Tricorn (LSE:TCN) is a value-added manufacturer and specialist manipulator of pipe and tubing assemblies. That may not have the glamour of mining or fin tech but to many industries, it’s a critical component. TCN has two main divisions suppling Energy (30% of revenue) and Transportation sectors (70%). It’s a niche but global market.
The interims to 30th September showed 49.5% increase in PBT to £0.55m with an EPS of 1.53p. The main driver was an increase in profitability in the Transport division and progress with the Chinese joint-venture.
The slow integration of acquisitions has tested investor patience. Recently, however a US powder coat and wet spray-painting line was acquired for what is thought to be a bargain price of $50,000. It’s expected to be fully operational in July and immediately earnings enhancing.
The transports business serves on and off-road customers, including construction, truck and agriculture. It’s division, Maxpower Automotive was reported to be making excellent progress and benefitting from investment. The rigid hydraulic tube business continued to grow and helped by investment in a is making productivity gains.
Demand at the smaller energy sector division from the power generation rental sector was lower. TCN provides tubular assemblies and fabrications for sectors include mining, marine and oil and gas applications.
After a slow start the joint- venture, Minguang-Tricorn Tubular Products is performing well. As it benefits from a strong operational performance and favourable market conditions. Exports are being helped by favourable exchange rates.
Finals are reported on Monday 3rd June for the year-end March 2019 and are forecast at £1.2m for and EPS 3.1p giving a prospective P/E of 6x while yielding 1.1% as the dividend is set to be restored. Institutions and directors hold 54% of the shares and directors last brought shares at 23p.
At the interims the net debt declined to £3.3m with the gearing ratio was reduced to 48% from 57.5% while net cashflow was £320k. The debt is backed by a Net Asset value of £14.8m which is around 43.7p a share.
The recent corporate activity along with the expected profits increase should make the rating look too low. Buy
Tricorn (LSE: TCN)
Mkt Cap £7.8m
Next Results: Finals Monday, June 3rd
By Andrew Hore & Jon Levinson
Andrew has been writing about small companies for 25 years, following the fortunes of many companies, both successful and unsuccessful. He worked at the Investors Chronicle for 12 years, ending up as smaller companies editor. He then went on to write AIM Bulletin and he is currently editor of AIM Journal and AimMicro.com. He is a former AIM journalist of the year and was on the shortlist for the journalist of the year at the Small Cap Awards.
Jon has been an analyst, a journalist, a fund manager and is currently a corporate broker. He will strictly never write on corporate clients. His MBA dissertation was on filling the Smaller Companies Equity Gap. When writing the Penny Share Focus he learned that not all that glitters is gold.
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