Opinions
Gavin Graham
Pall Corp.
PLL-N
BUY ON WEAKNESS
Mar 17, 2014
Stock price when the opinion was issued
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This is in the fluid filtration business, which has been a big growth business. They sell the infrastructure, but make the money on their filters. You have economic sensitivity in this through industry and you have growth through finding new customers. They are very good at what they do.
They make filtration systems. It is a great business because the customer can’t go to anyone else once they start doing business. Being acquired is a good fit. It is a well run company. It will work out in the long run. If you want to get out to move on to something else, then you could do that. He would take the stock you receive.
It is being acquired. An excellent company that got an attractive bid with 10 times 2016 earnings. It has high recurring revenue. The risk reward is not in your favour. This is the highest multiple paid in that industry in a long time. What if the deal gets called off? The risk/reward is not in your favour.
Water filtration systems. Has done very well and is up 50% in the last year, so you are not buying it at a particularly cheap valuation. A lot of the good news is in the price. It is 30X PE. However, it is a well-run company and this is one of those big demographic plays, because people need fresh, drinkable, safe water in the emerging markets. Also, we in the developed markets need to replace some of our early 20th-mid-20th century infrastructure. Wait for a bit of a pull back.