Recommendations » UK
Pressure Technologies plc (LON:PRES) report: Profit warning
By Daniel Stewart & Co
- Pressure Technologies has this morning warned that pre-tax profit for the year to 2 October 2010 is likely to be up to ?0.9m below market expectations. Our own forecast was above that of the company’s broker so our downgrade, from ?4.9m to ?3.6m, is a cut of 26.5% and will see current year profits falling by about one-third from the level achieved in FY2009.
- The warning stems from “some slowing in the conversion of prospects into orders for oil and gas support services projects” due to “customer indecision in setting technical specifications and continuing economic uncertainty”.
- We are moving our target price down by 11%, from 233p to 207p, this morning. Our new target price is a p/e of 9x FY2010 earnings. We have raised this from the 7.5x multiple we previously used as we believe that the company’s earnings should recover, potentially strongly, in FY2011.
- The earnings recovery should be helped by the acquisition of Al-Met Ltd, for up to ?2.25m in cash, as announced today. The company makes specialised, precision engineered valve wear parts for the oil & gas industry. The deal is expected to be earnings enhancing – a pre-tax return of 13.3% on the purchase price if historic profitability can be sustained.
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