New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Skellerup (SKL)</h2>
Acquisition of Silclear
Skellerup (SKL) has announced the acquisition of Silclear, a UK based silicone company, for ~NZ$7m (GBP3.3m). The deal is expected to be earnings accretive from day one; we estimate a 12-month EBIT contribution of ~NZ$1m (SKL FY20E EBIT 43.5m).
At first glance we view the acquisition positively for the following reasons:
<ul>
<li>Well aligned with existing business: Silclear fits well with SKL’s existing business and offers additional expertise in the silicone space. The focus on the dairy and medical industries means the products are subject to higher regulatory standards (i.e. food grade &amp; medical), which aligns well with SKL’s current strategy.</li>
<li>European exposure with room to grow: We expect SKL to leverage its existing relationships in Europe to grow Silclear. New Zealand and Australia represent relatively mature markets for SKL with Europe highlighted as a key growth area for SKL’s Agri business.</li>
<li>Undemanding valuation: We estimate SKL paid ~5.5x EV/EBIT for Silclear, well below SKL which is trading at 10.9x.</li>
<li>Good track record: SKL has a history of making bolt-on acquisitions with a good track of successfully integrating the businesses. We expect Silclear to be no different. SKL has sufficient balance sheet headroom to continue to pursue additional similar bolt-on acquisitions.</li>
</ul>
Silclear
<ul>
<li>Silclear designs and manufactures cured silicone products for use in the dairy and medical industries. Earnings exposure is largely weighted to dairy products such as milking liners and tubes.</li>
<li>Silclear is UK based with a predominantly Europe based customer set.</li>
<li>SKL has an existing relationship with Silclear, selling some of its products through its Conewango brand into the US.</li>
</ul>
Guy Hooper&nbsp; Analyst, Equities Forsyth Barr Limited
T:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; +64 4 495 5255 TF:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; 0800 367 227 F:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; +64 4 495 8193 P:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; PO Box: 5266, Wellington 6145 W: &nbsp;&nbsp; &nbsp;&nbsp; &nbsp;&nbsp; &nbsp;&nbsp;<a href="https://foundry.smartkarma.com/www.forsythbarr.co.nz" target="_blank" rel="noopener">www.forsythbarr.co.nz</a> Twitter:&nbsp; @forsythbarr

Skellerup (SKL)
Acquisition of Silclear
Skellerup (SKL) has announced the acquisition of Silclear, a UK based silicone company, for ~NZ$7m (GBP3.3m). The deal is expected to be earnings accretive from day one; we estimate a 12-month EBIT contribution of ~NZ$1m (SKL FY20E EBIT 43.5m).
At first glance we view the acquisition positively for the following reasons:

Well aligned with existing business: Silclear fits well with SKL’s existing business and offers additional expertise in the silicone space. The focus on the dairy and medical industries means the products are subject to higher regulatory standards (i.e. food grade &amp; medical), which aligns well with SKL’s current strategy.
European exposure with room to grow: We expect SKL to leverage its existing relationships in Europe to grow Silclear. New Zealand and Australia represent relatively mature markets for SKL with Europe highlighted as a key growth area for SKL’s Agri business.
Undemanding valuation: We estimate SKL paid ~5.5x EV/EBIT for Silclear, well below SKL which is trading at 10.9x.
Good track record: SKL has a history of making bolt-on acquisitions with a good track of successfully integrating the businesses. We expect Silclear to be no different. SKL has sufficient balance sheet headroom to continue to pursue additional similar bolt-on acquisitions.

Silclear

Silclear designs and manufactures cured silicone products for use in the dairy and medical industries. Earnings exposure is largely weighted to dairy products such as milking liners and tubes.
Silclear is UK based with a predominantly Europe based customer set.
SKL has an existing relationship with Silclear, selling some of its products through its Conewango brand into the US.

Guy Hooper&nbsp; Analyst, Equities Forsyth Barr Limited
T:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; +64 4 495 5255 TF:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; 0800 367 227 F:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; +64 4 495 8193 P:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; PO Box: 5266, Wellington 6145 W: &nbsp;&nbsp; &nbsp;&nbsp; &nbsp;&nbsp; &nbsp;&nbsp;www.forsythbarr.co.nz Twitter:&nbsp; @forsythbarr

Skellerup Holdings

Skellerup (SKL): Acquisition of Silclear