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Hardman & Co

Titon Holdings Plc Small, fresh and perfectly formed

Hardman & Co Report

Demand for the Group’s core ventilation products is benefiting from dynamic building methods, tightening regulation and increasing focus on healthy buildings. What is more, almost half of Group revenue is international, including, unusually, a manufacturing and distribution business in South Korea, which on a net profit basis contributes more than the UK.

► Strategy: Titon Holdings Plc (LON:TON) was formed in 1972, went public in 1988 and its founder, John Anderson, remains as a Non-Executive Director and Deputy Chairman (and a 16% shareholder) 44 years on. If not unique, it is certainly very rare and beacon-like as many industry players have been subsumed into largely continental European entities.

► Ethos and track record: The Group’s founder has also instilled an enduring ethos of excellence in quality, design, R&D and customer service, combined with an innate financial prudence. In 28 years as a listed company it has paid a dividend every single year.

► Valuation: Titon has financially outperformed many of its peers, yet it remains the cheapest stock in our sector on a derisory EV/EBITDA of less than 4x and there is complimentary yield above 3%.

► Risks: Q1 of 2016 has been characterised by force 10 turbulence in the financial markets. Similarly, geopolitical risks are omnipresent in the Middle East and elsewhere, China is a source of concern. The Group is pegged to the fortunes of both the UK and South Korean economies, neither of which are challenge-free.

► Investment summary: Titon Holdings Plc is a constituent of the Hardman UK Building Materials Sector – which is having something of a renaissance (six IPOs in three years) and the Group is as cheap as wood chips.

Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.