CGS – Castings pleases markets

CGS (Castings) issued its final results, sending its shares up 8.5% to 439p. Its RNS says:

The turnover of the group decreased … The foundry operation saw a reduction in casting output of 8.5%. This was expected from the high levels of the previous financial year

It’s difficult to believe that the market would get excited about that, isn’t it? However, it says further down:

the directors recommend an increase in the final dividend … In general we are now experiencing improved volumes from many of our customers and it is anticipated profits will increase providing the recovery continues.

I do own shares in CGS. Regrettably, despite the rise of 8.5% in share price today, I am still down 6.3% on it overall. Looking back on my notes in May, though, I did say that it was on a PE of 10.3, PEG 0.79, a yield of 3.66%, an EPS growth rate of 10.3%, and EV/EBITDA of 5.36 and a 5-year ROCE averaging 15.4%. So I obviously thought there was plenty to play for despite what the market was saying about CGS at the time.

Earlier this month I did a calculation of my new statistic: the incremental ROCE. I do like Stockopedia’s cashflow statements. Cash from operating activities rose from 8.36m for y/e 31-Mar-2009, and rose to 19.2m for y/e 31-Mar-2014. That’s an approximate 10.8m increase. Cash invested during that period amounted to 56.6m (=19.7+2.65+9.86+12.6+11.8), so the return has been around 19.1% (=10.8/56.6). There may have been lots of other factors affecting the cashflows, but just taking the numbers at face value, they are impressive.

It’s good to see the market respond positively to the news, so hopefully – fingers crossed – the market is prepared to re-rate the company. It’s on a decent yield, which just got better.

May you all be well.

439p

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About mcturra2000

Computer programmer living in Scotland.
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