Titon Share Discussion Threads

[rainmaker] 14/8/2015 12:20

No problem Mick, I'm glad you found it helpful.In all my considerable investing experience, I don't ever remember such a Company where deals in the same industry were being transacted at such a substantial premium rating to a quoted Company's share price and IMHO there is no rational explanation for it other than Titon being substantially undervalued. There's are plenty of other valuation models I could use eg return on equity, return on capital employed etc, etc and they would all show the same thing. As regard the share price catching up, famed Fund Manager Peter Lynch said exactly the same thing that eventually the share price will catch up.

best wishes

[mr. t] 14/8/2015 11:14

Positive that TON's hitting new highs.

Imo still very undervalued based on nav, cash, earnings, prospects, and recent m&a activity.

[someuwin] 14/8/2015 10:49

New highs.

[mickharkins1] 14/8/2015 03:01

Thanks for the helpful analysis Rainmaker.

I had a small top up yesterday and I believe just a case of sitting back and waiting and sooner or later the share price will catch up...I believe sooner based on the chart, which suggests we are poised to break out to a more than 7 year high, which should help attract some attention.

[rainmaker] 13/8/2015 16:38

Titon(TON), currently 83/86p

Valuation implied by recent corporate activity in Titon's industry and the current rating of other listed Competitors-

99p-x11.4 Polypipe EBITDA paid for Nuaire on 5 August 2015
114p-x10.54 EBIT Volution paid for Ventilair on 7 July 2015
158p-x1.13 gross assets Volution paid for Ventilair on 7 July 2015
209p-x1.14 annual sales Volution paid for Ventilair on 7 July 2015
288p-x2.07 gross assets Polypipe paid for Nuaire on 5 August 2015
418p-x2.28 annual sales Polypipe paid for Nuaire on 5 august 2015
491p-x2.68 annual sales is quoted Volution(FAN) current rating

So an average price of 253p nearly 3 times Titon's current share price

DYOR

regards

[rainmaker] 12/8/2015 12:34

I really like the way the management run this Company even when conditions in the industry were dire they maintained investment in research and development and they also kept a strict rein on costs which is great. I also like the "glass half full" understated management style but they should do more to keep investors in a loop and "connected" with the Company. There's a few things that they don't need to do but really should..........share buybacks at current levels make absolute economic sense and are in everyone's best interest and likewise a quarterly trading update to update shareholders.Just in case anyone is unsure about the validity and rationale for a share buyback then I would state the following reasons, not all of them economic-

It shows a vote of confidence in the Company from the directors and sends a reassuring message to shareholders

It reminds shareholders that the directors are acting in their and the Company's best interests and are conscious of opportunites to enhance shareholder value

It boosts tangible net asset value per share

It increases earnings per share with other factors being equal

It cuts the cost of a dividend

Its the most tax efficient way the Company can return value to shareholders since Investors would have to pay tax on special dividends

regards

[rainmaker] 12/8/2015 12:02

No problem, WC I just thought it would be a good idea to put together recent corporate activity in the ventilation industry and the implied value of Titon from those deals. I think any Investor with reasonable experience knows that you make the really big returns through a buy and hold strategy in hugely undervalued Companies like Titon rather than aggressively and proactively chasing shares and trying to time trades for short term profit.One approach can be viewed as investing, the other as speculating.

regards

[wad collector] 12/8/2015 11:34

Thanks for that , though it rather hinges on the results numbers rather than prospects , sentiment etc.
Helps to justify the long term hold approach that most of us seem to have adopted. Not likely to be one to trade with the spread in any case.

[rainmaker] 11/8/2015 15:55

I've put together a little piece on the recent corporate activity in Titon's industry-

For those Investors wanting further details on Titon Holdings(TON) and the implied value for the Company from recent corporate activity in the same ventilation industry.

I've used Titon's annual results for the year ending 30 September 2014 for the relevant figures to remove any seasonal bias even though interim results for the six months to 30 March this year show that the Company has continued to grow strongly.


10/7/2015-Volution(FAN) pay £11.6mln for Belgian based, Ventilair, a Company with annual sales of £10.2mln and earnings before interest and tax of £1.1mln.

So a price to sales ratio of 1.14, applied to Titon's annual sales of £19.256mln gives a valuation of £21.95 mln or 209p.Using EBIT of £1.1mln gives a multiple of 10.54, implying a value of £12.02mln or 114p.Since both Titon and the acquirer, Volution are in exactly the same business, we could quite reasonably apply Volution's current price/sales ratio of 2.68 to Titon and reach a valuation of £51.60mln or 491p.

Following the deal, Broker Liberum rated Volution as "cheap"

However I should also add a caveat that in addition to their ventilation business, Titon have a less attractive but nevertheless profitable UK, market leading manufacturing business producing "commodity type" window and door fittings business perhaps ideally suited to be shifted to a lower cost base, foreign manufacture .Turnover in the UK business is lower than 2007 but indications from recent strong housing starts and completions figures(the best since 2007 and 2009) lead me to believe that this business has excellent prospects from a historically low base.Titon own freehold Property and there is a £3mln book value in accounts for plant, property and machinery.




5/8/2015-Polypipe(PLP) pay a consideration of £145mln for UK based manufacturer of ventilation systems,Nuaire a Company with annual sales of £63.5mln in the year to 30 June so a p/s ratio of 2.28 and 11.4 times EBITDA so applying the relevant value metrics to Titon gives values of 418p and 99p, respectively.

It should be remarked upon that Nuaire's sales figures were up 18.8% on the previous year.



DYOR

[rainmaker] 11/8/2015 15:11

Always welcome, Someuwin but in the light of recent deals in the ventilation business its incredible that we're still trading at current levels as they provide the clearest evidence of Titon's severe undervaluation.

best wishes

[someuwin] 11/8/2015 10:40

Moving up a bit today.

[rainmaker] 05/8/2015 16:43

I don't know if you realised that the UK turnover,at some 70%, forms the majority of Titon's turnover yet incredibly, it is less than 2007 so we're starting from a very low base in the UK which is an exciting thought as housing starts and completions sky rocket.

regards

[mr. t] 05/8/2015 08:42

Nice spot sladdjo. Looking at other metrics, polypipe paid >2x annual sales and >2x net assets for nuaire.

That would lead to a valuation of >£2 per share for titon.

[sladdjo] 05/8/2015 08:30

PLP has just agreed to acquire a commercial and resi ventilation business, Nuaire, for 11.4x trailing EBITDA. Applying that multiple to our net income, never mind adding back depreciation and amortization, would lead to a market cap ~ 50% above curr level

[rainmaker] 03/8/2015 07:41

At the current offer price of 86p,the historic dividend yield is 3.20%, interim dividend of 2.5p + final dividend of 1.5p.

Some food for thought. If you believe in the long term business and expect earnings to grow to levels last since at the cyclical peak in 2006 then if we apply a 3% yield to the dividend payments of 7.10p in 2002-2006, we get a 233p share price. However don't expect large and sudden hikes in the dividend as the Company have a more progressive and sustainable dividend policy but nevertheless the Company increased the interim dividend in May by 25%.

Looking back over the years at Titon Holdings(TON)annual dividend payments, I believe it tells a story, in two parts. One is the performance of the market leading UK "commodity type" business manufacturing window and door frame fittings and generic ventilation systems(note MVHR is made exclusively in South Korea)and the nose-dive in Customer demand from 2008(and partial recovery in recent years) and the businesses lack of pricing power. Secondly the success of the lower cost base South Korean joint venture, established in the same year where they manufacture the energy efficient, enviromentally friendly, Mechanical Ventilation With Heat Recovery(MVHR) which IMHO has a terrific future.

2014 2.50p
2013 2.00p
2012 1.50p
2011 2.00p
2010 1.25p
2009 2.00p
2008 2.00p
2007 6.90p
2006 7.10p
2005 7.10p
2004 7.10p
2003 7.10p
2002 7.10p
2001 7.00p
2000 6.80p
1999 5.50p
1998 5.50p


I have no doubt that the UK manufacturing business where they are market leaders will go overseas even if Titon don't do it themselves.

DYOR, AIMHO

regards

[someuwin] 31/7/2015 11:01

What is the dividend yield at current sp?

[sonofbanjosinger] 30/7/2015 20:52

I thought being passive on Titon would be a good idea, already pays a far dividend which will rise and i have had a 60 percent rise on my large holding.

[rainmaker] 30/7/2015 12:52

SOABS-you'll enjoy this interview with Warren Buffett in which he famously says "The World isn't going to tell you about great deals, you have to find them yourself and it takes a fair amount of time so if you're not going to do that and be a passive Investor then I just advise an Index Fund"



regards

[sonofbanjosinger] 30/7/2015 10:54

Indeed a true bargain, I just think it will take time more time, i feel the next results will get things rolling a bit like like Spsy "one day Rodney"

[rainmaker] 30/7/2015 10:15

I have to say that ordinarily I'm not a believer in comparisons between companies in the same industry and the relative valuations but in the case of Titon Holdings the disparity is so stark,nonsensical and huge(Volution trades at 5 times Titon's rating) that taken in conjunction with the other valuation metrics, it can't pass without comment.

regards

[rainmaker] 30/7/2015 09:59

SOABS but I believe we enough evidence to make a reasonable assumption that the UK business where there is substantial scope for profit is continuing to recover from a very low base and no evidence to the contrary that the Korean business is other than continuing to thrive where even modest growth rates in this joint venture mean large increases in profit.

regards

[rainmaker] 30/7/2015 09:46

True Mr T and a very good business, very profitable yet only set up in 2008. I think its inevitable that the "commodity type" UK business where they are market leaders, will go overseas with huge cost savings.

regards