Interactive Investor

Packaging firm bags a 14% share price surge

26th August 2021 15:54

Graeme Evans from interactive investor

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Our stocks writer examines a Scottish packaging firm that has enjoyed a stellar day.

One of its best sessions in five decades as a stock market listed company today helped shares in protective packaging specialist Macfarlane (LSE:MACF) to their highest level since the late 1990s.

The 14% jump for the Glasgow-based FTSE All-Share stock came as it revealed improved guidance for 2021, despite seeing significant inflationary pressure on input costs and supply shortages of some materials.

Macfarlane continues to benefit from strong demand from existing customers in the e-commerce retail and medical sectors as well as a recovery in some industrial sectors.

Demand from the aerospace, high street retail and hospitality sectors is still weak, but profits for the first half of the year still more than doubled to £7.8 million today as the group also lifted its interim dividend by 24.3% to 0.87p a share.

Macfarlane's chairman Stuart Paterson, who has been on the board since 2013, expects the second half of 2021 to be just as challenging because of the ongoing inflationary pressure and supply constraints on most raw materials.

However, the group's first half performance and record in managing these pressures means he is more optimistic on the outcome for the full year. Paterson added: “Our people have excelled, maintaining service to our customers in the most challenging environment.”

The company started out as a commercial stationery company from a single room in Bath Street, Glasgow, in 1949 before floating on the stock market in 1973. The shares have almost doubled in the past year and stood at 136p after today's surge.

House broker Shore Capital upgraded its earnings forecast by 14% to £20.2 million or 10.2p a share after the interims results, adding that the company trades at an unjustified discount to peers including Bunzl (LSE:BNZL) and DS Smith (LSE:SMDS).

Shore said: “Momentum is behind the business and the sector given the ongoing structural shift to online/e-commerce and industrial markets recovering as economies and operating conditions continue to normalise.”

The broker's price target is now 155p for a multiple of 15.2 times 2021 earnings, but this is based on forecasts it expects Macfarlane to build upon given the momentum in its sector.

Volex on the up

Another stock doing well today was manufacturing services and power products firm Volex (LSE:VLX) after it boosted its exposure to the US defence market with the $16.4 million (£11.9 million) acquisition of Irvine Electronics, a California-based maker of printed circuit board assemblies.

AIM-listed Volex employs about 6,300 people and is focused on performance critical applications, such as data centre power connectivity and complex medical equipment.

Its executive chairman is Nat Rothschild, who holds a 25% stake in the business.

Shares rose 2% to 389p and are up by more than a fifth this year as Volex sets about achieving a target of $650 million (£473.3 million) in revenues and $65 million (£47.3 million) of underlying operating profit by 2024.

Rothschild said the acquisition of Irvine increased the company's geographic coverage and technical capabilities in the key North American market.

He added: “Our strategic intent is to develop Volex’s presence in the defence and military aerospace markets, adding further blue-chip customers involved in long-term programmes and partnerships.”

Setback for Helium One Global

Elsewhere on AIM, there was a fresh setback for Helium One Global (LSE:HE1) shares after the results of its maiden exploration campaign in Tanzania failed to identify helium gas.

However, chief executive David Minchin said there was now enough information to enable the company to define a two-track exploration route to develop the Rukwa project to discovery.

The company said it remains well financed and is planning for rapid deployment of phase two exploration activities as it looks to mobilise various geophysical investigations before the start of seasonal rains in November.

Helium One joined the stock market in December after it raised £6 million through an oversubscribed placing with institutions at a price of 2.84p. The stock peaked at 28p this month but is now back at 9p after falling another 3.5p in the wake of today's update.

The project in Tanzania aims to meet demand for “a scarce and irreplaceable commodity” essential for many modern technologies.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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