Formerly boxed in by asbestos liabilities and hefty debts, Cape has manoeuvred itself into becoming a well-placed supplier to oil, gas and nuclear liabilities, with a particular specialisation in liquid natural gas terminals. A return to dividends, soaring exports in Asia and the Middle East and better cash conversion have already doubled the shares since June, but with a forward P/E of 9.5, there is still plenty to go for especially as most firms in the oil and gas services sector trade on at least 18 times.
Shares in speciality chemical firm Croda have quadrupled since the start of 2009, as its markets have switched to growth and produced a highly geared response on its bottom line, with the third quarter trading statement showing pretax profits up 84 per cent for 2010 so far, despite some seasonal slowing in sales. Margins have jumped to 19 per cent in Q3 from 15 per cent. Net debt has been trimmed by £48m so far this year, but still stands at a hefty £241m.
Fortunes at conveyor belt firm Fenner are geared to the expansion of the global mining industry, particularly coal. Results this month showed a 49 per cent rise in pretax profits, improved operating margins and strong cash generation which allowed debt to be cut from £165m to £110m. The acquisition of Australia's BBV has further added exposure to Fenner's down under mining exposure. On 12.4 times Numis Securities 2011 forecast of 21.7p, the shares look good value.
While Britain's car industry may have been scattered to the four winds, GKN still represents the best British-based play on continued recovery in the sector. The firm has powered its way back from a horrible 2008 with resumed dividends and better sales. While third quarter margins were squeezed a little by steel prices, the company is hitching a profitable ride from the car-hungry middle classes in emerging markets, particularly in China where GKN has a 40 per cent share in the driveshaft market, which itself is growing at 8-10 per cent a year.
IMI may have been slow to move after our August share tip, but the engineering company's shares are now powering ahead, helped by the strategic acquisition of a German valve specialist, Zimmerman & Jansen and a very positive trading statement earlier this month. The company has plenty of emerging markets exposure, and a reliable stream of after sales service. The historic P/E is 16, dropping to 12 for 2011.
Britain's leading aero engine maker, and one of Britain's most powerful exporters, has still not recovered from the fallout over damage to an engine on a Qantas A380. While it seems likely that this is one of a few unrelated incidents, the cautious may want to wait for final confirmation before taking advantage of a dip in the shares. While engine buyers may understandably be cautious for a while, it is worth remembering that it is actually the maintenance and after-sales service where the big money is made.
Aerospace engineer to security conglomerate Smiths is doing well, even though its long restructuring is far from over. Its exposure to oil and gas through subsidiary John Crane hasn’t shown much growth this year as yet, and there are some misgivings because of the extent to which the group as a whole depends on government spending. However, the new worries over air cargo bombs are likely to lead to extra business in airport security scanners.
Industrial steam and pump specialist Spirax-Sarco sagged a little this month after a trading statement showed some softness in growth. Nevertheless, it is the emerging markets and North American sales story that is driving growth here while Europe, flat for the moment, should eventually kick in. The company is steadier than many in this list, with little exposure to big risky projects, but a heavy reliance on after-sales service.
The FTSE 100's top performing stock having soared 120 per cent in the last 12 months, Glasgow-based pump specialist Weir has been making cash from after sales service, which helped keep margins high. An exceptional order intake for the upstream oil and gas business in the third quarter has helped, though with the shares trading at 18 times forecasts for this year's earnings it may be better to make for a pullback. Long term prospects still seem bright.
Protective gloves may seem a low tech product, but demand for millions of pairs in Asia is powering Yule Catto's growth. The third quarter trading statement showed business on track, with a better than expected progress on debt pay down, and a strong order book despite the seasonal slowdown across the industry.
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