Small Cap Catch-Up: ALU, BRCK, LUCE and MBH

Alumasc Group (LON:ALU) – 6 Times Earnings And Offering A 7% yield

The results for the full year to end June from this the premium sustainable building products, systems and solutions group, showed group revenues from continuing operations maintained at £89.1m (£89.4m), while underlying profit before tax from continuing operations was £11.2m (FY22: £12.7m).

The Board anticipates short-term market conditions will remain challenging but is confident the group has taken the right actions to manage these, while remaining well positioned to benefit when markets normalise.

CEO Paul Hooper stated that:

“We are delighted to report these full year results which demonstrate the Group’s resilience and benefits of our diversified portfolio of innovative, sustainable building products, against a challenging market backdrop and a comparative which included significant overseas project sales.

David Buxton, analyst at finnCap, obviously likes the group’s shares, seeking them to rise to 315p in due course, almost doubling the closing price last night of

For the current year to end June 2024 he estimates an increase in sales to £96.0m and profit to £11.8m, generating earnings of 24.5p (24.7p) but paying out an increased dividend of 10.8p (10.3p) per share.

The analyst considers that there is substantial value in the shares and, as long as it can get through these trying times, I agree with him.

(Profile 13.02.20 @ 116p set a Target Price of 145p*)

(Profile 08.06.20 @ 80p set a Target Price of 105p*)

Brickability Group (LON:BRCK) – 4.8 Times Earnings And 7.1% Yield

Yesterday’s AGM Statement from the UK’s leading construction materials distributor could certainly have sounded more positive.

But then we all know that cost and mortgage pressures have exacerbated the housing market pull back.

Despite the first quarter of the group’s trading year to end July was in line with expectations, the group predicts that August was typical seasonally quiet, while expecting volume reductions from customers over the next few months.

We will have to wait until the end of next month, for the group’s H1 Trading Update, to see just how the group will have fared in the challenging circumstances.

This group’s shares are now at a two year-Low and are trading at some 20% below the initial IPO.

Even so analyst Andrew Gibb at Cenkos Securities rates the shares as a Buy.

He is expecting a fallback in both the sales and pre-tax profits for the year to end March 2024, with revenues of £652.3m (£681.1m) and profits of £39.6m (£44.6m), dropping earnings to 9.9p (11.9p) while increasing its dividend to 3.4p (3.2p) per share.

A cracking yield and a very low price-to-earnings ratio continues to make these shares at 48p really quite appealing.

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

Luceco (LON:LUCE) – Offering A 23% Upside?

After yesterday’s Interim Results were announced, showing an encouraging first half year to end June, its shares touched 138p at one stage, then back to 122p, before close last night at 126p.

The supplier of wiring accessories, EV chargers, LED lighting, and portable power products, sees continued improving momentum and a stronger orderbook, while remaining vigilant in a changing economic environment.

CEO John Hornby stated that:

“It has been an encouraging first half for Luceco. Our gross profit margin improved as material and freight cost pressures continued to ease during the period, albeit partially offset by wage pressures. We continue to build an attractive M&A pipeline and we have further strengthened our balance sheet.

We have a number of exciting product developments in progress, which provide us with good medium and long-term opportunities for growth. A strong order book supports a reassuring outlook for the remainder of the year. Historically the Group has enjoyed a stronger second half and, whilst we are mindful of the current economic environment, we expect a similar trend this year.”

Broker Liberum Capital’s analyst Charlie Campbell rates the group’s shares as a Buy with a Target Price of 155p.

For the year to end December he estimates a marginal improvement in sales to £207m (£206m) and profits rising to £19.9m (£19.4m), easing earnings to 10.4p (11.0p) while maintaining its dividend at 4.6p per share.

Just two years ago this group’s shares were trading up at 497p, since when they based out at 63p a year ago and have been steadily improving thereafter.

I now foresee the company’s Management coping with any forward pressures, while believing that Campbell’s Target Price is very realistic.

(Profile 15.06.20 @ 96.1p set a Target Price of 125p*)

Michelmersh Brick Holdings (LON:MBH) – Undervalued Quality

Considering how Brickability traded in its last year, the performance of this specialist brick manufacturer and brick fabricator was quite impressive.

For the six months to end June it reported a 23.5% increase in its sales to £42.0m (£34.0m), while its adjusted pre-tax profits were up 11.5% at £6.8m (£6.1m), lifting earnings by 11.9% to 5.73p (5.12p) per share.

Chairman Martin Warner stated that:

“The Group has delivered a positive first half performance despite a challenging macroeconomic backdrop which has impacted the construction industry significantly and in turn some of our end markets. Our first half performance has benefitted from a well-balanced order book and our diverse end markets and we will continue to prioritise appropriate portfolio pricing to support demand from our customers.

“Whilst the brick market has been impacted by lower consumer confidence, we continue to focus on delivering an excellent product and customer service, while proactively managing our input costs appropriately. Backed by the resilient fundamentals of our business, we remain on track to meet full year expectations.”

Analyst James Wood at Canaccord Genuity Capital Markets rates the group’s shares as a Buy, with a Price Target of 180p, which is more than double last night’s closing 89p.

He is estimating full year sales of £83.5m (£68.4m) and a modestly improved profit of £12.8m (£12.5m), worth 10.4p (10.6p) in earnings, while maintain its 4.3p dividend per share.

Wood considers the shares, now just 89p, to be trading at a 40% discount to the company’s peers.

Despite only being the UK’s fourth largest brick maker, I like this company and although its estimates may look too pedestrian it is boasting good margins and cash generation, with a growing balance to hand.

Hold on tight to this quality.

(Profile 27.03.23 @ 91p set a Target Price of 115p)

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