Fenner - 61.75p

The conveyor belting and advanced engineering products group Fenner has seen its share price collapse over the last three months despite producing excellent results for the year to August 31. The group entered the new financial year with healthy order books in the conveyor or belting business whilst, despite the temporary set back from Hurricane Ike, the advanced engineered products business started with similar sales to last year.

A number of directors have bought shares in the company since its results, many at higher prices than the current level which we believe adds weight to our recommendation.

The group operates through two divisions. Conveyor Belting is recognised as the world leader in the global conveyor belting market. This division accounts for 67per cent of sales and 53per cent of operating profit. Advanced Engineering Products accounts for 33per cent of sales and 47per cent of operating profit and is divided into five product group based businesses.

Over the last few years, Fenner has expanded both organically and through acquisitions which has seen both divisions expand. In the latest financial year, group revenue rose by 15per cent to £437.8m (2007: £380.8m), pre-tax profits rose by 21.5per cent to £41.8m (2007: £34.4m) whilst earnings per share were 15.9per cent higher at 17.5p (2007: 15.1p).

Net debt also rose to £97.6m (2007: £36.3m) although this will have risen subsequently due to the acquisition of Conveyor Services Corporation in the US.

The niche nature of the group’s businesses and the diversity of its markets should offer some protection from the global financial crisis and, despite the reduction in commodity prices, energy markets remain buoyant, with the outlook for coal being particularly positive. The share price has collapsed from over 200p in September and this has provided an outstanding buying opportunity.

WARNING: Opinions expressed are the writer’s judgments at the time of writing. The information does not constitute a personal recommendation and readers should seek their own professional advice as to the suitability of the investments.