Shares digital

Powerflute (POWR:AIM) – Finals PTP: €9.8m (€5m) Divi: 2.566p (n/a)

Ten months since floating, the Finnish paper mill owner has battled with wood shortages restraining production and a near 60% fall in share price. It could be further depressed if an acquisition isn’t made by May, as promised at the IPO. Powerflute, which sells semi-chem fluting to make corrugated boxes, says it is ‘on top of funding’ for a purchase, but an execution risk still remains.

While the negatives are fully priced into the stock, the valuation discount is excessive. The current PE of 5.6 is cheap when factoring in the full-year performance. Pre-tax profit nearly doubled. Production is on track to hit the target of 300,000 tonnes by the end of 2009. Higher energy costs have been passed on to customers and a new wood supply secured.

Shares says: Powerflute was set up to acquire. Until it expands, the shares will remain under pressure.

by: Dan Coatsworth