I first advised buying the shares at 60p ('Clean up on superbugs', 6 May 2014), since when the company has paid out an interim and final dividend totalling 1.85p a share and a special dividend of 3p a share a few months ago.
Ahead of the figures, analysts Paul Hill and Hannah Crowe at research firm Equity Development are pencilling in full-year revenues of £15.5m, implying 15 per cent like-for-like sales growth in the 12 months to end June 2015, and an operating margin in excess of 16 per cent, a 2.6 percentage point hike on the previous financial year. If achieved, this would result in pre-tax profits (before share-based payments) of at least £2.5m, or 38 per cent more than the £1.8m of profits reported in fiscal 2014.
Key to maintaining this double-digit sales growth rate is Tristel's high-margin and patented chlorine dioxide technology healthcare products, accounting for 85 per cent of sales. The company has a solid customer base both internationally and in the UK where the NHS accounts for a quarter of Tristel's revenues and, with MRSA and Clostridium difficile affecting one in every 16 patients in NHS hospitals, demand remains well underpinned.
Prospects are robust which is why analysts at Equity Development predict revenues will rise by a further 15 per cent to £17.8m and drive up pre-tax profits up by a fifth to £3m in the financial year to 30 June 2016. On this basis, expect EPS of 5.2p and another hike in the payout to 2.6p a share. This means that the shares are rated on just under 18 times earnings estimates net of a cash pile of 6p a share and offer a prospective dividend yield of 2.6 per cent.
That's still not too punchy a rating for a company expected to generate 20 per cent earnings growth in the current financial year (June 2016 year-end), and one that could also attract the attentions of larger rivals. I also suspect we could be in line for further earnings upgrades as the current financial year unfolds.
So having raised my fair valuation when I updated the investment case at 95p (‘Blue sky potential’, 10 June 2015), I am very comfortable maintaining a target price of 110p ahead of next week's full-year results announcement and trading update. On a bid-offer spread of 97p to 99p, I would run profits.
MORE FROM SIMON THOMPSON...
I have published articles on the following companies in the past fortnight:
■ Trakm8: Run profits at 195p, target 220p; Character Group: Run profits at 518p, target 575p; Marwyn Value Investors: Buy at 220p; Global Energy Development: Speculative buy at 30p; Software Radio Technology: Buy at 27p, target range 40p to 43p; Globo: Buy at 33p, target 69p; Pittards: Hold at 105p ('Cashed up for cash returns, 22 Sep 2015).
■ KBC Advanced Technologies: Buy at 112p, initial target 142p; K3 Business Technology: Run profits at 298p; Cenkos Securities: Buy at 177p; Netplay TV: Buy at 10p ('Small cap value plays', 23 Sep 2015).
■ Miton: Buy at 26.5p, target 35p; 32Red: Buy at 73.75p, target 90p; Stanley Gibbons: Buy at 138p; Vislink: Buy at 40p, target 70p ('Building momentum', 29 Sep 2015)
■ Moss Bros: Buy at 97p, target 120p; GLI Finance: Buy at 52p, target 80p; Town Centre Securities: Buy at 315p, target 350p; Globo: Buy at 39p, target 69p (‘Platforms for success’, 30 September 2015)
■ Safestyle: Run profits at 255p; Epwin: Run profits at 138p; Manx Telecom: Buy at 188p, target 210p (‘Income plays with capital upside’, 1 October 2015)
■ LXB Retail Properties: Buy at 86p, target 99p ('Bag a retail property bargain', 5 October 2015)
■ Creston: Run profits at 162p, target 171p; Fairpoint: Run profits at 184p, new target range 200p to 220p; Trifast: Buy at 114p, target 140p; 600 Group: Buy at 16p, target 24p; Renew Holdings: Buy at 315p, target range 350p to 375p; Stanley Gibbons: Hold at 105p ('Engineering ratings upgrades', 6 October 2015)
■ STM Group: Buy at 71p, target 80p ('Riding small cap winners', 7 October 2015)
■ First Property Group: Buy at 39.5p, target 49p ('In pole position for re-rating', 7 October 2015)
■ Tristel: Run profits at 99p, target 110p ('Cleaning up with superbug buster', 7 October 2015)
■ Simon Thompson's book Stock Picking for Profit can be purchased online at www.ypdbooks.com, or by telephoning YPDBooks on 01904 431 213 and is being sold through no other source. It is priced at £14.99, plus £2.95 postage and packaging. Simon has published an article outlining the content: 'Secrets to successful stockpicking'
