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Royal Ten Cate, Materials That Make Difference

Nowadays it is also possible for international (American) investors to buy shares on NYSE Euronext Amsterdam. One midcap stock that is interesting for investors that want to diversify their international portfolios is a company called Royal Ten Cate (ISIN NL0000375749, Ticker KTC NA). It has a market capitalization of almost EUR 600 mln and trades around EUR 23.

The TenCate share is listed on NYSE Euronext Amsterdam and has formed part of the AMX (midcap) index since 2008. The share is followed by around ten analysts from leading Dutch banks and securities houses.

Ten Cate is an industrial company active in the production of technical textiles and engineering components. The company is divided into three sectors: Advanced Textiles & Composites, Geosynthetics & Grass and Technical Components. Above these sectors is the Holding. Each sector consists of commercial divisions. See organogram

One of the key products from the Sector Textiles & Composites that is supplied by their division TenCate Protective Fabrics USA is TenCate Defender™ M  Since 2007, TenCate Defender™ M fabrics have repeatedly been chosen by the U.S. Army and U.S. Marine Corps for ground troops in the Flame Resistant Army Combat Uniform (FR-ACU) and Marine Corp’s Flame Resistant Organizational Gear (OTC:FROG) programs. TenCate Defender™ M fabrics are made from a unique fiber blend that includes Lenzing FR® Rayon. As the leader in inherently Flame Resistant materials, TenCate Protective Fabrics also provides fabrics used in other American programs such as Inclement Weather Combat Shirt (IWCS), Army Aircrew Combat Uniforms (A2CU), Improved Combat Vehicle Coveralls (ICVC), Navy Shipboard Jackets, Army Flash Hoods and several others. TenCate Defender™ M is also delivered to the Norwegian Navy and to the Soldier of the Future program of the Italian Army.

Ten Cate published very strong H1 results, with sales increasing by 30% (of which 27% autonomously) to EUR 592.4 mln. EBITA increased by 47% (organic growth 60%, currency impact -11%, divestments -2%) to EUR 56.1 mln and net profit came it at EUR 33.1 mln, 69% higher. Earnings Per Share EUR 1.30 (H1 2010: EUR 0.78).

The strongest sales and profit increase was recorded at Advanded Textiles and Composites TenCate Defender M products and Tecasafe Plus products were important drivers. At the Geosynthetic & Grass sector, an solid increase in sales was recorded, but profits dropped by 26%. This was partly due to raw materials increases at Geosynthetics and a restructuring process in the synthetic turf market.

The company maintains  its positive outlook for this year, stating that it expects record revenues for the full year.

Royal Ten Cate has strong positions in very attractive growth markets, leading to a solid growth path, also in the longer term. At a P/E multiple below 10, the shares look attractive. The recent share price of EUR 23.61 offers an opportunity for investors that are looking for a company with innovative products and strong market positions. With an EPS of EUR 2.62 (2011) and EPS of EUR 2.88 (2012) I believe the share should trade around EUR 30. Dividend yield is 3.8%.   

More information you can find on their website:

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.