Buy-one-get-one-free deals may be disappearing from UK supermarket shelves, but on the stock market one GDP resilient, GARP stock still offers two attractive businesses for the price of one: specialist engineering firm Avingtrans (AVG).
 
Today, this £135m nuclear, oil & gas, defence, industrial, and healthcare group posted in line FY23 results, with turnover up 14% on a like-for-like basis to £116.4m, adjusted EBITDA of £13.7m at a maring of 11.8%, and EPS of 23.4p. It also ended the year to May with net cash - excluding IFRS16 leases - of £13.0m, or 40p a share.
 
Better still, despite the macro backdrop, its mission critical safety products and aftermarket services continue to enjoy robust demand, with noteworthy contracts signed with numerous blue chip clients. These include Sellafield for low-level waste storage boxes, TerraPower in the US, Forsmark in Sweden, Magnox in nuclear power, alongside a Rolls Royce defence deal, tunnel blast proof doors for HS2, and energy projects around the world, from the North Sea to China.
 
That meaning Avingtrans has entered FY24 with what it describes as a "healthy order book” providing more than 90% revenue cover. To me, this first class compounder is worth a minimum of 10x EBITDA - £150m, or 465p a share.
 
Elsewhere,  Avingtrans has also developed a high potential medical devices division via a 75% stake in Magnetica and fully-owned Adaptix. Together, they could transform the $3bn small form X-ray and MRI imaging markets by offering crisp 3D, orthopaedic, and veterinary based scans at the point of care, typically for hands, elbows, and feet.
 
There’s plenty left to do, of course. Yet the division's IP-rich technology appears to be state-of-the-art, with Adaptix receiving FDA approval for its first orthopaedic X-ray machine in December 2022 and first sales already secured. That offers a blueprint for Magnetica, which is pursuing a similar commercialisation strategy and is also set to launch in America sometime in FY24, subject to regulatory clearance.
 
How much might this healthcare arm be worth? Given its exciting growth trajectory and attractive unit economics, I would estimate that Adaptic and Magnetic together could ultimately create another £150m+ of value. Combined with Avingtrans' more traditional engineering side, that would hypothetically deliver a sum-of-the-parts valuation of between £9 and £10 a share. Or in other words, a buy-one-get-one-free deal bargain for investors.
 
CEO Steve McQuillan commented: “Despite the global economic environment, our markets continue to develop and M&A opportunities remain a priority. Businesses like ours can command high valuations at the point of exit.”
 
Chairman Roger McDowell added: “We entered FY24 with a healthy order book and we look forward to further progress this year, with macro developments in the energy, infrastructure and medical markets being tilted in our favour”.
 
House broker Singer Capital Markets has a BUY rating and a 510p price target on the stock, with Cavendish targeting a similar 495p.