Coral Products (CRU) – Value lying at the bottom of the sea bed

Coral Products (CRU) – Value lying at the bottom of the sea bed

Coral Products (CRU) is a UK-based manufacturer and distributor of plastic injection and molded products for a variety of sectors. This includes personal care and household products, food packaging, healthcare, the automotive industry, telecoms, and rail (latest share price: 10.25p, market cap £8.6 million).

The opportunity 

Its activities are divided among four subsidiaries:  Coral Products (mouldings), Interpack, Tatra Rotalac (plastics innovation), and Global One Pak (an international supplier to many familiar brands).

The company came to my attention on 23 October of this year (2018) with its AGM statement here. Sales, gross margin, EBITDA, and profit before taxation were all materially ahead of the prior six month period and this was followed by no fewer than five Director/PDMR shareholding RNSs. In 2018 alone, there have been fourteen of these RNSs with plenty of PDMRs buying too.

Looking at the Final Results, the company made a loss of £497,000 before taxation. However, underlying profit before taxation was £568,000. Looking at the cash flow statement, £1,212,000 for depreciation can be added back as well as £348,000 for the amortisation of intangible assets. The company is generating a healthy £1,441,000 of operating cash flow before movements in working capital; this is significant as it should mean no discounted placing is required to keep the lights on.

House broker Daniel Stewart has a target of £1.8 million for FY19 PBT. I always assume broker notes are not worth the paper they are written on, but having spoken to CEO Mick Wood he believes the company is fully behind those numbers. This would give the company EPS of around 1.7p putting the forward P/E ratio at 6 given the current share price of 10.25p. With sharp growth anticipated and the new recycling division not included in these numbers (Coral is in advanced talks with several local authorities to take plastic waste from them to recycle), I would argue that this is cheap for the growth anticipated.

Technical Analysis

Coral Products has been well and truly sunk and now lies at the bottom of the sea, close to its all-time lows. However, since the start of 2018, the stock has traded in a range of 9-12p. Selling volume is perhaps starting to thin as volumes have been low and there has been enough buying interest to prevent the stock from falling out of this range. I have a small position for now as I prefer to let the price tell me what to do, and would look for a break of the 200-day moving average. With the results due in December, this could be the catalyst to kick-start the price from the lows and back into an upward trajectory.

(Source: SharePad.)


Coral Products deserves a space on your watchlist simply due to the amount of PDMR buying. Insiders sell for many reasons, but they only ever buy material amounts for one, and I will be watching for any more once the results are announced. Investment and acquisitions within the business are starting to bear fruit and in a market where lofty P/E ratios are looking vulnerable, Coral has the potential to be an excellent value play. The company is not free of debt and has an EV of nearly £16 million but the bank has agreed to waive previous breaches of covenant and with revenue, margin, and profit all expected to grow this can only be a step in the right direction.


At the time of publication, the author has a long position in CRU.



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