A lot of Broker Buys and coverage on this stock and why not with a miserly forward P/E of just over 8 going into 2011.....

Morgan Crucible Company (The) PLC

FORECASTS
2010 2011

Date Rec Pre-tax () EPS (p) DPS (p) Pre-tax () EPS (p) DPS (p)

Arbuthnot Securities
07-08-09 BUY 70.00 16.20 7.45

Panmure Gordon
07-08-09 BUY 62.43 14.82 7.00 70.57 16.74 7.00

KBC Peel Hunt Ltd
06-08-09 SELL 40.01 8.92 7.00 35.20 7.42 7.00

Arden Partners
03-08-09 ADD 60.00 14.50 7.00 64.00 14.80 7.00

Evolution Securities Ltd
29-07-09 BUY 54.90 12.00 7.00 62.50 14.10 7.00

Numis Securities Ltd
29-07-09 BUY 59.60 12.30 7.00 74.50 16.00 7.35

Speirs & Jeffrey Ltd
26-06-09 BUY 54.90 13.70 7.00 85.90 21.60 7.00

2010 2011
Pre-tax () EPS (p) DPS (p) Pre-tax () EPS (p) DPS (p)

Consensus 58.97 13.66 7.00 68.61 15.65 7.00

1 Month Change -1.16 0.02 0.00 -6.80 -1.32 0.00
3 Month Change -15.04 -4.05 0.00 -4.98 -3.20 -0.30


GROWTH
2009 (A) 2010 (E) 2011 (E)

Norm. EPS 22.82% -48.85% 14.57%
DPS 3.70% 0.00% 0.00%

INVESTMENT RATIOS
2009 (A) 2010 (E) 2011 (E)

EBITDA 140.90m 121.84m 126.00m

EBIT 110.10m 75.40m 93.00m

Dividend Yield 5.06% 5.06% 5.06%

Dividend Cover 3.82x 1.95x 2.24x

PER 5.18x 10.13x 8.84x

PEG 0.23f -0.21f 0.61f

Net Asset Value PS 0.28p 76.56p 83.29p

Moving up nicely this afternoon.

Jefferies note out today:
"Morgan Crucible this morning issued a profits warning, and with the exception of a robust net debt performance, there are few crumbs of comfort to be had. Management is guiding to 2H12 sales being 10% below 1H12, and the performance to be “materially below the Board’s previous expectations”. Management is undertaking a restructuring of the group, but this could potentially be more widespread than the £15m costs announced today.

Trading update: This morning, Morgan Crucible released a particularly downbeat trading update, highlighting that trading conditions have deteriorated across most geographies in 3Q12, with particular softness in Europe and China. As a result, 3Q12 revenues were 10% below the average for 1H12, and based on recent order intake/order books, management is not looking for an improvement in the remainder of the year. Management is now expecting the full year performance to be materially below previous expectations, although there is a likely benefit from a lower-than-previously-expected tax charge (27% versus previous guidance of c29%). As we discuss below, management has begun a restructuring programme, while net debt: EBITDA guidance for the end of the year remains reasonably robust at 1.2-1.3x.

Divisional/regional commentary: Both the Technical and Thermal Ceramics divisions have seen “some deterioration” in trading, although the Thermal business in North America has been more resilient (in aerospace, medical and chemical processing). However, in Europe, Fibre demand has softened, and industrial demand in China has continued to be weak, and there are few reported signs of improvement. In the AM&T division, 3Q12 revenues are significantly lower yoy, being impacted by a slowing Chinese economy, a “global downturn in the clean energy sector”, poor September trading in the seals & bearings business, deteriorating trading in the electrical business and delays in (high margin) body armour deliveries. NP Aerospace sales guidance has also been lowered, to £60m with some contracts being delayed into FY13. MMS is the only bright spot, with 2H12 trading reportedly in line with 1H12.

Restructuring being undertaken: Management has indicated in the statement that it is looking to address the cost base given the recent trading performance. The focus will be on the AM&T division, and management has guided to a FY12F restructuring cost of £15m (we had previously expected £4m) with £10m of cash costs. This will drive an expected £7-8m of benefit on an annualised basis. We also note the commentary in the trading update that highlights that management are “reviewing further structural actions” and would suggest that all options for the AM&T division will be considered. Management is however continuing to invest in the business, and particularly in Superwool and to drive further expansion into Emerging Markets.

Forecasts: In line with management’s comments regarding the full-year outcome (“with the weaker environment, group performance is expected to be materially below the Board’s previous expectations”) we expect to see consensus forecasts come down at least 10% for the current year (current Bloomberg consensus is c27.5p, hence we suspect that consensus will end up at c24p) and for those that look at EBIT/PBT post restructuring, the downgrades will be larger, with consensus in that respect likely to be 20-21p, in our view

Valuation: The above potential changes to consensus imply FY12F PER of c11x, and EV/ EBIT of c9x, taking into account the 13% decline in the share price this morning, and on a post restructuring basis.