May 22, and Lindsay Investment Trust, with 13 percent as at May 18, 2017.
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