Tricorn Share Discussion Threads

[rivaldo] 10/7/2012 14:01

The uptrend continues. The Times today reports that 30,000 commercial aircraft are due to be built over the next 30 years, and that the Government are now making another £120m available to the British aerospace industry to continue its success. Plenty to go for from TCN's customer base including Rolls-Royce, Bombardier, Smiths Aerospace etc.

[rivaldo] 29/6/2012 13:59

3 more large rail contracts in the last 4 days announced by TCN's client Bombardier:

[shauney2] 22/6/2012 15:01

Thanks for the link ss.

Given as a buy in Money Week under Gamble of the week.

[rivaldo] 22/6/2012 12:41

I was looking at a TCN broker note dated June 2010. The forecast for the year to March'12 was 2.2p EPS (with no divi) at that time - TCN actually achieved 3.8p EPS with a 0.2p divi...

[thamestrader] 21/6/2012 10:14

Hopefully all this optimism will enable them to double the dividend every year until it eventually becomes enought to buy a pint.

But if they can invest the money more wisely than I can, I hope they don't!

[rivaldo] 21/6/2012 09:51

Excellent spot, thx ss. Some interesting points:

- 80% of revenues are recurring! Extremely reassuring.
- a 5 year agreement/letter of intent is already in place in China to supply all of a major customer's pipework
- the Chinese 45,000 sq ft facility is now in place (impressive photos)
- "expansion of manufacturing to service growing markets of South East Asia"
- TCN expect £5m annual revenues from the new Chinese facility, with more such facilities to follow

[sammy_smith] 21/6/2012 08:50

I found this audio interview with TRICORN GROUP (TCN

Its worth a listen:

[cfro] 19/6/2012 16:54

Thats just what i was going to say IC2......an earnings enhancing acquisition looks on the cards by the look of things. ;-)

Again, thanks so much for sharing the broker note rivaldo.

[interceptor2] 19/6/2012 16:23

rivaldo, thanks for sharing. Nice write up and confirmation of 50p price target,and looks like Westhouse expects an earnings enhancing acquisition at some stage.

ic2...

[rivaldo] 19/6/2012 08:59

I got hold of the latest Westhouse note on TCN, so FYI here's the first page. I've left off the forecasts table, so to reiterate, they go for 3.9p EPS this year and 5p EPS next year, with 0.3p and 0.4p dividends respectively.

To March '15 they go for 6.1p EPS with a 0.5p dividend.

Here's the note:

"Strong results and investing for the future

Tricorn delivered strong results on improving margins across the group. While
there was significant capex in FY2012, this will be substantially higher again in FY2013 with the recent customer-led move into China. The Transportation and
Energy & Utilities divisions both traded strongly throughout FY2012 and the
Aerospace division was returned to profit. In our view, Tricorn is substantially
undervalued especially as there is scope for the strong forecast organic growth
to be boosted by acquisition in due course. On upgraded forecasts for FY2014E,
we maintain our 50p target price (10.0x forecast P/E) and Strong Buy rating.

Positive trading due to strong customer demand
In each of its divisions Tricorn has very good blue-chip customers including Caterpillar, Cummins and Rolls-Royce. As a result of the investment in capex, its innovative approach to new solutions and good service, Tricorn is increasing the amount of work it does with each of its major customers. Not only is it increasing the volume of work, as a result of the above, it is also improving margins. Transportation and Energy & Utilities were the star performers in driving profit forecast upgrades in FY2012, but Aerospace
also made a quicker return to profit than we had forecast.

Robust balance sheet despite capex
Tricorn increased its capex to c.£0.9m in FY2012 with significant investment in new kit in each of the three divisions. Despite this investment and the payment of a maiden dividend for FY2011, Tricorn saw an increase in net cash to £0.6m. As a sign of management confidence, the FY2012 dividend was double the 0.1p of the previous year.

Outlook remains positive
One of the major developments in Tricorn's history is the establishment of a facility in China. We forecast capex will increase to £1.9m during FY2013 and although in financial terms this is significant, we view the fact that Tricorn has been encouraged by its major customers to build a presence in China will result in substantial new business in due course. The operations in the UK are continuing to trade in line with expectations, although we are mindful that the macro-economic environment remains difficult.

Valuation
Since we initiated coverage on Tricorn in June 2010, we have upgraded our profit
forecasts on seven occasions as the management has been able to "prove and move" on its strategy of improving margins. With the medium-term target of 10% group operating margins more than achievable in our view, we continue to believe there is scope for further upgrades in due course. For FY2013, the China initiative will require management time and adds the element of uncertainty as to the timing of when it becomes operational during the second half and how quickly the initiative results in revenue growth.

Our 50p target price implies a FY2014 P/E of 10.0x. We believe this premium rating is fully justified given the ability to hit margin targets and the potential for China to deliver much better returns than assumed in our forecasts."

[rivaldo] 15/6/2012 07:53

Bombardier are another major TCN client. They announced a major $631m contract today:



This follows a series of such contract wins:



IC2, thx for post 1087, excellent summary.

[alter ego] 14/6/2012 13:46

very good summary ic2

[interceptor2] 14/6/2012 13:39

rivaldo, pleased you like the post, see the copy below.

I guess that most investors here are well aware of Tricorn Group TCN, but I thought I would highlight how much stronger a Zulu stock these are now after Mondays full year results.

Some Zulu highlights at todays 34p.

Mandatory
PER = 8.7 (2013) and 6.8 (2014)
PEG = 0.72 and 0.24
Forecast growth = +12% and +29%
Cash flow vs EPS last 5 years = +54%
Net cash = £0.586m
No selling by directors

Desirable
Pays a dividend
Accelarating EPS, historic and forecast

Bonus
PSR = 0.46

Something new
New products throughout Tricorn, and planed new Chinese facility.

The only Zulu negatives I can see are as follows.

12 Month relative strength only 6%, a little low.
No recent director buys
Market cap £11.6m

Below is my updated notes since the full year results.

Tricorn Group 11 June 2012

Tricorn Group released strong full year results today, reporting pre-tax profit of £1.53m and EPS of 3.49p which was ahead of forecasts from broker Westhouse securities. With both Energy and Utilities and Transportation divisions continuing to perform strongly, seeing revenue increase 11% and 21% respectively. But the most encouraging news was the turnaround and a return to profit at the Aerospace division, which contributed £0.025m pre-tax profit . To understand the significance of this it is worth breaking down the Aerospace results in half year segments. See below.

2010 H1, pre-tax loss = £0.169m
2010 H2, pre-tax loss = £0.114m
2011 H1, pre-tax loss = £0.045m
2011 H2, pre-tax profit = £0.070m

Tricorn achieved net margins of 4.68% against 3.15% last year, these figures are increasing now to more normal historic levels now, net margins were 7.5% in 2007.

Cash flow generation was very strong. Net cash flow from operating activities was £1.296m and Capex was £0.451m. So they had CFS of 3.91p and capex ps of 1.36p. And these figures don't included the sale of treasury shares of £0.278m, which are highlighted separately under cash flow from financing activities. Not surprising to see net cash at £0.586m now, against net debt of £0.061m last year.

As well as the confidence shown by doubling the dividend, it is worth remembering that they paid off bank borrowings of £250,000 in October 2011 which were due in August 2012.

Tricorn have a new manufacturing facility in China to service South East Asia, with installation of plant and equipment to commence shortly. Which is on track to be operational by the end of 2012, and earnings enhancing in the financial year ending 31 March 2014. Initial investment is estimated to be approximately GBP1.0m, which would seem to be comfortably met by strong cash flow generation.

Worth a mention is some of the blue chip customers which includes Rolls Royce, Caterpillar and JCB, these companies have been performing very strongly recently, which has benefited Tricorn.

CEO Mike Welburn made the following statement today, "Our alignment with major global OEM customers and our expansion of manufacturing to serve the expanding markets of South-East Asia positions us well for the future and we are very optimistic about mid-term growth opportunities"

Broker Westhouse Securities have issued increased forecasts, with expectations of a 2013 pre-tax profit of £1.70million and EPS of 3.90p, and expectations of a 2014 pre-tax profit of £2.20million and EPS of 5.00p.

So on a 2013 P/E 8.2, and a 2014 P/E of 6.4, Tricorn Group still look rather good value at 32p.

ic2...

[rivaldo] 14/6/2012 09:10

Yep, nice finish yeaterday and holding well today.

IC2, I've just started re-reading the ZULU thread for the first time in a long time (just got out of the habit of reading it). What an excellent thread. Anyway, I thought your post on TCN was terrific - perhaps you could copy it on to here for everyone's info?

[cfro] 13/6/2012 18:32

Smashing rise close to the end of play. :-)

[interceptor2] 13/6/2012 16:33

Spot on shauney2, similar delayed reaction last year also, can we break resistance at 37p?

ic2...

[shauney2] 13/6/2012 16:05

Forgive me for ramping.
This looks ready to fly.

[interceptor2] 13/6/2012 08:32

Thanks for the forecasts rivaldo.

So that makes for a per of 8.46 and 6.60, and a peg of 0.56 and 0.23, looks rather cheap imv.

cfro, good point you made about no negatives in the results, unless I really tried to nitpick I couldn't see any either.

ic2

[rivaldo] 13/6/2012 06:55

Cheers for the GCI write-up ic2. Let's concentrate on the Strong Buy aspect of it :o))

I note that Westhouse's new forecasts are for 3.9p EPS this year - and 5p EPS next year....

[cfro] 12/6/2012 20:23

Thanks Glasshalfull and rivaldo for your thoughts earlier today on your calc/uses of eps. Although i can see where you are coming from GHF, i still prefere to play it cautious and use the basic eps figure which came in at 3.49p.

[interceptor2] 12/6/2012 19:22

I think the loss of Miles Nolan from GCI to WH Ireland is a great loss to them. He seemed to research companies well and had a real interest and understanding of these companies.

The impressive turnaround of the Aerospace division, or the impressive blue chip customer base including Caterpiller, JCB and Rolls Royce could have been mentioned. And the strong cashflow should also have been mentioned, with figures and historic comparisons.

ic2...

[shauney2] 12/6/2012 18:00

Thanks for the posting ic2.
Not concerned at all.I saw it as a sign of confidence.

[apad] 12/6/2012 17:27

Journalists are paid for words ic2,
TCN is a supplier to major companies, if its orders dry up it will have to pull its horns in like all the other suppliers, large and small. That's the negative, the rest seems good.
apad