Bricks and windows are going cheap – Brickability and Safestyle

Brickability Group (LON:BRCK) – I foresee a 50% share price uplift as further expansion shows through

I really like the way this group has been built up to date and I now expect it to expand a great deal further in the next couple of years.

Yesterday’s Pre-Close Trading Update clearly stated that its results for the year to end March 2022 will come in higher than market hopes.

It is now expecting to report group sales of some £520m and showing an EBITDA of over £38m.

The £301m capitalised group, which is a leading construction materials distributor, supplies bricks, timber, roofing, cladding, heating, doors, flooring and windows.

Operating from some 41 locations across the UK and Europe, it continues to satisfy ongoing demand from contractors and housebuilders.

Despite external pressures the group predicts an underlying long-term demand for higher quality materials from the UK housing and construction sector.

Following the Update, analyst Kevin Cammack, at the group’s brokers Cenkos Securities, now has estimates out for the 2022 year of nearly trebled revenues at £520.0m (£181.1m) and a more than doubled rise in adjusted pre-tax profits of £34.1m (£15.0m).

That should generate 9.6p (5.6p) of earnings and very amply covering a 2.1p (2.0p) dividend per share.

For the current year Cammack goes for £573m sales, £36.9m profits, 9.9p earnings and a 2.3p dividend per share.

Understandably he rates the group’s shares as a ‘buy’ looking for a 136p ‘fair value’ per share.

Its entrepreneurial management is confident that it will be able to continue with its strategic growth, with several potential acquisitions under active consideration.

I am more bullish than Cammack. I see the group’s ‘buy-to-build’ strategy proceeding at a pace between now and the end of next year, with earnings enhancing deals to the fore.

The group’s shares peaked at 114p last September, however I feel that, taking into account its growth prospects, they are significantly undervalued at the current 101p.

I suggest that 150p should be the right market price to reflect this company’s potential, a much better equity value that would be right for such an acquisition vehicle.

(Profile 16.04.20 @ 39p set a Target Price of 55p*)

Safestyle UK (LON:SFE) – massive recovery now underway makes the shares look really cheap

This group has had its hassles over the last year or so, culminating in a Russian cyber-attack in January.

However, it has a very able management that has coped well with the various pressures.

I feel that within the next year we could well see it recover and its shares more than double in the process.

With around a 9% share the company is the market leader in retailing and manufacturing PVCu replacement windows and doors for UK homeowners.

The results for the year to end December 2021, declared yesterday, reported a 26.6% jump in sales to £143.3m (£113.2m) and a swing from losses of £6.2m pre-tax in 2020 to a profit of £6.0m last year. That saw earnings turn around from a 4.3p loss to a positive 3.5p per share.

Impressively the group’s net cash evidenced its strong generation closing the year at £12.1m (£7.6m). That compares with a market capitalisation of only £57.5m.

The company passed on its cost increases to its clients, while also steering its way through its supply chain problems.

At the same time the company has been processing its margin improvements.

It has already got well underway in the current year, with record order books signifying strong demand in its first quarter.

The group’s management is now expected to concentrate upon speeding on the company’s growth and pushing further ahead with its market leading position.

It will be looking to develop further its new business and its organic growth, while also investing into strategic acquisitions.

Analyst Charlie Campbell at Liberum Capital having set a price aim of 75p for the group’s share rates them as a ‘buy’.

He sees a current year increase in sales to £151m, while expecting adjusted pre-tax profits of £4.0m, worth 2.3p per share in earnings. For the coming year he has pencilled in £168m sales, £10.2m profits and 5.5p in earnings per share.

Over at Zeus Capital their analyst Andy Hanson estimates £154.5m of sales this year, £4.7m profits and 2.8p earnings. For 2023 he has an estimate of £167.3m revenues, £10.8m profits, and 6.1p per share in earnings.

Hanson considers that the shares, trading on just seven times 2023 earnings, more than discounts concerns regarding the UK consumer. Noting its strong cash position, it is in a good position to also drive its earnings through acquisitions.

My view is that this group’s shares really do look to be a strong recovery prospect for 2022 and a big profits earner in the coming year.

At last night’s close of just 41p they offer quite a significant upside. Just a year ago they were trading at around the 66.75p level, they are headed back up there again very soon.

(Profile 06.01.21 @ 36.5p set a Target Price of 48p*)

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