Small Cap Catch-Up: Braemar, Hunting and Loungers
Braemar (LON:BMS) – Totally Lacklustre AGM Statement
This group, which is one of favourites, is a leading provider of expert investment, chartering, and risk management advice to the shipping and energy markets.
It offers services that enable its clients to secure sustainable returns and mitigate risk in the volatile world of shipping and energy.
The group’s experienced brokers work in tandem with specialist professionals to form teams tailored to its customers’ needs, and provide an integrated service supported by a collaborative culture.
In late May when announcing its Final Results for the year to end February, it reported another strong performance for the group, demonstrating its strategy to grow the business, to build its resilience, and to generate sustainable shareholder returns across the shipping cycle.
The company stated that FY25 had started well, entering the year with a total forward order book as at 29th February 2024 of $82.6m (FY23: $56.2m).
It also noted that it looked forward to continuing the successful execution of its growth strategy, through hiring talented individuals, geographic expansion and making selective acquisitions, while at all times maintaining a strong focus on cost efficiencies and improving operating margins, as the business continues to scale.
CEO James Gundy stated that:
“The overall market outlook remains positive. Geo-political and natural events, as well as environmental considerations are leading to longer voyage times, and global seaborne trade continues to grow, while the total fleet size remains at similar levels.”
After the recent results, analyst Ian McInally, at Cavendish Capital Markets, increased his Buy note Price Objective to 392p, concluding that:
“We believe our forecasts are conservative and the shares look good value at current levels, trading on just 6.7x FY25E underlying EPS.”
He commented that the worldwide fleet remains low by historic levels and seaborne trade continues to grow, providing a positive outlook for the business, notwithstanding normal cyclical movements in individual shipping sectors.
For the year to end February 2025 he is going for £154.7m (£152.8m) revenues, with adjusted pre-tax profits of an unchanged £16.1m, but with earnings increasing to 38.1p (34.1p), enabling a dividend of 14.0p (13.0p) per share.
Yesterday the group held its AGM after having issued a totally feeble Trading Update which said almost nothing, it read:
“Further to the update provided in the FY24 results announcement issued on 23 May 2024, the board is pleased to report that the Group has continued to trade well and that performance in FY25 to date is in line with expectation.
The Group remains focused on its stated growth strategy and the board looks to the year ahead and beyond with confidence.”
Despite that ‘nothing’ of an Update I still like this £90m capitalised group and consider that its shares at 297p each are undervalued.
(Profile 05.12.19 @ 185p set a Target Price of 250p*)
(Profile 20.05.20 @ 99p set a Target Price of 150p*)
(Profile 07.05.24 @ 277p set a Target Price of 350p)
Hunting (LON:HTG) – Hoping For A Very Positive H1 Trading Update Next Monday Morning
This group is a leading manufacturer of precision engineered products and integrated systems, and a provider of print-part manufacturing services.
Located in 11 countries across four continents, it manufactures critical components, high technology systems and precision parts for international oil and gas and energy service groups globally.
The group’s expertise is also applicable to other industries including aviation, medical, power generation and space.
On 17th April at the group’s AGM CEO Jim Johnson updated shareholders on the progress in the group’s first quarter:
“The year has started positively for the Group, with Q1 2024 results marginally ahead of management’s expectations, and well ahead of the Q1 2023 result, which demonstrates the continued growth momentum of the Group.
Our OCTG, Subsea and Advanced Manufacturing product groups are continuing to see strong momentum as offshore and international activity remains robust.
While Perforating Systems has had a slow start to the year, H2 2024 is likely to see stronger activity as increased LNG exports in the US drive natural gas demand.
It is particularly pleasing to see our Q1 2024 EBITDA result surpassing the Q4 2023 result, given the strong result delivered in the prior quarter, with Subsea being our standout performer this quarter.
2024 is likely to be a further year of growth for the industry driven by geopolitical and macro-economic factors.
Therefore, management remains confident of delivering its current EBITDA guidance, given the broad-based strength of the global oil and gas sector.”
Next Monday 8th July will see the group declare its H1 Trading Update, which I am convinced will be bullish in overall content.
The £700m group’s shares at 422p are certainly not expensive considering its potential.
(Profile 15.03.21 @ 275p set a Target Price of 350p*)
(Profile 12.04.23 @ 240p set a Target Price of 300p*)
(Profile 19.02.24 @ 303.5p set a Target Price of 360p*)
Loungers (LON:LGRS) – Positioned For Growth
In the UK hospitality sector, this group operates through its three established complementary brands – Lounge, Cosy Club and Brightside.
There are 220 Lounges nationwide, each is a neighbourhood café/bar combining elements of coffee shop culture, the British pub and dining.
There are 35 Cosy Clubs nationwide, they are more formal bars/restaurants offering reservations and table service but share many similarities with the Lounges in terms of their broad, all-day offering and their focus on hospitality and culture.
Brightside is a roadside dining concept, launched in November 2022 and now with three locations in Exeter, Saltash and Honiton.
On 26th April the group issued a Trading Update for the 53 weeks to 21st April this year.
It stated that the company had delivered a record total revenue for the financial year of £353.5m, up 24.7% on the previous year (£283.5m).
CEO Nick Collins stated that:
“I am delighted with our performance over the year.
We have consistently outperformed the sector on a like for like basis whilst having delivered a record 36 new site openings.
As ever, it’s our continued focus on menu innovation, value for money and exceptional hospitality that is driving the strength of our performance in both the mature estate and our new openings.
As we start the new financial year we are looking ahead with optimism.
Our experience suggests that the UK economy is holding up well and we are well positioned to deliver continued growth.”
Analysts Anna Barnfather and Nishant Dahad at Liberum Capital rate the group’s shares as a Buy looking for 400p as their Price Objective.
Their estimates for 2024 are for £353m (£284m) sales, £13.7m (£9.4m) in pre-tax profits, with earnings of 8.9p (8.1p) per share.
For the current year they go for £394m revenues, £16.7m profits and 10.9p per share in earnings.
The £278m valued group’s shares are currently trading at around the 268p level, after having been up to 286p and as low as 178p within the last year.
Hold very tight.
(Profile 03.09.19 @ 205p set a Target Price of 275p*)
(Asterisks * denote that Target Prices have been achieved since Profile publication)
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