Monday Morning Round-up

Norcros – another inexpensive products supplier

Last Thursday’s announcement by this bathroom and kitchen products group covered its interim results to end September.

They were very impressive and identify the group’s shares as being cheap.

On a 48% rise in group sales to £200.9m it reported an underlying pre-tax profit of £20.9m, an increase of 95%. Even earnings advanced significantly, almost 89% better at 20p per share.

Apparently, the boost came from increased activity in both the UK and the South African ‘repair, maintenance and improvement’ markets.

This group’s brands are well including Johnson Tiles, Croydex adhesives, Triton showers, Vado taps and mixers, and Merlyn shower enclosures and trays.

Like industry generally it has suffered cost, energy and supply chain challenges.

“Notwithstanding these factors and based on the excellent first half performance and the group’s revenue momentum, the Board remains confident our proven business model and leading customer proposition will lead to further progress, in line with its expectations, for the year to 31 March 2022.”

Estimates are for the year to end March 2022 that the group will increase sales to £380m (£324m), with profits rising from £29m to well over £34m. That should see earnings coming in at over 33p (29p) and more than treble covering a 9p dividend (8.2p) per share.

They peaked at 351p a month ago, so with its shares now trading at only 315p, I would suggest that there is at least another 85p to go for in the price.

(Profile 20.08.19 @ 214p set a Target Price of 321p)

Smiths News (LON:SNWS) – ‘stop now and buy some’

Capitalised at just £96m, making over £30m pre-tax profits annually, with its shares trading on just four times earnings and yielding almost 6% per annum – this group is massively undervalued.

Points against centre around the slow demise of the printed word in the newspaper distribution sector.

This group has a lot more operating efficiencies to put in place which will jack up a greater return from its £1bn plus yearly revenue – that will drop smartly to the bottom line and increase both earnings and cash generation to help to rapidly reduce overall group debt.

In due course I see the company making greater dividend payments, while the possibility of some capital distribution payments is high as the company progresses upon its corporate regeneration policy.

I still consider that the market will reassess the investment appeal of this company’s shares – if it doesn’t then I would not be at all surprised to see a number of active capital sector players taking positions in the equity.

Analyst estimates put out valuation prices of between 70p and 80p a share, compared to the current 39p.

(Profile 24.07.20 @ 20.25p set a Target Price of 27p)
(Profile 24.06.21 @ 39.5p set a Target Price of 50p)

Revolution Bars Group (LON:RBG) – a while to wait for ‘ole, ole, ole’ but…

Tomorrow morning this premium bars operator will be declaring its results for the year to 3 July this year.

On a collapsed revenue of just £39m against £110m previously it will have seen pre-tax losses increase from £10m to £24m for the year.

With some 67 bars in its estate, it is obvious why the last trading year was so awful.

However tomorrow should see an up-to-date comment on the current trading year’s first four months activity, together with its aspirations for the balance of the year.

On an estimated increased revenue of around £140m, it should report around a break even in profit terms to the end of June 2022.

Jumping ahead could seek a £160m revenue produce around £3m in pre-tax profits, worth 1p per share in earnings.
Analyst Douglas Jack at Peel Hunt has a ‘buy’ out on the shares looking for 35p, as he is guessing that its number of bars will grow another 20% over the next three years.

These shares, at 25.5p, are not cheap and take a lot of recovery for granted in their price, however I still feel that my price objective, fixed in the middle of last month, is very attainable.

(Profile 13.10.21 @ 24.25p set a Target Price of 31p)

(Asterisks * denote that the Target Prices have been achieved subsequent to profile publication)