CONTENTS
Investment case ........................................................................................... 3
Risks ............................................................................................................ 6
Our central case........................................................................................... 7
The cycle advances – V-shaped recovery in store ....................................................... 8
H1 2009E earnings shocks represent buying opportunities...................................... 9
Balance sheets to remain robust..................................................................................... 9
Further cyclical rallies are forecast ...............................................................................10
Swift adaption to the new climate................................................................................11
Best in class......................................................................................................................12
All-important FX tailwinds ...........................................................................................13
Sales visibility and reliability..........................................................................................16
Revenue shock analysis ..................................................................................................17
Theoretical revenue and earnings shock analysis.......................................................17
Pension issues – the third player ..................................................................................18
Indebtedness...................................................................................................................18
Other performance ratios..............................................................................................19
Valuation ..........................................................................................................................20
P/E and EV/EBITDA ratios.......................................................................................20
Value ratios.......................................................................................................................22
Setting the target price ...................................................................................................22
Share price performance................................................................................................23
Panmure Gordon’s estimates versus consensus.........................................................24
Companies.....................................................................................................
Bodycote ....................................................................................................................26
Charter........................................................................................................................37
Cookson Group ........................................................................................................49
Halma..........................................................................................................................61
IMI ..............................................................................................................................72
Melrose .......................................................................................................................84
Morgan Crucible .......................................................................................................95
Rotork.......................................................................................................................106
Spirax-Sarco Engineering ......................................................................................117
Tomkins....................................................................................................................128
Weir Group..............................................................................................................139