Pacifica sheds baggage
Recommendation
The newly crowned MD, John McKenzie, is thinking along the same lines. Brought into the limelight on 2 July, McKenzie decided after an internal review to sell the 51% owned Viscount Plastics to 49% UK partner Linpac for $44.5m, a profit of $3.4m no less.
This smart move was greeted with cheers and jubilation. The share price rose by almost 7% in the days following the announcement but retreated after the half-year results were released at the end of July.
Profit fall
The profit fall of 11% to $16.3m may not have impressed the market but we think Pacifica is shaping up nicely and have upgraded our recommendation accordingly.
Here's why. As we saw with Mayne Nickless, a new appointment doing the right things is often a trigger for a re-rating. If the new MD can ditch the construction division - there is no point peeling a banana and not eating it after all - this could well be on the cards.
Pacifica also manufactures a world-class product in a market where the most popular form of public transport is car-pooling.
Although a slowing US market would present some problems, we can't see Americans falling out of love with their fender benders. This is a country where Congress has just approved oil exploration in Alaskan nature reserves. Bad news for caribou, great for Pacifica.
The share price has some downside risk should the economy slow but the business is sound and well managed. We're upgrading to LONG TERM BUY.