Investment Column: Hamworthy helped by going with the flow

Walker Greenbank; Regency Mines

Our view: Buy

Share price: 505p (+3p)

The fact that Hamworthy's shares were slightly higher despite the market rout last night tells you just how much City liked the marine engineer's latest acquisition. The company, which makes fluid handling systems for the shipping, oil and gas and industrial sectors, said it was buying AW Flow, which makes specialist valves for the oil and gas industry.

The deal is worth £24m, with Hamworthy shelling out £21.6m on completion; the remaining £2.4m is payable over the next two years. Analysts were quick to welcome the move, with Evolution and others highlighting the attractive price. Not only that, but AW sat well with Hamworthy's existing operations, they said.

The point was also flagged up by the company, which said it would merge the new business with its pump systems arm to form Hamworthy Flow Solutions. "[AW's] range of valves are highly complementary with to Hamworthy's existing pump range," it said.

So, the deal appears to be good for investors, as it should bolster Hamworthy's offering and boost its capacity to cross sell in new territories. But what of the share price, which has endured something of a slump in recent months?

We bought in back in April, when Hamworthy was changing hands for around 524p. The subsequent months were positive, with stock rising as high 705p in July. But then they began giving way, even though Hamworthy issued a confident update alongside its annual meeting in July.

We can only assume that the weakness is down to the declines in the wider market, with investors worrying about the impact of sluggish economic growth around the world.

Still, the company has not put out any warnings that would spark concern about its business. If anything, analysts are expecting news of recovering trading trends when Hamworthy issues its next update. Adding to the attraction is the fact that, at around 16 times earnings on the estimates for next year, falling to around 12 times on the figures for the year after, the stock is affordable. We would keep backing ahead of what we expect to be another upswing in the shares.

Walker Greenbank

Our view: Buy

Share price: 42.75p (-3.5p)

The story of Walker Greenbank's recent revival is a familiar one in the corporate world. Not only does the furnishings group operate at the luxury end of the market, which has been more resilient of late, but it is also benefiting from strong demand for its brands overseas, in the Russian, Japanese and Chinese markets.

Its growing international reach helped Walker, which sells its products through department stores and licensees in more than 75 countries, boost pre-tax profits by 14 per cent to £2.35m for the six months to July.

Revenues were up 11 per cent to £37.4m, with all four of its brands making a positive contribution. Indeed, Walker reckons its UK manufacturing base is a key advantage and it has continued to invest in its two sites, in Loughborough and Lancaster.

However, the US market continues to be "challenging" and sales there in the first half were flat. That said, the company lifted its interim divided to 0.2p a share. Overall, as the business celebrates its 150th birthday this year, we think its heritage brands have growth ahead of them, particularly overseas. And with its shares trading on a forward earnings multiple of just 6.1, we think the luxury group is worth a punt.

Regency Mines

Our view: Hold

Share price: 1.95p (-0.21p)

Regency Mines, the copper and nickel explorer, continued to underwhelm investors with its latest update yesterday, its shares falling as the statement failed to excite the market.

The group said previously announced delays to work permits needed to carry out work in Papua New Guinea, and problems with visas in the Philippines, resulted in "disappointing drilling progress" at its Mambare joint venture. That said, all but one of the visas have now been issued, and analysis of what drilling there has been yielded positive results.

Regarding its Direct Nickel project, Regency said it was still awaiting delivery of a unit necessary for one part of the process, but other parts of the plant were now running and undergoing testing. All in all, this might not be the most exciting investment prospect in the world, but with the better-than-expected test results in Papua New Guinea, it is worth holding.

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