US Edition RPC Group
332.3p
Questor says BUY
Things at the plastic- packaging company are going very well indeed. The company said recently that profits in the first half of this year would be "significantly" higher than last year.
This is down to the inclusion of its strategic European acquisition Superfos in the numbers and an improvement in like-for-like sales. The sales mix was also better – as the company's stated strategy is to move into higher value-added sectors.
The company is reaping the benefits of its successfully completed cost-cutting drive called RPC 2010.
Polymer prices have been easing since May after sharp rises in the past year. However, RPC has the pricing power to pass on the raw material costs to customers – but there is always a time lag with this.
The company has completed its cost–saving programme, which is boosting profitability.
The shares are trading on a March 2011 earnings multiple of 9.3, falling to 8.2 next year. This looks cheap considering that the company is expected to post a growth in earnings of 16pc this year and 14pc next year. Also, many of its end markets are defensive.
The prospective yield is 3.9pc, rising to 4.3pc next year, so is worth having too. It is well covered by earnings, with the dividend cover being 2.75 times covered by earnings.
RPC was first recommended on July 26 2009. Adjusting for last year's rights issue, the entry price was 240p. The shares are now 38pc higher.
Buy.