Investor's Champion Blog
Provides refreshingly forthright, independent comment on predominantly small cap companies and specialist investment funds. Informed opinion, based on first-hand research, but pulls no punches in exposing management weaknesses.

WEIR - broker's views conflicting but this is a high quality business

Positive final quarter, benefits from the effects of a positive foreign currency translation notably from the strengthening of the US dollar against sterling.

Net debt at 31 December 2008 expected to be lower than the half year figure of £261.7m with operating cash flow generation and the proceeds from the sale of the Materials & Foundries businesses being partially offset by an adverse foreign currency translation effect.

A total of £625m of committed revolving credit facilities, expiring in 2011 in place.

Full year outlook for profit from continuing operations before tax, intangibles amortisation and exceptional items to increase to around £174m (from £170m)

Lots of conflicting opinion from analysts:

Dresdner Kleinwort cuts Weir Group (WEIR.LN) target price to 550p from 1100p.
Arbuthnot Securities upgrades Weir Group (WEIR.LN) to buy from neutral,
Weir is a survivor and a winner – Evolution

Broker Daniel Stewart (‘DS’) is clearly keeping a close eye on things commenting that the number of active oil drilling rigs in the USA fell sharply (98 to 1,623 – that’s c6%) in the most recent survey by Baker Hughes, the US oil services company. Apparently the biggest week-on-week decline since the oil industry crisis in the mid 1980s bringing the fall to a total of 408 rigs (a 20% cut) since the peak of the market in early September 2008.
DS went on to say that the reduced activity will have an impact on SPM, the US-based manufacturer of high-pressure well service pumps and related flow control equipment which Weir acquired in June 2007 for £328m. It is the largest element of the group's Oil & Gas division, which they expect to produce just over one-third of the group's profits for 2008.

It’s obviously tough in the short term but WEIR is a high quality business.

At current price shares are trading at under 7x 2009 full year estimates, gearing c30%, yielding c5% covered over 2x.


Investor's Champion is a registered trade mark of Investors Champion Ltd.  Investor’s Champion Limited is a company registered in England and Wales under number 03577867 whose registered office is at Langwood House, 63-81 High Street, Rickmansworth, Herts WD3 1EQ. Investor’s Champion Ltd is associated with Fundamental Asset Limited who is authorised and regulated by the Financial Services Authority.