Brokers tip specialist investment group Melrose Industries as a ‘buy’

19th May 2014

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Analysts are tipping specialist investment group Melrose Industries as a ‘buy’ following the group’s latest market update.

Brokers at Investec have upgraded their recommendation on the stock to a ‘buy’, echoing the general market sentiment towards the FTSE 100 listed firm, which specialises in acquiring under performing businesses, turning them around and selling them on.

Melrose’s most recent purchase, the German water and gas meter making group Elster, will make up around 66% of the business, after recent sell-offs. Graham Spooner, investment research analyst at The Share Centre, is also backing the firm.

He says: “Investors should note that margins have improved to 17.4%, as reported in the March update. Although the same results suggested that sales growth would be more difficult in 2014, the focus for the market is now turning towards its next acquisition.”

The firm has witnessed its shares rise by 8% over the past year but fall by 10% over the last six months, and Spooner asserts that investors should note that the management team have many years of experience and an excellent track record on improving businesses that it has acquired.

Spooner adds: “In January the group announced its latest return of capital of £600m, equating to 47p per share. Although the recent returns may be hard to replicate, an update from the group in May stated that it is confident of meeting market expectations. We are happy to suggest investors ‘buy’ for the chance of further growth and cash returns.”

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