Mid-week Small-Cap Round Up Featuring Sureserve, UP Global Sourcing and Vertu Motors

Sureserve Group (LON:SUR) – not to be underestimated

The Guinness Partnership, a large national provider of social housing that owns and manages more than 65,000 homes throughout England, has been a long-standing client for this compliance and energy services provider.

Earlier this week the group announced an extension of their gas servicing, repair and installation contract with Guinness, which is expected to generate a revenue of £140m over the next ten years.

This excellent news took the group’s shares briefly up to 100.49p before they eased back to the current 95.5p.

Analyst Alastair Stewart at Shore Capital, brokers to the company, is looking for the year to end September to see revenues up from £195.7m to £243.1m, while adjusted pre-tax profits could rise from £9.4m to £12.9m, with earnings increasing from 4.9p to 6.6p, covering a 1.5p dividend per share (1.0p).

For next year he estimates £264m revenues, £15.4m profits, 7.8p earnings and a well-covered 2.0p dividend.

He rates the shares as having compelling value to the growth and earnings quality.

There should be a post-year end Trading Update announced in early October

This stock, which has been a cracking performer since the beginning of last year, should not be underestimated.

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

UP Global Sourcing Holdings (LON:UPGS) – market-beating profits

The year to end July, for this consumer goods brands group, could be showing a near 18% advance in revenues to £136.4m, with underlying pre-tax profits up nearly 37% at £11.2m, which is better than the market was expecting.

The group is an owner, manager, designer and developer of a number of well-known home brands.

It has six product categories: Audio; Heating and Cooling, Housewares, Laundry, Luggage and Small Domestic Appliances.

Its brands include Beldray (laundry, floor care, heating and cooling), Intempo (audio), Salter (kitchenware and scales), Constellation (luggage), and Progress (cookware and bakeware).

The Oldham-based group, which also has showrooms and offices in Cologne, Germany and in Guangzhou in China, sells to over 300 retailers across 37 countries.

Its products are sold to national and international multi-channel retailers as well as smaller national retail chains.

The group’s best-sellers include frying pans, mugs and speakers, selling one million of each product every year.

Shore Capital’s analysts Clive Black and Darren Shirley estimate that the current year will see revenues rise to £162m and make almost £16m pre-tax profits, worth 13.8p in earnings and covering a 6.9p dividend per share.

The shares, having touched 238p, closed last night at around 225.5p.

They remain a strong hold ahead of their finals being declared on 2 November.

(Profile 13.07.20 @ 74.8p set a Target Price of 100p*)

Vertu Motors (LON:VTU) – brokers go for 80p-90p a share

With the staggering amount of money that the likes of Cinch, Cazoo, WeBuyAnyCar, Motorway, CarWow and Spoticar spend on television advertising, it is surprising that any other companies in the motors market can do any business at all. Despite this, Vertu actually upped its profits guidance for the current year last Friday.

The group, which is the fifth largest automotive retailer in the UK, operates from 116 locations, and has a network of 155 sales outlets (151 franchised sales outlets and four non-franchised sales) across the country.

Its dealerships operate predominantly under the Bristol Street Motors, Vertu and Macklin Motors brand names.

Like SigmaRoc, it is an excellent example of what ‘buy-to-build’ groups can achieve.

Its acquisition strategy, together with a focused organic growth strategy, has built up an enviable national dealership network.

After considering its trading in the six-month period to 31 August, the group has upped its estimate for the full year pre-tax profit, from the £40m to £45m range, to now expecting between £50m to £55m for the year.

Used cars really have been the driver – such that analyst Sanjay Vidyarthi at Liberum Capital has a 90p price objective on his ‘buy’ note on the group, while Zeus Capital has an intrinsic value on the shares at 80p.

After touching 53.6p the shares closed last night at 52.5p.

(Profile 12.10.20 @ 30.5p set a Target Price of 40p*)

Renold (LON:RNO) – untangling itself beneficially

Order intake of £79.7m during the first four months of the current year at the industrial chains and related power transmission products group was a staggering 61.3%. higher than during the comparative period.

Apparently, the momentum experienced in the final few months of the group’s last trading year has continued strongly into this year to end March 2022.

The group in its AGM Trading Update, issued on Monday, it stated that “Despite uncertainty caused by considerable raw material and transport cost inflation and continuing supply chain disruption, the Board now expects adjusted operating profit for both the first half and full year of FY22 to be higher than both market expectations and the equivalent prior year period.”

Well, that news created an excellent fillip for the shares, rising from 19p to the current 24.75p. There was a magnificent 1.87m shares traded yesterday, almost four times the daily average volume.

However, they are still a long way off my aim – even so I reckon that an early punt could well see them through the 30p level fairly soon.

(Profile 04.06.19 @ 30p set a Target Price of 60p)

Capital Limited (LON:CAPD) – creeping higher despite sellers

It seems that whenever good news comes out from this mining services group more shares get offered onto the market.

The latest seller was Patrick Thomson, the CEO of the group’s labs business, who sold off 145,000 shares in four parcels, at prices from 78.71p to 80.02p each.

But that does not worry me too much because they still offer good upside and I remain hopeful.

They closed last night at around 82.8p.

(Profile 23.07.19 @ 48p set a Target Price of 76p*)

(Profile 22.10.19 @ 61p set a Target Price of 100p)

(Profile 03.08.20 @ 77.5p set a Target Price of 100p)

John Menzies (LON:MNZS) – ready for lift-off

Having been devastated by the Covid-19 pandemic’s effect upon the global air transport markets, it is pleasing to see that this international aviation services group is on the expansion trail and winning new business.

On Thursday of last week, it announced further expansion in Central America with the acquisition of Interexpresso, a Costa Rica-based aviation service provider.

It also stated that it had secured additional contract wins in the Oceania region with Virgin Australia.

The Edinburgh-based group, which provides ground services, into-plane fuelling and air cargo services, operates at over 200 airports in 35 countries across the world.

Analyst Robin Speakman at Shore Capital has a ‘buy’ out on the group’s shares. He reckons that Menzies is emerging from the pandemic smaller, but focused and able to capture opportunities in recovery which is, he states, a testament to strategic delivery and effective cost management.

“We continue to see strong earnings recovery potential, underpinning the short-term equity story. As recovery gathers pace, with volumes expected to build on a recovery track from the pandemic, visibility should continue to improve with the financial performance.”

Disappointing to date, the shares at 325.5p are a long way off my price objective, but that does not mean that they don’t have investment appeal at these lower levels.

(Profile 17.12.19 @ 450p set a Target Price of 530p)

SigmaRoc (LON:SRC) – a solid broker ‘buy’ to 125p-135p

The interim results from this ‘buy-and-build’ quarried materials group were declared on Monday.

They showed that the six months to end June had a revenue of £84.8m (£54.5m), with underlying pre-tax profits of £8.7m (£5.3m) and earnings up from 1.98p to 2.68p per share.

This group is going from strength to strength as it acquires a portfolio of important operations, the latest being Finland’s Nordalk group, which quarries and manufactures limestone-based products.

Analyst Clive Lewis, at brokers Peel Hunt, has a ‘buy’ out on the shares at 135p, while Charlie Campbell at Liberum Capital reckons that the group is extending its track record. He has a 125p tag on his current ‘buy’ recommendation for the shares, now 104p.

(Profile 04.09.20 @ 49p set a Target Price of 65p*)

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