Small-cap round-up: featuring Medica, Smiths News, Sureserve and more…

In this weekly summary, Mark Watson-Mitchell updates his readers on previous company profiles and other news of interest from the exciting world of small cap stocks…

Medica Group (LON:MGP) – a very clever bit of Irish?

The UK market leader in providing teleradiology services announced a very shrewd acquisition on Wednesday.

It is paying an initial £14.5m to acquire Global Diagnostics Ireland, which is the teleradiology services market leader in Ireland. It is a debt-free acquisition that will be immediately earnings enhancing – just the right type of deal to do in these markets.

On Tuesday the group’s shares had fallen back to 98p. However, on the next day the news was good enough to jack them up 9% to 107p.

The deal, which has tremendous rationale, expands the group’s service offering into ophthalmology. It will now have a 50% market share in the provision of diabetic retinopathy screening services on behalf of the Irish Health Service.

It was good to see that both the CEO and the CFO directors bought more shares in the group after the deal announcement, paying up to 109.5p for their additional shares.

The shares close the week at around 108p. They will be going a lot higher yet if Gresham House Strategic has its way.

(Profile 07.01.20 @155p set a Target Price of 215p)

(Profile 29.10.20 @ 106p set a Target Price of 138p)

Smiths News (LON:SNWS) – Connect Group changes its name

Following the disposal of The Big Green Parcel Holding Company, which included Tuffnells Parcels Express earlier this year, the Connect Group made the strategic decision to provide clarity on its future direction.

Looking to deliver value to the group’s investors, it will now concentrate on its core news and magazine business, and accordingly it is changing its name to Smiths News.

With a 55% market share, the group is the UK’s largest newspaper and magazine wholesaling business. It also owns Dawson Media Direct, which supplies newspapers, magazines and inflight information technology to airlines and travel points in the UK and worldwide.

The group’s finals to 29 August will be announced within days.

Its shares at 25.9p look good value on hopes of a positive statement.

(Profile 24.07.20 @ 20.25p set a Target Price 27p*)

Sureserve Group (LON:SUR) – Slater adds to its holdings

That man Holt never stops.

Bob Holt, chairman of this compliance and energy services group, a month ago announced a bullish post-year-end trading update, declaring continued strong performance by the business and an encouraging forward visibility.

Well, now he has managed to help a long-term holder of his equity to dispose of a holding, while welcoming the further purchases of Sureserve equity by Slater Investments, who have taken their holding in the group up from 10.19% to 12.12%, then up to 15.0% within the last week.

The group’s finals to end-September should be announced in just over two months.

Its shares, which have been up to 57p in the last few months, close the week at just 47p – I sense that they are going higher in 2021. I still have 70p in my mind.

(Profile 14.01.20 @ 36p set a Target Price of 50p*)

Accrol Group (LON:ACRL) – rolling up?

You do not need me to tell you just how popular toilet rolls are currently.

And this group, which is one of the UK’s leading tissue converters is big in loo rolls. Furthermore, as of this week it can ‘wipe’ even more of its marketplace.

It is buying the Leicester Tissue Company for £41.8m, in an immediately earnings enhancing acquisition. LTC is an excellent fit, also being a tissue converter, supplying private label and branded toilet roll and kitchen towel to its UK customers.

This deal takes Accrol’s share of the £1.7bn UK market up to about 16%.

The group’s shares hit 58.5p early in September but had eased back to 44p prior to Wednesday’s news of the expansion.

They close the week at 51p and look very capable of edging up to the mid 60p range.

(Profile 12.03.19 @ 22p but set no Target Price)

Chemring Group (LON:CHG) – new orders and bullish expectations

Sensors & information and countermeasures & energetics – those are the two strategic product segments of this high technology products group.

It is a supplier of those products and services to the aerospace, defence and security markets.

At the same time as announcing, earlier this week, that it had picked up a £25.8m naval countermeasures contract, as well as a £5.5m air countermeasures contract, the group stated that its year to end-October had closed robustly.

At the same time as announcing, earlier this week, that it had picked up a £25.8m naval countermeasures contract, as well as a £5.5m air countermeasures contract, the group stated that its year to end-October had closed robustly.

The finals, which are due on 15 December, are likely to be at the top end of market expectations. Its closing order book at £476m, compared to £449m last year, gives confidence and visibility. Even net debt has been reduced from £75.7m to £48m at the year end.

I remain a big fan of this group and rate its shares at 266p, after 285p on Thursday of last week, as a good hold going into 2021.

(Profile 20.06.19 @ 177p set a Target Price of 300p)

Premier Foods (LON:PFD) – a good slice or two?

Well that is all it needed to break it above my price objective again.

Wednesday’s statement that the sales process of its 49% interest in Hovis Holdings was still on the cards just helped this food and bakery group to see its share price up nearly 6% to close at 104p.

That took them over my target price of 101p. It felt that it was a long time coming, but in fact it was a good performance since having been highlighted just over four months ago.

They are now around 103.4p. Hold tight.

(Profile 29.06.20 @ 67.5p set a Target Price of 101p*)

N Brown Group (LON:BWNG) – interims and a £100m Open Offer

Thursday’s half time results announcement was accompanied by a £100m pre-emptive equity raise of £100m at 57p a share, backed by the group’s substantial shareholder David Alliance.

Lord Alliance, the Liberal Democrat politician of Iranian origin, is said to be worth over £3bn and can easily afford to take up all the issue if no-one else does.

However, I am convinced that this clothing and footwear digital retailer is getting things right and is ready to see sales and profits grow strongly over the next few years.

It appears that over 90% of the group’s revenues are derived digitally and now that the group’s unsecured net debt is being repaid the group’s strategy will be heavily actioned going forward.

The shares fell from 60p on Wednesday night to as low as 52p subsequent to the fund raising and interims news. That fall looks overdone to me and I expect that they will recover very soon from their closing level at 56p.

(Profile 06.07.20 @ 36.15p set a Target Price of 50p*)

D4t4 Solutions (LON:D4T4) – yet more contract wins

The data solutions provider has picked up four new contracts, worth another £5.5m in current year revenue.

This group’s pipeline of new business possibilities with new and current clients gives some strength to its H2 earnings ability.

Peter Kear, the group’s CEO, stated that “We are in a good position and remain confident about our prospects for the full year with clear visibility on both existing and new business, plus the high level of recurring revenue to be recognised during the second half.”

There they are again – the magic words – ‘recurring revenue’ – I just love those words and so too does any CEO and CFO – ARR just helps the business grow.

I look forward to the company announcing its interim results to end-September in a few weeks.

In the meantime, the shares which are moving ahead again, now at 214p, could well be heading back up to and over the 242p peak they touched during the summer.

(Profile 09.04.20 @ 170p set a Target Price of 215p*)

DWF Group (LON:DWF) – positive H1 Trading Update

The first-half trading update from this global legal group was declared yesterday and the market’s reaction was very positive.

It appears that in the six months to end-October the group performed very well despite the Covid-19 hassles. Revenues were up 14% while the adjusted pre-tax profits will show through slightly weaker, down £1m at £13m.

The group’s management is cautiously optimistic about its full-year outlook, especially because it is more than capable of handling lockdowns through remote working.

House broker Zeus Capital is now estimating £339m revenues for the year to end-April 2021, with profits of £27.3m, earnings of 6.7p and a dividend of 4.7p per share.

Next year Zeus goes for £352m revenues, £33.9m profits, 8.4p of earnings and 5.9p of dividend per share.

Stretching further ahead their estimates are for £364m, £38m, 9.4p and 6.6p respectively.

In my book, that makes the shares at 85.8p, up 6.5% on the day, look very appealing, my price objective is not too far away now.

The interim results are due to be announced on 10 December.

(Profile 01.06.20 @ 67p set a Target Price of 100p)