VE­SU­VIUS (VSVS) 579.5P

Shares - - MONEY MATTERS -

VE­SU­VIUS IS A cycli­cal en­gi­neer that re­lies on the health of the global steel in­dus­try. We think its rat­ing is un­de­mand­ing given de­cent earn­ings growth po­ten­tial and a nice div­i­dend yield on top.

The £1.58bn company designs and man­u­fac­tures spe­cial­ist prod­ucts that con­trol and pro­tect the flow of steel in foundries, plus other cast­ing units. It also sup­plies ef­fi­ciency mod­ules to the in­dus­try.

The steel in­dus­try is cur­rently in de­cent shape and the out­look ap­pears fairly pos­i­tive ac­cord­ing to most an­a­lysts.

This has played well for Ve­su­vius, which is one of many UK heavy in­dus­try com­pa­nies to have en­joyed dou­ble-digit in­creases to earn­ings fore­casts thanks to pos­i­tive trad­ing, growth in­spired ac­qui­si­tions and stream­lined op­er­a­tional costs.

UBS an­tic­i­pates op­er­at­ing profit margins go­ing from 9.5% in 2016 to 11.5% in 2018. A div­i­dend grow­ing in the mids­in­gle dig­its and yield­ing 2.9% this year bol­sters a mod­est­lyrated share price trad­ing on a 2018 price earn­ings mul­ti­ple of 13.1. (SF)

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