Small Cap Round-Up: Sure Things

Sureserve Group (LON:SUR) – Deserving a Much Higher Rating

I like the way that the shares of this gas safety compliance and energy efficiency services group have been gently nudging higher over the last week or so.

Last night they closed up another 3.5p at 91.5p, valuing the business at £152m.

The shares have been down to 83.66p since I commented upon the group and its prospects just a week ago.

At that time, I fixed a new Target Price for the shares to rise to 106p this year, so the last week’s advance is a useful stride forward.

The group will be presenting its full year results on Tuesday 24 January.

Pre-tax profits have risen steadily over the last few years from £8.3m in 2019, then £9.4m in 2020, with adjusted pre-tax profits for the year to end September 2021 reflecting a 24% sales uplift in the Covid year to £244m, producing profits of £13.6m.

In the same three years earnings lifted from 4.4p to 7.1p per share.

The estimates by Shore Capital analyst Alastair Stewart suggest £304m sales lifted profits to £16.4m, worth 8.1p per share in earnings.

The group had an excellent order book of some £585m at the 2022 trading year end, which is very impressive and that is a figure that is sure to rise strongly over the next few years, underlining the group’s profit prospects.

What is more the group is boasting a strong net cash position, £23.2m at end September last.

The soon-to-be announced results will surely be accompanied by a positive outlook statement despite external pressures.

Shore Capital have already pencilled-in estimates for the current year for £319.2m revenues, £18.6m profits and 9.2p per share in earnings.

Based upon the strong cash balance and undrawn facility, upon the massive and improving order book and the current estimates – I see my Target Price of 106p being rapidly achieved, while later in the year market anticipation of improving profits will see an even higher rating.

These shares are headed higher and through the 100p, possibly within the month, if not days.

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

(Profile 06.01.23 @ 85p set a Target Price of 106p)

M Winkworth (LON:WINK) – Valued At £22m, Making £2.5m profits, Holding £5m net cash And Yielding 6.8%

The latest Trading Update from this leading franchisor of real estate agencies suggests that the group may well be reporting better than expected results for the year to end December 2022.

Winkworth is the leading London franchisor of residential real estate agencies with a pre-eminent position in the mid to upper segments of the sales and lettings markets.

The franchise model allows entrepreneurial real estate professionals to provide the highest standards of service under the banner of a long-established brand name and to benefit from the support and promotion offered by Winkworth.

Chief Executive Officer Dominic Agace stated that:

“While the challenges facing the sales market in 2023 have been widely voiced and it will be hard to match the strength of the conditions witnessed in 2022, we are very pleased with our sales results for last year and are less downbeat than the consensus on the outlook for prices in the current one.

Lettings market activity abated towards the end of 2022, but we expect it to be strong again in 2023.”

Analyst Alastair Stewart at the group’s NOMAD and broker Shore Capital has estimates out for last year’s revenues of £9.3m (£9.5m), with adjusted pre-tax profits of £2.5m (£3.2m), easing earnings down to 14.7p (19.5p), while raising dividends up to 11.0p (9.3p) per share.

At this early stage his views are for £9.4m revenues, £2.4m profits, 13.9p earnings but with an increased dividend to 11.8p per share.

I think that Stewart sums the group up well when noting the Winkworth focus upon the family homes market in suburban London and the wider South-East. He considers that the group has a relatively low-risk structure.

We will have to wait until 19 April for the full final figures and statement for the 2022 trading year.

The group has plans to open up a further six offices in 2023, which will add to the bottom line, hopefully, improving over the next year or two.

The shares, at the current 167.5p, value the group at around £22m, of which net cash is around £5m.

Better times will return and reward the longer-term investors.

(Profile 19.07.21 @ 190p set a Target Price of 240p)

(Asterisks * denote that Target Prices have been achieved since Profile publication)