No big deal on the horizon but at 14 times earnings they look like good long-term value is Tempus´s view of industrial turn-around specialist Melrose. That after towards the end of last year the company´s share price was able to regain almost all of what it lost following a profit warning in November. As well, the shares could gain fresh impetus from further good news from Elster, which makes smart meters sold to utilities for fitting in homes, such as if revenues re-accelerate or if the company begins its roll-out across Europe. Likewise, the market could take the view that the shares are still lagging a bit behind and re-rate them.

The transformation of Pace, under the new management team led by Allan Leighton, the chairman, has been truly remarkable. The shares were the second-best performer in the FTSE 350 last year. The news flow of late has been negative however — the company lost the contract to supply the much-delayed YouView TV service and an attempt to take over Google's own set-top box maker Motorola Home late last year. But the other view is that these are positive developments. The YouView contract was of marginal profitability, at best. Pace refused to pay over the odds for Motorola, leaving this to Arris, of the United States. Not only that but, as can be gleaned from the company´s trading statement yesterday, the company´s current cash-flow means that it could be debt free by the end of the year, after which it could either reinvest those funds or return them to investors. The shares sell on about eight times this year's earnings. That still looks like good value, though some might care to take some profits, The Times´s Tempus adds.


AB

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