Mark Watson-Mitchell’s Monday Round-Up

McColl’s Retail Group (LON:MCLS) – ‘shambled egg on my face’

What a total shambles. That was my reaction to this group’s announcements and funding last week.

I was severely disappointed in the way that it was suddenly dropped upon the market, the way the profits warning was snuck out and the massive discount to the previous market price at which it was deemed necessary to raise £30m.

The lack of corporate control on the prior information proved disastrous for the convenience stores group’s shareholders.

Although I tip my hat to Sky News for acquiring the ‘inside information’, I do believe that the matter was handled badly in a way that disadvantaged investors.

It has left me with a certain amount of ‘egg on my face’ after I profiled the company just three months ago. At that time, the share price was some 47% higher than Friday night’s closing price of 21p.

It feels as though we just have to sit back and watch closely as the massive flood of new stock gets digested and eventually settles down.

(Profile 26.04.21 @ 32.5p set a Target Price of 41p)

Accrol Group Holdings (LON:ACRL) – cleaning up?

Did you know that sales of lavatory paper were up 18% last year and hit a record high of £1.3bn?

Do you remember that supermarket shelves at the start of the pandemic were wiped clear of loo rolls?

The Office of National Statistics informs us that over 855,000 tons of paper went into the manufacture.

Let us hope that the recent strong rise in paper pulp prices has been passed on as efficiently as possible by Accrol, which is one of the UK’s leading tissue converter and supplier of toilet tissues, kitchen rolls, facial tissues and wet wipes.

The UK retail tissue market, taking the various products into account, is worth over £2.1bn – of which Accrol claims to have a 16% market share.

It will be interesting to see how the current year is progressing for the group, which in the year to end April recorded sales £1.8m higher at £136.6m, while adjusted pre-tax profits were significantly better at £9.1m (£4.8m).

Analysts Mike Allen and Rachel Birkett at brokers Zeus Capital estimate £185m sales in the current year and £17.5m in profits. This would generate 4.3p in earnings per share and cover 1.1p dividend.

We should be getting an Update before the group’s AGM in October.

In the meantime, the group’s shares, which touched 75p in late April this year before going as low as 39.6p a month ago, are now idling at around the 50p level.

The shares may well dip again. I would then imagine cheap buyers could be out bottom fishing and we shall just have to hold on for a while.

(Profile 12.03.19 @ 22p did not set a Target Price)

Braemar Shipping Services (LON:BMS) – raising the ‘plimsoll line’ at 444p

Andi Case, the boss at Clarkson, amid surging container costs, put up a strong defence against suggestions that freight companies have recently been artificially pushing up prices.

Clarkson is one of the country’s biggest shipbroking companies and a peer to Braemar who will be holding their AGM on Thursday of next week.

I am looking forward to a positive Chairman’s Statement from the group, which has four main operating divisions – shipbroking, financial, engineering and logistics.

I believe that the group’s shares, currently trading at around the 276.5p level, are undervalued.

Analysts Guy Hewett and Michael Clifton at finnCap are estimating that the current year’s revenues will be some £122.4m, with adjusted pre-tax profits of £11.3m, earnings per share of 24.1p and a 5.7p dividend.

Considering that the BMS shares are trading at a 30% discount to the Clarkson valuation, it is perhaps not too surprising that the brokers recently upped their price objective from 281p to 444p – which offer tremendous upside prospects.

Top-up while you can.

(Profile 05.12.19 @ 185p set a Target Price of 250p*)

(Profile 20.05.20 @ 99p set a Target Price of 150p*)

Restore (LON:RST) – into ‘drifting mode’

Following having fought off the Marlowe bid approach at 530p, the board of this document management and relocation services group has seen the market maintain the higher level of 505p for the company’s shares.

That is actually quite impressive because they were trading at around 390p prior to the bid approach.

The maintained level is a testament to the support of seven institutional investors who control over a third of the equity and declared that they would reject such an offer.

The group, even during the approach hassles, has been busy expanding its business through acquisition.

We may not get any financial corporate news out before the group’s Capital Market Day in November.

Until then, it would be reasonable to expect the shares to drift.

(Profile 16.09.20 @ 335p set a Target Price of 420p*)

Avon Protection (LON:AVON) – needed help

Oh wow – that was a bad hit on Friday.

The gas mask and armour manufacturer hit the market for six when it cut its revenue guidance and warned that it would have both supply chain and delayed order issues.

Its shares collapsed horrifically, with the price dropping by some 28% to close 818p down on the day at 2,132p.

Brokers’ pre-tax profit estimates were slashed by 40%.

The way that I look at this is that the group is extremely well managed and will cope with its hassles professionally on both sides of the Atlantic. Its problems will prove to be temporary and it will maintain its excellent client relationships and order books.

Avon is a class company and short-term problems will be coped with – despite them lingering over into 2022.

I would suggest that its shares are worth nibbling away at over the next few months.

(Profile 03.10.19 @ 1,700p set a Target Price of 2,000p*)

Wilmington (LON:WIL) – whipping into shape

This group is all about governance, risk and compliance.

For those who are needing to know more about those markets, then Wilmington is the company to go to for the provision of data, information, education and training services.

In its year end Trading Update just under a month ago, its management declared that its revenues, adjusted pre-tax profits and net debt balance figures were better than expectations.

Its finals will be published in the fourth week of September.

The group, which employs around 1,000 people and sells into around 120 countries across the globe, ended its Covid-19 year in quite good shape after having undergone a restructuring of its organisation.

It is now split into just two main divisions: information and data; and education and training.

Iain Daly, analyst at Radnor Capital Partners, has estimated that the last year’s revenues will have been steady at £113.1m, while its profits could have improved from £11.9m to £14.8m and earnings of 13.2p more than double covering a 5.6p dividend per share.

Already for the current year, to end June 2022, he sees £119.3m of sales, £16.6m of profits, 14.8p earnings and a 6.2p per share dividend.

The group’s shares were down to 116p in March last year, since when they have crept gradually higher, closing on Friday night at 213p, just 11p below their recent peak.

They could easily attempt to climb higher than the 275p they reached in November 2016. What a lot has happened to the world, the market and to the company since then!

I see the shares continuing their ascent on or before the finals in a month’s time.

(Profile 22.06.20 @ 143p set a Target Price of 175p*)

(Asterisks * denote Target Prices have been achieved subsequent to Profile publication)