|That BREXIT worry was short lived|
|2016 – The Great Irish Share Valuation Project (Part I):
Company: Kingspan Group (KSP:ID)
Last TGISVP Post: Here
Market Cap: EUR 3,910 M
Price: EUR 22.05
Kingspan’s firing on all cylinders… The transition towards more energy efficient buildings & building techniques – in both developed & (increasingly) emerging markets – provides an attractive secular growth tailwind, while relentless industry consolidation underpins an eat or be eaten strategy. Management capitalised on the company’s financial strength (as I’d expected) in late 2014, with an astonishing six month blitz of acquisitions. US/Canadian acquisitions propelled North America to 20% of total revenue, while buying Joris Ide rounded out pan-European exposure & delivered a 25% step-change in revenue. [Astonishingly, KSP still finished FY-2015 with net debt at just 1.0 times EBITDA]. With two acquisitions only closing in H1-2015, annualised H2 results offer a better run-rate, in terms of revenue/profitability.
That pegs current trading margin at 9.4%, on €3.1 billion of revenue, leaving Kingspan’s peak 13.3% margin (from 2006) well within its grasp again. A fairer valuation would average the two – implying an 11.3% margin, which deserves a 1.125 Price/Sales ratio (noting the company’s superior cash generation). [NB: Observing market/M&A multiples over the years, per my rule of thumb a 10-12.5% operating margin deserves a 1.0 P/S multiple (on average). And higher margins justify expanded multiples, e.g. a 30% margin might deserve a 4.0-4.5 P/S multiple. Also, see my related DCC notes & commentary here]. And with finance expense a mere 5% of trading profit, Kingspan’s got substantial firepower to pursue more earnings-enhancing acquisitions (without impacting valuation, or imposing undue financial risk). We should upgrade our valuation accordingly, by: i) adjusting for (surplus) cash, and ii) adjusting for incremental debt potential of €0.6 billion*, which would increase finance expense (at a standard 5%) to a still-manageable 15% of trading profit – but we’ll apply my usual 50% haircut to be conservative. [*Here’s the math: (288.4 M Trading Profit * 15% – 14.8 M Finance Expense) / 5%]. Recognising the current & potential growth trajectory here, we should also factor/average an appropriate earnings multiple into our intrinsic value estimate: With earnings up 21% & 70% in the last two years, just about any multiple’s justified…again, to be prudent, we’ll limit ourselves to a 20.0 Price/Earnings ratio, based on a 123 cents adjusted diluted EPS H2-2015 run-rate:
(EUR 1.23 Adj Dil EPS * 20.0 P/E + (3,078 M Rev * 1.125 P/S + 212 M Cash + 569 M Debt Adjustment * 50%) / 177 M Shares) / 2 = EUR 23.50
Kingspan’s now marginally under-valued – quite surprising for an outstanding growth story which offers an attractive combination of organic growth & a steady diet of acquisitions. Management’s discipline financing this growth is remarkable too – they’ve increased the outstanding share count a mere 6% in the past decade, relying instead on the judicious use of leverage. KSP’s never really been a cheap stock, but noting its balance sheet strength & capacity to generate cash, plus the white space still ahead (for example) in N America & the Rest of the World, the current share price & price target are well deserved. I wouldn’t be at all surprised to see them marching ahead together in the years to come.
Price Target: EUR 23.50
For related links/graphs/files, and more TGISVP analyses/price targets: Google the Wexboy investment blog.|
|Great set of results today. Testing all time high
|This is getting close to an all time high|
|Merrion Capital suggesting they could spend up to 400 million if management identify other suitable targets.|
Kingspan on a roll as sales jump 10%
Tuesday, February 25, 2014
Shares in insulation products specialist Kingspan jumped by over 3% yesterday after the company published annual results beating both analyst and its own expectations.
By Geoff PercivalThe stronger-than-anticipated 2013 figures for the Co Cavan-based firm showed a 10% rise in sales to 1.79bn, an 18% rise in basic earnings per share to 51.7c, and a trading profit of 122.8m, which represented a yearly increase of 14%.
The profit figure was 10% ahead of Kingspan's last forecast in November and nearly 5m ahead of most analysts predictions.
Pre-tax profit for the year was up from 89.9m to nearly 102m, whilst after-tax profits rose 19% to 89.2m.
Kingspan's share price closed up 3.23% at 14.40 yesterday.
While revenue slipped by 12% and 3%, respectively, in its environmental and insulation boards divisions, the two units, nonetheless, showing a 25% rise and 0% respective change in trading profit.
The group's main business - insulated panels - grew sales revenue by 23% to just over 1.03bn.
That division saw sales rise by 46% in mainland Europe, by 1% in the UK, by 7% in north America and by 24% in Ireland.|
Company: Kingspan Group
Prior Post: Here (valuation, no commentary)
Price: EUR 8.698
Kingspan's insulation & related businesses are in a marvelous niche, attracting both green customers & green investors. However, there's no escape from the economic & construction cycle while it continues to increase revenues, based on acquisitions & market share wins, operating profit margins remain under pressure.
I tagged Kingspan as marginally over-valued last year. Fortunately, its balance sheet remains in good shape, so the share price has responded pretty positively to two new acquisitions. The purchase of ThyssenKrupp's insulated panel business, with EUR 315 mio in Mainland Europe sales, and Rigidal, another panels & roofing business operating in the Gulf region (with $39 mio in sales), adds significantly to future sales.
However, the price rally may be based more on hope at this point, rather than any immediate earnings enhancement as ThyssenKrupp currently operates at a loss, which likely matches/exceeds Rigidal's current profit. But we can expect to see extensive restructuring here, and I'm confident margins will eventually converge to group levels. Meanwhile, the operating profit margin is likely to fall from 6.6% to 5.4%, albeit on higher revenues.
However, Kingspan's long-term growth story remains intact. With a rather absurd EUR 141 mio of cash on hand (vs. EUR 338 mio of debt), the total acquisition consideration presents no financial drag. The company may even have some scope for further acquisitions. With a genuine improvement in the economy, and/or the bombed-out construction sector (who knows when?!), it's obvious Kingspan's margins could rocket higher. Meanwhile, it's reasonable to price KSP somewhere between its prospective 5.4% & its historic 13.3% peak operating margin, which would equate to something like a 0.75 Price/Sales ratio. This confirms the company is fairly priced.
Price Target: EUR 8.51
|2013 The Great Irish Share Valuation Project (Part IV)
I take a look at Kingspan Group, plus a batch of other Irish stocks:
|Nice rise today on the back of two acquisition announcements;
|Irish? does that mean it's 1% stamp duty on these to buy?|
|Looking good, broke the Jan 11 high, Aug 08 is the next one to beat.|
|construction and materials, housebuilding seem to be all the rage atm ... KGP about to breakout nicely here.|
Just posted Part III of The Great Irish Share Valuation Project on my blog. I'm setting a Fair Value Price Target for every listed Irish company. So far I've valued almost 3 dozen companies, including Kingspan:
I hope you'll take a look (plse don't hesitate to comment/email me), and perhaps become a regular reader.
|Half year figures look better than I was expecting|
I am looking for info on this one too,do you have any brokers forecasts.
|Anyone got an opinion on this. Highest since Aug 08. Good result due?|
|well the share price keeps rising so i dont know what to think. Next guidance is results early March.|
|Kingspan warns order intake in key markets is on the wane
BANK of Ireland has secured a 22.5m summary judgment order on consent against Dublin businessman Frank Gormley over unpaid property loans.
The bank told the court yesterday that it intends to seek similar orders shortly over the same loans against Smart Telecom purchaser Brendan Murtagh and two Cork businessmen|
my banker friends -- yes, I still have a few -- whisper to me that even firms they previously reckoned were rock solid are now coming to them with serious problems.|