MIDAS SHARE TIPS: Shares fly as new boss lights fire under cigarette filter firm Essentra

By Joanne Hart for The Mail on Sunday

Updated: 06:43 EDT, 28 September 2014

Essentra is a company on the move. Once called Filtrona, it has changed its name, strategy and product range since chief executive Colin Day arrived three years ago.

The firm makes a range of components, from cigarette filters to plastic pipe protectors for the oil industry, and has gone from being the 300th-largest firm on the stock market in 2011 to the 150th today.

Meanwhile, the shares have more than doubled to 8011⁄2p. Day is set on reaching the 120th position over the next few years. That would imply a share price of more than £10 – and there is every chance that Day can do it.

Products: Essentra is one of the world's biggest makers of cigarette filters and has moved into e-cigarettes

Formerly the finance director of household goods giant Reckitt Benckiser, Day has turned Essentra from a firm with little or no growth into one with annual sales increases of about 8 per cent.Over the next five years, he intends to increase revenues by 6 to 7 per cent a year while cutting costs.

Brokers expect profits to rise by just over 10 per cent this year to £132million and 15 per cent in 2015 to almost £152million. The dividend is forecast to increase by 15 per cent to 17.7p this year and 15 per cent in 2015.

Essentra is one of the world’s biggest makers of cigarette filters, but the division has moved from zero to double-digit growth as it has expanded into Asia and moved into e-cigarettes.

At the same time, Day developed Essentra’s other divisions. The biggest sells plastic protectors, used in areas from office furniture to car engines to oil and gas pipes. This division is growing steadily, boosted by the US shale industry.

Essentra also makes foam and plastic parts used for products such as air fresheners. The plan is to expand this division into the oil and gas industry, providing oil filtration items, for example.

The fourth division focuses on secure packaging, tapes and labels for products including ID cards and drug packets. The group is growing by acquisition as well and only last week completed its 13th deal since 2011.

Midas verdict: Essentra delivers a trading statement on October 13 and holds a day for big investors in November. The shares should respond positively to both. Buy now and hold.