Techtronic Industries Co. (669), owner of vacuum cleaner brands Hoover and Dirt Devil, rose in Hong Kong trading after saying it has held talks to discuss the possible sale of its floor-care business.
Techtronic rose 2.6 percent to HK$8.60 at the 4 p.m. close in Hong Kong. Shares had earlier surged as much as 7.9 percent, the biggest intraday gain since Nov. 19.
The company has held “very preliminary discussions with a number of potentially interested parties” on selling the business that includes vacuum cleaners and carpet washers, Techtronic said in a filing to Hong Kong’s stock exchange yesterday. The division accounted for 29.5 percent of total sales last year, according to its 2010 annual report.
“The potential disposal is short-term positive to Techtronic on improved financials, but neutral on long-term valuation due to the weaker growth outlook,” Kenny Lau, a Hong Kong-based analyst at Credit Suisse, said in a note to clients. He has a “neutral” rating on the stock.
Techtronic’s executive director, Frank Chi-Chung Chan, declined to comment in an e-mail.
The Wall Street Journal reported July 16 that Hong Kong- based Techtronic is seeking US$900 million for its floor-care business in North America.
Techtronic bought Hoover Co. from Whirlpool in 2007 for $107 million. Hoover and floor-care brands Dirt Devil and Royal are managed by subsidiary TTI Floor Care North America. U.K.- based brand Vax was acquired by Techtronic in 1999, its first venture into the floor-care business.
Its power-equipment business, which sells drills, chain saw, and mowers, contributed 71 percent of Techtronic’s sales last year.
“The company is undervalued,” said Bertram Lai, head of research at CIMB-GK Securities in Hong Kong. “For power tools, we see higher growth and better margins going forward” while the floor-care business is more mature, he said.
The company is trading at a lower price-earnings ratio than its competitor Stanley Black & Decker Inc. even though it has been gaining market share in the power-tool segment, Lai said.
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