Investment: Weir engineers a profits bounce
Thursday 20 August 1998
And there is more: the group expects orders to bounce to a record level in the second half thanks to a couple of submarine contracts from the Ministry of Defence. Factor in Weir's bullish noises on acquisitions, and yesterday's 5p jump in the shares to 213p looks entirely justified.
Can the good times last? The answer is yes. For a start, Weir's geographical spread should protect it from any further economic downturn in the UK. With businesses ranging from Sudan to China, the company is able to ride the peaks and troughs of different cycles, including the Asian rollercoaster.
Similarly, Weir's strategy of supplying its pumps and valves to completely different industries, from the naval sector to oil via power generation, should guarantee a reasonably stable order flow and avoid it becoming too reliant on one industry.
As with many engineers there is always a risk that a prolonged slump in the emerging markets where Weir operates could lead to project cancellations and delayed orders. But Weir's involvement in what it grandly calls "basic human needs" - electricity and water - makes a sudden slump in orders less likely than with some of its rivals.
The shares have had a pretty torrid time of late, as the gloom surrounding the engineering sector dragged them down from a year's high of 304.5p.
They are now trading on just nine times 1998 forecast earnings of around pounds 65m. On such a large discount to the market, they are certainly worth a punt.
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