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ISEQ lower-Kingspan's new acquisition

Tuesday, September 11 09:08:44

The ISEQ is lower this morning at 3,239, down 24 points as markets consolidate ahead of the important German court ruling and Fed action. Kingspan has completed another important acquisition and the implications are examined by Davy Stockbrokers:

Kingspan has announced (September 11th) the completion of the ThyssenKrupp Construction Group (TKA) acquisition. It has also revealed that the Rigidal deal was completed last week. There were no material changes to the terms of the acquisitions.

ANALYSIS: Kingspan had previously flagged that the TKA deal was likely to close around mid-September. News of its completion is therefore as expected. The deal, which adds over 15pc to Kingspan's revenue base and greatly enhances the group's position in the continental Europe insulated panel market, is potentially transformative. However, it does not represent a financial gamble as the transaction cost was just E65m, representing an EV/sales multiple of just 0.2x. Our forecasts already include a contribution from the deals in 2012.

DAVY VIEW: With the TKA deal now completed, from here on it is all about execution and delivery. Given that the TKA business is currently loss-making, restructuring measures are required. We are confident that Kingspan can deliver on these and possibly in a shorter timeframe than has been suggested (the target is to get the TKA margin to group level by 2015). Along with the structural and cyclical arguments (respectively organic growth thanks to product development and the impact of building regulations, and trading margins well below the long-term average at present), we believe that the TKA deal adds an exciting third tier to what is an already impressive Kingspan investment case according to Davy Stockbrokers.