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magazineLuceco up 20% since we said to buy in October 2016
Luceco (LUCE) 180p
Gain to date: 20%
Original entry point:
Buy at 150p, 20 October 2016
Luceco (LUCE) says trading was good in late 2016 and positive momentum has continued into the New Year.
Luceco makes and distributes wiring accessories, power products and LED lights. It has a diversified customer base, selling to trade, retail and direct to corporates for specific projects.
Chief executive John Hornby tells Shares that many of Luceco’s input costs and sales are priced in dollars, including products bought by UK customers. He says that may impact demand if sterling stays weak.
Despite this obvious risk, Hornby insists demand so far remains strong in Luceco’s main markets including house building.
The company also has an edge over competitors by manufacturing its own products from a low-cost facility in the Far East. He says products can be re-engineered and manufacturing efficiencies could be pushed through should it need to take action from currency pressures.
Broker Numis upgrades its price target from 190p to 220p off the back of the trading update. It forecasts earnings before interest and tax (EBIT) moving from £11.4m in 2015 to £17.4m in 2016, £21m in 2017 and £25.5m in 2018.
We are comfortable with the stock’s high equity rating given that impressive growth rate. Luceco trades on 18.1 times forecast earnings for 2017.
We are mindful of the currency issues but remain buyers at 180p.
Important information:
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Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
