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Strix offers income and growth

The newly listed company looks a good bet for income seekers
October 2, 2017

If you’re enjoying a cuppa as you’re thumbing through the IC, there’s every chance it was heated by a kettle that incorporates Strix (KETL) safety controls. The company, which joined Aim in August via a private equity-backed IPO, holds dominant market positions both at home and abroad, and offers shareholders growth and income characteristics.

IC TIP: Buy at 138p

Strix commands half of the global safety control market by value. It is driving up its market share in emerging markets, most notably in China, to 50 per cent from just 20 per cent five years ago. And there is a structural reason behind the industry’s forecast annualised growth rate of 7.6 per cent through to 2020 – low levels of existing utilisation. Kettles may be ubiquitous in the UK; not so much in other parts of the world.

Maiden half-year figures are noteworthy for their strong margins and cash flow; increased sales of higher-return components fed through to a cash margin of 33.6 per cent, while operating cash flow was up 12.4 per cent to £15.6m (118 per cent of cash profits). As Strix is domiciled in the Isle of Man (with zero corporation tax) its effective tax rate is estimated at 3-4 per cent – another plus point for earnings and free cash flow.

Zeus Capital gives adjusted pre-tax profit and EPS of £26.6m and 11.3p for the December year-end, rising to £29.1m and 12.4p in 2018.

STRIX GROUP (KETL)   
ORD PRICE:138pMARKET VALUE:£262m
TOUCH:136-140p12-MONTH HIGH:142pLOW: 127p
DIVIDEND YIELD:0.7%PE RATIO:11
NET ASSET VALUE:137pNET CASH:£12.5m
Half-year toTurnover   Pre-taxEarnings perDividend
30 Jun (£m) profit (£m)share (p) per share (p)
201639.69.44.9nil
201742.210.35.31.00
% change+7+10+8-
Ex-div:9 Nov   
Payment:30 Nov