Bonhill Group – This group is on the up

Since March this year we have done well with the shares of a business information and publishing group called Centaur Media (LON:CAU), with its shares up 70% in the intervening period.

And they still look cheap.

However, today I am profiling a much smaller group that I consider has some real price upside to compare – it is the Bonhill Group (LON:BONH).

Size is deceptive

This company is far bigger than its £10.6m current market capitalisation would suggest.

Serving clients in some 25 countries, Bonhill is a leading global media company.

It delivers analysis, insight, networking and data for financial services and business solutions communities.

The company’s focus is upon the high-value, specialist communities with its dedicated brands across: the financial markets in the UK, Europe, Asia and the US; the UK small to medium enterprise communities; the diversity and inclusion sectors; and finally, across the environmental, social and governance sector.

Shaped to its markets

Through its 15 editorial websites, regular print titles and over 130 live and virtual events per annum, the company offers its forward-thinking products while providing high-quality information that helps to lead to both better and informed decisions.

For its commercial partners Bonhill offers sales, marketing, networking and transactional opportunities via their global network of senior executives in the communities they serve.

The group’s magazines act as the authoritative voice for its audiences. Its digital offerings provide breaking news and daily updates while the live and virtual events create networking opportunities and build communities.

The company’s data driven approach allows it to deliver in a tailored and relevant fashion as well as equipping its audiences with the latest industry research.

Revenues are derived by advertising income, event sponsorship, custom solutions, and research services.

Creatively informed

Set up way back in 1991 the Bonhill Group, which employs some 130 people, has a team of content creators, events professionals, product managers and commercial experts with support functions across marketing, finance, technical and human resources, all operating within the spheres of financial services and business solutions.

The business creates content, sales and marketing opportunities, networking events and transactional opportunities for its audiences of entrepreneurs, business owners and managers, chief technology officers, asset and wealth managers, and professional women, in addition to its sponsors, advertising clients and customers.

The group’s flagship brands include Investment News, ESG Clarity, Portfolio Adviser, Fund Selector Asia, What Investment, SmallBusiness.co.uk, GrowthBusiness.co.uk, Women Adviser Summit, Information Age, and DiversityQ.

Good equity split for such a small company

There are some 98.6m shares in issue.

The larger investors include Gresham House Asset Management (14.57%), Schroder Investment Management (12.39%), Downing (11.60%), Anthony Cross and family (9.04%), Herald Investment Management (9.03%), Hargreaves Lansdown, stockbrokers (6.43%), Unicorn Asset Management (3.84%), and the group’s directors with 3.51% of the equity.

Interims pointed the way

In the middle of September, the group declared its interim results to end June. They showed that it had made some significant advances in cutting its losses and that it had instituted cost savings and operational changes across the company.

Now the group operates through just two divisions – Global Financial Services and Business Solutions.

It has also been implementing a load of technology improvements, while a number of site upgrades are continuing.

It is now developing its global offering to address the much bigger US asset management market.

Group revenue at the halfway stage was down 13% at £6.7m, while its gross margin had improved to 78.9% (77.8%), helping to significantly reduce its operating loss from £11.0m in 2020 to just £2.5m.

Group CEO Simon Stilwell, who has recently been adding to his own holdings, stated that “We are confident of achieving revenue growth of approximately 5% and to report EBITDA of approximately £1.2m, excluding any Government support, in 2021. We are cautiously optimistic about H2 and the important fourth quarter and believe the promising start we have made to the year positions us well for future growth.”

Broker’s View

Analyst James Wood at Canaccord Genuity rates the group’s shares as a ‘buy’ and has a price objective of 25p.

Over at the house broker Shore Capital, its analyst Roddy Davidson is also very bullish. He looks for the current year to the end of next month to show revenues up from £17.8m to £18.7m, while adjusted pre-tax profits could come in at £866,000 (loss of £497,00). That would see earnings at 0.9p per share for this year (0.5p loss).

For next year he sees £21.9m of sales and £1.79m of profits, worth 1.4p per share in earnings and capable of paying a 0.3p per share dividend (nil).

My View

This little group has some big ambitions, which I believe will be achieved in due course.

This is a cracking small-cap investment taking a medium-term view, say over the next couple of years.

We will get to know more early in January when the group issues its finals Trading Update.

Just three and a half years ago its shares were up in the 140p price range, I do not consider that is possible again for some years to come, however more than twice the current 10.75p is likely within the next year.

My more conservative short-term Target Price is 14p.