Small Cap Catch-Up: Cars, Books and Balls

Aston Martin Lagonda Global Holdings (LON:AML) – Pole Position On The Portfolio Grid

Well, what can I say about last month’s share price performance by this luxury car maker?

On 10^th May, I Profiled the company at 213.5p, looking for 265p as my Target Price.

Within two days they were down to 201p in lacklustre dealings.

On 17^th May the group’s AGM went off without a hitch, by which time the shares had turned around and closed that night at 231.20p on the back of 1.8m shares being traded.

The next morning the group announced that Geely Holding, China’s leading independent automotive group, had committed £234m of its funds to become Aston Martin’s third largest shareholder.

It agreed to buy 42m shares from the Yew Tree Consortium for 335p a share.

In addition, it subscribed £95m for 28m new shares in the group at the same price of 335p a share.

That leaves Lance Stroll’s investment group the largest holder with 21% of the equity, followed by Saudi Arabia’s Public Investment Fund with 18%, then Geely with 17%.

It also agreed to not acquire more than 22% of the shares in total until after August 2024.

Boy is this situation building up.

The shares touched 288p that day, before succumbing to profit-taking clipping them back to 255p by the middle of last week.

At the end of last month, they hit 290p at their best, before closing last week at 277.5p, up 12.5p on the day.

I would now expect the £2.17bn group’s shares to waiver between 260p to 300p in the next few weeks, ahead of the company announcing its interim results at the end of next month.

If you are still holding after such a fabulous profit turn in less than a month, then I suggest that you hold tightly to your shares because I have a feeling that there is more action to come yet.

(Profile 10.05.23 @ 213.5p set a Target price at 265p*)

Hunting (LON:HTG) – Rising Order Books

Last Tuesday morning saw the announcement by this group of a new major contract combined with fresh 2023 full year guidance for investors.

It secured a record $91m Oil Country Tubular Goods three-year contract with Cairn Oil and Gas, in India, covering some 100 wells for that company’s operations in Rajasthan.

With this order, Hunting’s sales order book now is some $575m, which represents a material increase since the year-end.

Based on the timing of the first deliveries of that order, the group’s management now believes that the 2023 full year EBITDA will be in the range of $92-$94m, which represents a further increase to the guidance issued at its 2022 full year results in March 2023.

Hunting provides tools and components for oil and gas and energy industries.

The company operates through Hunting Titan, North America, Europe, Middle East and Africa, and Asia Pacific segments.

The Hunting Titan segment manufactures and distributes integrated and conventional gun systems and hardware related products. This segment also offers H-2 and H-3 gun systems, controlfire switches, powerset charges, EQUAfrac shaped charges, and T-Set tools.

The North America segment offers subsea equipment, intervention tools, electronics and deep hole drilling and precision machining services, as well as connections and oil country tubular goods.

The Europe, Middle East and Africa segment supplies threading, legacy pipe storage and related accessories.

The Asia Pacific segment manufactures connections, accessories, and intervention equipment. 

CEO Jim Johnson stated that:

“Hunting’s successful run of significant OCTG and Subsea orders since H2 2022 demonstrates that our technology and global footprint is well positioned to deliver significant growth in the medium term.

US market activity remains stable and with the orders received for China, Guyana, Brazil and now India, Hunting continues to see a strong growth profile given our standing and recognition with major energy companies, coupled with the strong international market sentiment being reported in many regions.”

Following the group’s latest guidance to the market, analyst Daniel Slater at Zeus Capital has substantially upgraded his current year and his 2024 estimates.

For the year to end December Slater now goes for $861.7m of sales against his old estimate of $815.9m, for its adjusted pre-tax profits he lifted it 25% to $51.9m, and similarly 25% better for earnings to 26.1c, easily covering a 10c per share dividend.

For the coming year his figures are progressed 6% on sales to $991.9m, profits 12% better at $61.0m, lifting earnings 12% to 27.9c and covering a maintained 10c dividend.

To come in line with others in its sector Slater puts an immediate value of 285p on the group’s shares, however he states that:

“In our view, Hunting’s level of intellectual property, business position and positive momentum should justify a premium to this level. Using 7.0x our 2024 forecast would imply a valuation of around 355p, which we think is fully achievable given the ongoing momentum in the business.”

The £365m group’s shares, which were up to 343p in mid-January this year, were down to 201p just before this week’s news.

The closed at 219p on Friday night, which in my view offers an excellent buying opportunity.

They are on their way back upwards again.

(Profile 15.03.21 @ 275p set a Target price at 350p*)

Bloomsbury Publishing (LON:BMY) – Always A Good Read

In the middle of last week Nigel Newton, boss of this now global publishing group, reported the results for the year to end February 2023.

They showed record sales and profits ahead of recently upgraded expectations.

He stated that:

“We are delighted to have achieved these record results with sales up 15% to £264.1m and profit up 16% to £31.1m.

Compared to two years ago, sales are up 43% and profits up 62%.

Our growth outperformed the industry which was up 4%.

These results demonstrate the strength of our strategy to publish for both the consumer and the academic markets, unusual in our industry, and to grow digital revenues while expanding globally.

In challenging economic times, readers are turning to books as affordable as they cut back on more expensive forms of diversion.”

Bloomsbury publishes academic, educational, and general fiction and non-fiction books for children, teachers, students, researchers, and professionals worldwide.

The company offers books and digital resources to international research community and higher education students; online law, accounting, and tax services for the UK and Eire professionals; and publishing services for corporations and institutions.

It also serves communities of interest in sports and sports science, nautical, military history, natural history, arts and crafts, and popular science; and offers books for students of the arts, humanities, and social sciences.

In addition, the company provides digital resources and databases for school libraries and professionals, as well as educational content for primary and secondary schools, together with professional development content for trainee teachers and teachers.

Bloomsbury also publishes non-fiction list, such as cookery, sport, crime, natural history, health, and well-being books.

Additionally, the company publishes fiction lists for adults, as well as titles in print, e-book and audio book formats for both adult and children.

The current consensus market expectation for the year ending 29 February 2024 is for revenue of £272.1m and profit before taxation and highlighted items of £32.2m.

After having touched 492.5p in November last year, it was sad to see the £340m group’s shares close at just 406.5p last Friday night – but that is more a reflection of recent market inactivity than a realistic valuation.

Having followed the company closely since it floated decades ago, I continue to rate this group and its potential very highly – its shares are cheap at these levels.

(Profile 28.02.19 @ 231p set a Target price at 257p*)

(Profile 27.03.19 @ 238p set a Target price at 270p*)

Hollywood Bowl Group (LON:BOWL) – Driving Further Growth

Operating ten-pin bowling centres in both the UK and in Canada is what this group is all about.

Earlier last week the company announced its half-year results to end March.

CEO Stephen Burns stated that:

“I am delighted with our record performance in the first half, and I would like to thank our fantastic team members for all the hard work that goes into delivering excellent value for money, high quality experiences.

It is clear from our high customer satisfaction scores that our continually evolving proposition appeals to all generations looking to enjoy affordable leisure activities together.

We are looking forward to driving further growth in the UK and Canada, capturing the significant market opportunity ahead.

Our resilience to inflationary pressures, strong balance sheet and cash-generative model gives us confidence in the future as we continue to invest so that our customers have the best experience possible in our centres.”  

The group is one of the largest operators of bowling centres in the World, and certainly the UK’s largest ten-pin bowling operator, with a high-quality portfolio of 73 centres across the UK under the Hollywood Bowl and Puttstars (mini-golf) brands.

It specialises in operating large, high quality bowling centres, predominantly located in out-of-town multi-use leisure parks (typically co-located with cinema and casual dining sites) and large retail parks.

The centres are designed to offer a complete family entertainment experience with each centre offering bowling lanes or mini-golf courses alongside on-site dining, licensed bars, and state-of-the-art family games arcades.

A year ago the group acquired Teaquinn,the operator of Splitsville and Striker Bowling Solutions, which operates nine large entertainment centres in Canada, each with ten-pin bowling lanes, dining, bar, and amusement offers.

The company makes most of its sales from hiring out the bowling lanes (48.8% of turnover) then 24.6% from food and drink, with 24.4% from amusements, the balance is derived from mini-golf and bowling equipment installation.

Last year some 96.8% of its revenues were earned in the UK, with Canada taking up the balance.

Of the eight or so analysts that follow the company, the consensus average Target Price is 332.5p, with the highest assumption being for 410p a share.

The £458m company’s shares were up to 277p in the last week, before closing at 266p on Friday night, some 5p off for the day.

Patient investors could well see the 300p barrier being beaten in 2023, before heading higher in 2024.

(Profile 14.11.19 @ 240p set a Target price at 300p*)

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