Howle Holdings, with just four shareholders which account for nearly 70% of equity valued at less than £6m, could appeal to private investors looking for growth rather than income.
The company specialises in engineers’ cutting tools and in tungsten carbide products.
There are no investors in prospect yet. When Howle floated for a full quote last February by reversing into the old SW Farmer `shell’, George Govan, chairman and chief executive, said capital growth was the aim.
He made the point again when no dividend emerged with this week’s interim statement.
Analyst Adrian Murray of house broker Teather & Greenwood, said that the shares – standing at a marginal discount to net asset value of 30.4p – are under valued by around 30%.
That view is based on the broker’s estimate of Howle’s potential growth in a UK automotive market which the Cardiff Business School reckons will grow by 30% by 2000.
Howle’s interims show pro-forma profits pre-tax of £342,000 on sales of £4.53m. Murray forecasts £800,000 for the full year to September, rising to £1.2m in 1997-98 when growth should be spurred by a range of new products announced by Govan this week.
The company floated with 100% gearing (net debt £5m), but Murray reckons this will fall to around 60% by the year end.
Govan aims to use profits to grow organically and by acquisition, and is `aggressively pursuing opportunities abounding’ in the fragmented hard metal sector.
Howle targets the `specials’ metal cutting market with its products. Margins top 15% for its tungsten carbide products range.
Acquisitions medium-term are likely to be bolt-ons financed from profits.