US Edition Carr’s Milling Industries
£17.65+15p
Questor says BUY
CARR’S Milling Industries [LON:CRM] reported a strong performance across every division yesterday, and Questor continues to believe the shares are overlooked and undervalued.
Most analysts and investment bankers will be tearing their hair out trying to put a value on the company, which is an odd mix of flour milling facilities, a nuclear robotics engineer and an animal feed business.
Questor thinks the difficulty in reaching a value for these very different parts of the business means the company as a whole is often overlooked by professional investors.
Tim Davies, chief executive, said he expects results for the full year ending August to be in line with expectations. With six weeks left in the current year, the market consensus is for pre-tax profits to rise 6pc to £16.5m, giving 129p in earnings per share, on revenues of £439m.
At the interim results released in April, the company reported a 2pc increase in pre-tax profits to £10.1m, while management confidence was underlined by a 9.7pc increase in the interim dividend to 8.5p.
Carr’s core business is the provision of animal feed to farmers, with the agriculture division contributing about three-quarters of group revenue and two-thirds of pre-tax profits.
The company said it had strengthened its position in the UK animal feed market through the acquisition of Lancashire-based Merit at the end of April. Management added that demand from dairy farmers had created significant gains in animal feed sales.
The flour milling operations contribute a fifth of group revenue and 4pc of pre-tax profits. Carr’s new flour mill at its Kirkcaldy plant in Fife has been fully operational for 10 months and the company continues to generate savings from better efficiency.
One of the more interesting parts of Carr’s operations is Walischmiller, its Germany-based engineering unit, which makes mobile robotic handling equipment used in the nuclear industry. A new factory was opened in Germany last month to cope with orders.
Carr’s shares are rated on a fairly conservative 13.8 times earnings, falling to 12.1 times next year, and we continue to like the overlooked odd mix. Buy.