Investment Column: Deal-hungry IMI is ripe for the picking

Abbeycrest; Impax Asset Management

Our view: Buy

Share price: 828.5p (+15p)

IMI, the international valve-maker based in Birmingham, is shelling out €135m (£120m) for Germany's Zimmermann & Jansen (Z&J), in what analysts tip to be the first of a spending spree that could reach £1.8bn.

IMI's stock has been rising steadily since the middle of last year and looks set for strong months to come. The Z&J deal has much to recommend it. The target company has factories in Germany, the US and South Africa, as well as a sales and procurement office in China. Sales hit €125m last year and produced underlying profits of €15m.

There is also a strong fit in terms of both sales and technology. IMI is active in a whole range of industries from oil and gas to medical to automotive. But the German company's focus – in the refinery and petrochemicals industry and the iron and steel markets – will take IMI's "severe service" division into new areas. And although Z&J already has a global presence, with 40 per cent of its sales in emerging markets including Russia, India and China, there is plenty to be gained from IMI's larger global sales infrastructure.

City analysts not only commended yesterday's deal but said they expected more. Oliver Wynne-James, of Panmure Gordon, upgraded his earnings-per-share estimates by 2 to 3 per cent to reflect both the Z&J deal and IMI hitting its 15 per cent margin target earlier this year. Further acquisitions and the proposed non-core disposal programme also weighed in the stock's favour. "IMI offers decent value relative to other more highly rated specialist engineers in the sector," Mr Wynne-James said. We agree, so buy.


Our view: Hold

Share price: 5.75p (-0.25p)

The sparkle came off jewellery maker and designer Abbeycrest's shares a few years ago. Under its executive chairman Simon Ashton, who has been in charge since September 2008, Abbeycrest is heading upmarket. It is selling more branded jewellery and reducing its reliance on low-margin products to high-street stalwarts such as Argos.

But with tight financial constraints, Mr Ashton faces an uphill battle and Abbeycrest has traded as a penny share for more than a year, which suggests that investors are not convinced by its recovery story. Yesterday, the company gave the optimists cause for hope when it reported a five per cent uplift in revenues to £18.8m over the six months to 31 August. Furthermore, it touted a 14 per cent reduction in net debt to just £7m.

Yet the half-year results also contained several scuff marks. Abbeycrest's pre-tax losses, before exceptionals, widened to £460,000 during the period. While its upmarket brands division delivered a marginal improvement in profitability, its overall performance was dragged down by its mass-market "Essentials" division.

Abbeycrest will be keeping its fingers crossed that the crucial Christmas trading period delivers the goods, but we are more concerned about the anaemic trading conditions awaiting the jewellery maker next year. Largely for this reason, we advise caution. Hold.

Impax Asset Management

Our view: Buy

Share price: 59p (+4p)

Since Al Gore's extraordinarily successful documentary An Inconvenient Truth, corporations and governments have been banging the drum about the extent of their green credentials.

Beyond the simple glow of saving the world, more and more companies are springing up to make money out of the environmental drive. Impax Asset Management Group is one of these: an investment manager focused on the environmental sector.

In previous recessions, the company said environmental investing was swept away. Not so this time. Impax released preliminary results yesterday for the year ending 30 September, in which it forecast that revenues would be comfortably ahead of last year's, while assets under management have risen 45 per cent to £1.8bn.

Impax was set up 16 years ago but the past few years have changed it "out of all recognition", according to its chief executive,Ian Simm. The firm's conviction is driven not only by its results internally but by wider factors such as legislation, including the Renewable Energy Directive, and about $500bn worldwide in stimulus money earmarked for the green sector. It also sees Asia as a huge growth market and, last week, its investment trust targeting the region raised £131m.

Execution Noble has the stock on a price of 13.6 times the estimated earnings for 2011. The headwinds seem to be in Impax's favour, so buy.

Start your day with The Independent, sign up for daily news emails
Life and Style
love + sex
Life and Style
Tikka Masala has been overtaken by Jalfrezi as the nation's most popular curry
food + drink
A propaganda video shows Isis forces near Tikrit
voicesAdam Walker: The Koran has violent passages, but it also has others that explicitly tells us how to interpret them
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Christine McCleave: FP&A Analyst

£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn