Small Cap Catch-Up: Billington, The DX Bid, Futura, Northcoders and Braemar

Billington Holdings (LON:BILN) – A Buy Ahead Of Interims Next Tuesday?

This group’s shares really are excellent value, trading on only 6.92 times earnings and yielding 5.7%.

The business model of the group is to operate as a designer, manufacturer and installer of structural steelwork through its subsidiaries Billington Structures, Peter Marshall Steel Stairs and Specialist Protective Coatings, and as a supplier of safety solutions and barrier systems to the construction industry, through its subsidiary Easi-Edge as well as providing site hoarding and branding systems through Hoard-it.

The parent company acts as a holding company providing management services to its subsidiaries.

2022 was a year of significant progress and achievement for Billington, with an excellent trading performance, despite the continuing industry wide challenges of material price increases along with restrictions in the availability of certain products and some labour shortages arising throughout the period.

Current Trading And Outlook

Billington is a robust business with a strong market position.

Whilst there inevitably remain further challenges ahead and macroeconomic headwinds are likely to remain for some time, particularly with regard to material availability, price volatility and continuing inflationary pressures, it has been seeing a consistent stream of opportunities at improved margins and now has a very healthy order book.

The group’s capital investment programme and efficiency improvements implemented have enabled it to achieve improved margins on the opportunities that it is seeing, leaving it well placed to deliver improved results in 2023.

Broker’s View – Price Objective Of 541p

Analyst David Buxton at Cavendish Capital Markets (the merged finnCap and Cenkos Securities) considers that the group’s shares offer significant upside, looking for 541p.

His estimates for the current year to end December look for revenues to rise strongly from £86.6m to £115.0m, creating a handsome £8.0m (£5.8m) in adjusted pre-tax profits, worth 50.6p (39.1p) in earnings and easily covering a 20.0p (15.5p) dividend per share.

My View – Excellent Value Purchase

Ahead of the group’s Interim Results being declared next Tuesday (19^th September) I rate the shares of this £45m capitalised group as an excellent value purchase.

The accompanying Trading Statement may well outline the current order book and just how its Management is coping with external pressures, together with some better guidance for its H2 and going into 2024.

The shares at 350p are trading on just 6.92 times earnings while yielding a very attractive 5.7%.

They remain a strong hold for existing shareholders and a bargain for new ones too.

(Profile 02.04.19 @ 266p set a Target Price of 314.5p*)

(Profile 13.06.22 @ 217.5p set a Target Price of 295p*)

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DX (Group) (LON:DX.) – This 48.5p Possible Offer Undervalues The Group

Of course, I am delighted for my readers who have followed my previous utterings on this excellent little delivery group – because they will be standing in with a very handsome profit, so far, nearly quadrupling their money.

However, I believe that the proposal from H.I.G., if it materialises, at 48.5p cash per share, actually undervalues the business by at least 11.5p a share.

H.I.G. Capital is a Miami-based alternative investment outfit with some $58bn of capital under management.

It is understandable that on behalf of its own clients and shareholders it is needing to buy business assets as cheaply as possible, but I think that it should be squeezed a little more to pay a more realistic price for the delivery group.

This latest approach, which has already won potential acceptance by nearly 30% of the DX investors, came after H.I.G. previously made several approaches.

But will the professional investors in the DX equity roll over as easily?

I hope not because 48.5p feels like a cheap offer.

The shares are currently treading water at around the 43p level, hold tight, you never know another private equity player may well pop up on the scene and bid higher – but then pigs may fly – who knows?

(Profile 20.02.20 @ 12.5p set a Target Price of 15p*)

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Apart from SRT Marine Services and Billington Holdings reporting, next Tuesday morning (19^th September) will see a number of this column’s favoured stocks issuing corporate news, including Futura Medical and Northcoders.

By the way SRT Marine Services will also be holding an Investor Open Day at its Head Office in Midsomer Norton, Somerset, from 9am to 11am next Tuesday, before holding its AGM some 500 metres away, from 11am to 1pm, subsequent to which the company will host a Buffet Lunch for those attending.

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Futura Medical (LON:FUM) – Interims could lift market hopes that this sexual health pharmaceutical products company is well on the way to halving its losses of last year.

Analysts are looking for the rapidly developing group to show only £3.3m pre-tax losses against £6.9m last year.

Following on from the major announcement earlier this summer that Haleon will be helping to commercialise the company’s MED3000 product, which was FDA approved in June.

Analyst Seb Jantet at Liberum Capital, who rates the group’s shares as a Buy, recently raised his Price Objective from 142p to 152p a share, compared to last night’s closing 52p.

They have previously peaked at 67p, on 22^nd June this year, that is a price that could so easily be achieved again on the back of some good news.

Will next Tuesday’s Interim announcement be the herald of a higher price?

(Profile 14.03.19 @ 15p setting no Target Price)

(Profile 22.12.21 @ 34.5p setting a Target Price of 50p*)

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Northcoders (LON:CODE) – Interims To Show Good Sales Growth

Analysts Nick Spoliar and Charlie Cullen at WH Ireland still have a 365p a share ‘fair value’ assessment on this sales expanding software coding training group.

We have done well previously catching the shares very early last year, before they then fell away to half of its best.

They touched 375p this time last year before collapsing back to 162p at their lowest earlier this month.

Last night, ahead of next Tuesday morning’s Interims declaration, they picked up slightly to 174p, at which level the group is valued at only £14.36m.

The analysts are looking for the year to end December to show sales leaping ahead to £9.5m (£5.6m), while doubling adjusted pre-tax profits to £1.2m (£0.6m), lifting earnings to 16.2p (7.9p) a share.

At that rate of growth, it is understandable why the analysts rate the shares so well – they do look cheap and ready for another run upwards.

(Profile 28.01.22 @ 296p set a Target Price at 370p*)

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

Questions asked of Braemar – 12.09.2023

On 26^th June this year my favourite shipping services group Braemar (LON:BMS) made the following statement:

Publication of FY23 results & investigation into 2013 transaction

During the past two years, in addition to establishing and developing the Group’s growth strategy, the board has focused on ensuring that proper procedures are in place to deliver good practice throughout the business as it scales. As part of this work, the board and the Group’s auditors have been carrying out an investigation into a particular transaction of circa $3m, which originated in 2013, and involves payments being made through to 2017.

The board is not presently comfortable with the manner in which the transaction has been historically represented and the remaining liability recorded in the Company’s balance sheet. Upon conclusion of the investigation, should this liability be released, it would not affect the underlying trading profit or cash position of the Company for FY23.   

The investigation into this transaction and any related matters which may arise, is still ongoing. The board has appointed FRP, an independent specialist firm to assist with the investigation and has established a specific investigation committee, chaired by the Group’s non-executive Chairman, to oversee the matter.

On 3^rd July the group announced that Braemar’s shares were subject to a Temporary Suspension of Listing and Trading.

That was more than two months ago and not a whisper from the company nor from any of its advisers, so I considered it time to ask what the situation was by contacting the group’s Company Secretary.

The Company Secretary, Braemar

On behalf of several subscribers to The Master Investor website I have been asked to find out exactly what is going on now at Braemar and why have its shares been suspended for so long?

Are they due for an early return to Dealings?

Reply within hours from The Company Secretary

Dear Mark

Thank you for your email.

As previously announced on 26 June 2023, the board and the Group’s auditors have been assessing certain liability balances, including pertaining to a particular transaction, which originated in 2013 and involves payments being made through to 2017.

The investigation is ongoing and good progress is being achieved, a further announcement will be made on completion of the investigation.

We expect to seek re-listing of the shares once the accounts are published.

My reaction – I was impressed by the quick response, so many companies are rarely this prompt.

Alas though we shall just have to hang fire for a while yet, which is a shame.

I have seen a piece reported in late August, not on the main company news channel, suggesting that Braemar’s suspension would be extended for another 20 days.

However, the intervening period of time has seen the market as a whole under pressure, so holders should, perhaps, be grateful for the shares not being subjected to a wave of ill-founded rumours.

Even so it will be interesting to see just how well framed the situation will be revealed to the Braemar shareholders.

I continue to be a massive fan of the group and its Management style and still consider that its potential is considerably in advance of even its suspended share price of 233p.

Is news getting closer, my gut feeling is that we will not have to wait too much longer.