MIDAS SHARE TIPS UPDATE: Enthusiastic fans boost shares of electronics designer Stadium Group
When a company issues new shares at a discount to the prevailing price, the existing shares invariably fall to that discounted price or even lower.
Last Tuesday, however, when electronics design firm Stadium Group issued more than five million new shares at 110p to fund an acquisition, the stock rose, ending the week at 133½p.
The reaction underlined stock market enthusiasm for chief executive Charlie Peppiatt’s strategy. It is also excellent news for investors who bought Stadium shares in March 2011, when Midas tipped them at 65½p.
Electronics designer: Stadium specialises in power products, such as components for MRI scanners
The group has been through tough times since then and the stock sank to just 35p in 2012. But Stadium has fought back. Having focused on making electronics equipment for other companies, it has shifted increasingly into designing kit from scratch and concentrating on a few chosen sectors – medical, security, transport and energy saving.
Stadium specialises in power products, such as components for MRI scanners, wireless technology for devices such as black boxes in cars, and touch screens, including the entertainment screens on the latest Airbus.
Peppiatt joined in 2011 from FTSE 250 electronics business Laird. Initially in charge of operations, he became chief executive in June 2013. At the time, the shares were at their low point, but they have since almost quadrupled in value.
Last week’s issue raised £6 million to fund the purchase of Stontronics, a power firm that should significantly expand Stadium’s customer base.
Brokers expect a 48 per cent increase in profits to £4million for 2015, rising to £6 million in 2016. The dividend is also forecast to rise 29 per cent to 2.7p for the current year and to 3p in 2016.
Midas verdict: The electronics sector is vast, but Peppiatt has wisely chosen to focus on a few niche areas. The stock has had a hard time and investors may wish to hedge their bets and sell 30 per cent. But they should keep the rest.
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