Nuts And Bolts Investing

By David Holding | 15 May 2008

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Trifast (LSE: TRI) is never going to set the word alight, but it may well prove a steady investment for long term value and income seekers.

A glance at the "Products" section of the company's website is enough to send most of us to sleep ..."stock and distribute a vast range of industrial fasteners and associated components. Our factories in Europe and Asia produce bar turned and cold formed fasteners from 0.6mm diameter up to 12mm diameter, specifically to customer drawing. In addition, our global network of approved sub-contractors allow us to offer practically any size of turned, cold-formed, pressed or moulded component".

As one might expect, the share price graph doesn't look too pretty given the world's financial woes in recent times. The shares peaked at 87.75p last summer but now stand at 56.5p valuing the company at a shade over £48m. And Trifast confirmed that it was finding life harder with its interim results for the six months to September 2007.

What's the attraction?

So what's the attraction?

Well the good news was that the company was battling along, delivering results in line with expectations of an underlying pre-tax profit of £4.75m on revenues of over £62m.

Then a trading statement last month said that results for the year to March would be broadly in line with the previous year. In other words pre-tax profit would be around £8.8m. Even better, the operating margin would rise from 7.4% to 8%.

This suggests that the underlying performance remains positive despite conditions conspiring against Trifast. Meanwhile, the company has a net asset value of over £50m (higher than its £48m market cap) and net tangible assets of around £27m. So it certainly isn't disappearing any time soon.

A lot will depend on the outlook statement that accompanies next month's final results. So far, the company has successfully weathered the storm, but hasn't been rewarded for that performance in terms of its valuation.

If the brokers' consensus forecasts are correct for the current year, Trifast is on a price-to-earnings ratio of a little over 7.5; lower than its peers. And bear in mind that it operates in a market worth £24 billion a year and which is predicted to grow to £27.5 billion by 2010.

On the presumption that the final dividend is maintained at the same level as last year of 1.66p, this brings the overall yield to a healthy 4.58% which offers good consolation for patient investors waiting for a recovery in fortunes. Unfortunately, though, there has been no Director buying of the shares - which are mainly held by institutions - that would have demonstrated confidence before the close period.   

I'll be looking out for Trifast's full-year results which are due on Wednesday, June 18^th.

David holds shares in Trifast.

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