Titon Holdings: Solid 2017 results, outlook good and still on 10x PE

Thursday, Dec 14 2017 by

Earlier this year, I stumbled across Titon Holdings (LON:TON), an illiquid family controlled micro-cap which looks conservatively managed, with most profits coming from Korea and in recent years has shown impressive top line and EPS growth.   In addition, it has a  2.5% dividend yield and the dividend is very well covered by earnings and dividends have increased steadily over recent years.    However, a slightly more than preliminary look revealed the complexity of the Korean corporate structure and it got put in the too difficult bucket.    However, I had a spare day recently and decided to go through some accounts and I felt reassured enough to buy some shares.   But the stock has minimal research coverage (Hardman) and I was still uncomfortable enough to wonder if there was something I was missing.   Hence this post and I would be grateful if anyone who understands the stock can add a comment on any points I have overlooked.

Titon Holdings is a UK micro cap, producing passive and mechanical ventilation on a P/E of 10x, with just under 20% of the market cap in net cash and this year a 20% increase in the dividend.   Today the company came out with full year FY 2017 results (end-Sept) which included a fairly upbeat outlook statement for FY2018.

Titon’s business is dependent on the housing market (particularly new builds) and therefore is cyclical and following the 2008 crisis profits collapsed.   Most of its business has traditionally been in the UK, with some exports into Europe and a small US business.    But in 2008 it also started a joint venture in Korea, which has been a real success and now accounts for over half of the profits of the group.    Despite the geopolitical issues, the South Korean economy is also forecast to have quite strong growth over the next few years.

The joint venture structure in Korea is quite complex.   

Titon Holdings Plc owns 51% of Titon Korea Co Ltd.    Titon Korea, which is fully consolidated, manufactures passive ventilation products and sells effectively all its production to Browntech Sales (BTS), which is 49% owned by Titon Holdings plc.   The other 51% of BTS is owned by South Korean investors who have operational control of BTS.  BTS distributes ventilation products in South Korea and recently has started also investing in and developing schemes in the South…

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Titon Holdings Plc is a United Kingdom-based supplier of ventilation systems and windows hardware. The Company operates through four segments: United Kingdom, South Korea, North America and All other countries. The United Kingdom segment includes sales of passive and powered ventilation products to house builders, electrical contractors, window and door manufacturers. The South Korea segment includes sales of passive ventilation products to construction companies. The North America segment includes sales of passive ventilation products to window manufacturers. The All other countries segment includes sales of passive and powered ventilation products to distributors, window manufacturers and construction companies. The United Kingdom segment supplies window and door hardware. The Company offers trickle ventilation and window and door hardware products, and mechanical ventilation products. The Company's manufacturing base is located at Haverhill. more »

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6 Posts on this Thread show/hide all

Fegger 17th Dec '17 1 of 6

Always interesting to find out about a new (to me )share rated on a stockrank of 90 and above. I would however be put off by the drop in earnings forecast by the broker from July onwards

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Wimbledonsprinter 17th Dec '17 2 of 6

In reply to post #255458


As far as I am aware, given the illiquidity, Titon only has the one broker covering it - Hardman (and this is paid Corporate research). In May 2017, following Titon's interim results Hardman reduced its FY2017F EPS from 14.1p to 13.6p and its FY 2018F EPS from 15.6p to 14.6p (as Stockopedia show happening in July - I think the data feed was a bit late on the uptake).

In its prelim results (announced on Thursday), Titon reported a 16.5p EPS for FY2017 (so comfortably ahead on the forecast). Hardman publishes its research freely on its website (its style is a bit breathless for my liking). I see that it has just updated its research over the weekend (although dated tomorrow, Monday) and now is forecasting FY2018F EPS of 17.9p. Research is available at:


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iwright7 18th Dec '17 3 of 6

The Hardman forecast equates to a PE of 8.9x for a company whose overseas earnings are growing and has produced an 2017 Earnings Surprise - Boring product, under the radar and improving metrics - A StockRank archetype?

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Wimbledonsprinter 20th Dec '17 4 of 6

I see the Stockopedia data feed has now incorporated the FY18 EPS upgrade to 17.9p from Hardman on its earnings expectations graph - and has corrected/ backdated the Previous EPS cut (15.6p to 14.6p) from July to May.

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daveinthelakes 8th Feb '18 5 of 6

In case you were not aware Titon Holdings (LON:TON) was put up last Friday by Simon Thompson of IC as one of his ten bargain shares for 2018. I thought it was one of the better selections but confess to worrying about the UK housing market if Brexit negotiations go wrong and the oddball relationship of the Korean element. It looks like they are now in part a Korean property developer?

The shares shot up on Thompson publishing but I got some in the market blow off on Tuesday. Can't decide if to keep them now.

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Wimbledonsprinter 5th Jun '18 6 of 6

I understand Titon will present at Mello South (Hever) next week.

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