Strix H1 19 results were published today: ‘The Group has delivered a solid H1 performance and is trading in line with full year market expectations’. Accordingly, we leave our FY 19/20 forecasts unchanged. Reassuringly, Strix reconfirms at this stage its intention to pay total dividends of 7.7p per share for FY 19, +10% YoY. This should underline the income attractions of this stock to investors.
CEO Mark Bartlett highlights in his update the operating progress achieved by the Group in H1 together with comments on stable market share as the leading player in the global kettle controls market. This is a market still growing at c. 2% pa, in spite of well-flagged macro headwinds.
Re operating momentum in 2019, we signal the appointment of a CCO (Chief Commercial Officer) to increase focus on new product innovation plus the new, enlarged manufacturing facility in China, where construction is due to start imminently, with expected completion in Q1 2021. Agreement has also been reached for the recently acquired Astrea product to be launched globally under the Philips brand. Taken together, these initiatives highlight the scope for future value creation at Strix and the forward planning of management.
Time to revisit the Strix investment case. The shares have been treading water in recent months, in part reflecting the sell-down of a major institutional shareholding. In our view, this appears an attractive entry point to the shares. Valuation multiples are undemanding at 11x PER, 9.6x EV/EBITDA. The dividend yield at the current price is a compelling 4.7%. We estimate fair value for the shares in the 220p-240p range.
Strix is a unique strategic asset on the UK stockmarket, with industry leading margins and a number of growth initiatives. It also screens well for investors with a ‘sustainability’ mandate, with a focus on health products and improved filtration.
