Sunday share tips: AB Dynamics, Victorian Plumbing

18th Feb 2024 23:03

(Sharecast News) - The Sunday Times's Lucy Tobin tipped shares of Victorian Plumbing to her readers, arguing that major investments should begin to pay off in coming months.

For example, the company was operating near its maximum sales capacity and its £300m of sales were made "somewhat inefficiently" via outmoded picking from five warehouses.

But a new £26m automated hub that was set to open later in 2024 would see that capacity jump to approximately £600m.

The new hub would also let Victorian sell some of its short and expensive warehouse leases, Tobin pointed out.

The tipster further argued that the company's cash flow was "strong" and noted how it had £46m in cash sitting on its balance sheet.

A new app that was set to be rolled out was also expected to stoke demand for bigger and more profitable orders.

"Splash out on Victorian Plumbing."

The Financial Mail on Sunday's Midas column sounded an upbeat note on the outlook for AB Dynamics.

In its judgement, the company should still "reward long-term investment", as it was still winning customers worldwide and its chief executive officer, James Routh, was a "determined operator".

Nonetheless, with its shares having surged sevenfold over the preceding nine years, the time to book some profits might be now, Midas said.

The vehicle testing company could count even America's National Highway Traffic Safety Administration among its clients.

More importantly, Routh was hoping to more than double the business over the following five years, with AB Dynamics having already grown sales six-fold since 2015.

The increasing complexity of automobiles with the introduction of electric vehicles is expected to benefit the company while the number of tests conducted on each car to ensure is expected to continue rising.

AB Dynamics is also moving into new markets, including the use of robots in mining trucks operating under dangerous conditions.

"Shares in AB Dynamics have risen more than sevenfold in the past nine years and now might be a good time to take some profit," Midas said.

"But, like Synectics, this fast-growing, UK technology firm is winning customers worldwide and Routh is a determined operator. At £17.75, the shares should still reward long-term investment."