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Stock of the week: GKN

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Ian Forrest, investment research analyst at The Share Centre, explains why the global engineering group GKN is his share of the week.

Bid speculation has resurfaced for GKN as foreign firms are rumoured to be eying up the FTSE 100 company. The plunge in the pound and the renewed confidence in the UK economy appear to have laid way for overseas companies wanting to takeover top British assets.

The interim results in July broadly showed a continuation of the trends seen in 2015 with growth in the aerospace and automotive divisions offset by a further drop in sales at the agricultural equipment business. Overall sales rose 17% to £4.5bn with pre-tax profit up 12% to £344m. Investors will also be interested as the interim dividend was lifted 2%.

GKN continues to see demand in the Driveline and Powder Metallurgy divisions for their fuel efficiency and reduced emission products. Interested investors should also acknowledge that the strong commercial order book for the Aerospace division and global light vehicle production are predicted to provide growth.

We continue to recommend a ‘Buy’ on GKN because it is well-managed, has a diverse mix of businesses, a good geographical spread and a well-covered dividend growing above inflation.”

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