Sunday 22 April 2018 | ShareProphets: The one stop source for breaking news, expert analysis, and podcasts on fast-moving AIM and LSE listed shares
Tom Winnifrith Bearcast - in awe of Cynical Bear and all my colleagues and feeling like a prat ( or not) over the AIQ scandal
Did you see the latest 52%/48% result on Thursday? Thankfully it is nothing to do with Brexit but rather the finale to the contested bid for one of my tips of the year GKN (GKN) where the corporate fixer-upper Melrose (MRO) prevailed and in its words looks forward to creating 'a UK industrial powerhouse with a market capitalisation of over £10 billion and a tremendous future'.
Time for an update on the tussle surrounding one of the UK's last industrial behemoths. Regular readers will recall I got a bit lucky with one of my tips of the year a month or so ago as GKN (GKN) picked up a bid from business takeover specialist Melrose (MRO). I guess it was inevitable that a newly appointed CEO - albeit one who is pushing close to a classic retirement age - who got the job to help turn the struggling business around would agitate rather than roll over. At the turn of the month GKN was minded to tell its shareholders that:
Well, well, well. Just when you thought that you have seen it all...the stock market can continue to surprise.
You do not have to be active in the stock markets for long to realise that FTSE-100 companies have the propensity to deliver incompetence and intrigue just like their smaller cap brethren. Today's shocker is centred on automotive and aerospace sector giant GKN (GKN) which has made a bit of a habit over the last few months in bogging things up.
GKN PLC (GKN) took a hit this week when its final results didn’t quite meet market expectations and sparked a sell-off.
In my appraisal of GKN (GKN) shares last July, I said that I thought they would have attractions when they got to around 340p on the basis that I thought I could see with my little eye, potential trend support when the valuation, on the basis of second half estimated expectations, would make the shares probably look good value.
The shares of GKN (340p last seen) were as high as 468p in May having fallen back an impressive 27 %. After the drop it is worth revisiting the logic for investing here. The reason for buying the shares hitherto was twofold: first the recovery in the world automotive industry (more than 46% of GKN Group sales are accounted for as supplying the world’s auto industry) and second the management’s strategy of building up the Group’s aerospace business by acquisition, taking the company into more growth prospect and better margins; considerably higher than in vehicle manufacture. However does this logic now bear up to scrutiny in light of recent performance?
The GKN (GKN) share price has grown very well in the last year, up 38%, when the market has only managed 3%. That performance clearly left the share price open to profit taking. This happened, from the peak at 417p in February and to at 385p – a decline of just over 7%. The question now is will GKN rally off a 2012 support line and regain momentum or will it sink below this level of technical support?
GKN (GKN) the automotive and aerospace engineer is flying well. My first note on the company in high summer rated them a buy at 325p; now in autumn, after publication of the nine months figures to 30 September, at a 370p share price (last seen) I still regard them as cheap and worth buying.
GKN (GKN) yesterday produced its first half profits numbers to June 30the. The shares were tipped here at 325p (now 354p, last seen) so where next other than crates of champagne to RSS Towers?
There are a number of reasons for investors to take a positive interest in GKN (GKN).
Search ShareProphets |
Recent Comments |