Small Cap Catch-Up: Costain, Loungers, Journeo And Billington

Costain Group (LON:COST) – Could Finally Be On The Way Back 

I was pleased to see that the Investment Director of stockbroking group AJ Bell was highlighting the investment attractions of this infrastructure construction group. 

In Tuesday’s edition of The Daily Telegraph, Russ Mould used his Questor Stock Picks column to feature Costain Group – pointing out that it had £167m of cash in its coffers compared to its market capitalisation of only £160m. 

He mentioned that the group had an order pipeline of some £1.5bn, where it already had preferred bidder status. 

In reaction to his bullish article the group’s shares hit 60.80p, up 4p, before closing 5.51% better on the day at 59.80p. 

In late August I Profiled the company again, having failed twice before to score on my Target Prices. 

I stated that the group’s shares were too low to be ignored by any investor looking for the UK to correct its economy and its infrastructure as well. 

Noting at the time that buying the shares at the then 50p, where they stood at 4.4 times current year earnings and an even lower 4.1 times the 2024 estimates, could well see them look to achieve the 62p that they reached earlier in April this year. 

Russ Mould is right – these shares are for buying. 

(Profile 05.09.19 @ 1551p set a Target Price of 250p) 

(Profile 02.08.21 @ 55p set a Target Price of 69p) 

(Profile 24.08.23 @ 50p set a Target Price of 62p) 

Loungers (LON:LGRS) – Driving A Strong Roll-Out Programme  

Tuesday morning’s announcement of the continued strong like-for-like sales growth for the 24 weeks to 1^st October did little to excite the hospitality group’s shares, closing down 1.71% on the day. 

Takings were up 22.3% from £122.3m to £149.6m while its pre-tax profits were £3.94m against £2.83m previously, generating 2.6p (2.3p) in earnings per share. 

CEO Nick Collins stated that: 

“This has been another period of strong financial and operational growth for Loungers.  

The fact that we have delivered increases of 22.3% and 23.6% in our revenue and EBITDA respectively should be taken as yet another reminder that it is not all doom and gloom in the UK hospitality sector.  

We are living proof that businesses which can provide outstanding hospitality, great food and drink and excellent value are still capable of thriving, and we see more growth potential for Loungers than ever before. 

Our accelerated site roll-out programme continues at pace, and we are on track to open 34 in FY24, which means that we will end the year with more than 250 sites.” 

Analysts Anna Barnfather and Nishant Dahad at Liberum Capital continued to rate the group’s shares as a Buy, looking for them to rise to 400p. 

Stating that the group was well on track to exceed 250 sites by the year end, but still only a third of the way through its expansion journey, the analysts upped their estimates for the year to end April 2024. 

They are now looking for £347m (£284m) sales, profits of £13.4m (£9.4m) and earnings of 8.9p (8.1p) per share. 

For 2025 they see £386m takings, £15.1m profits and 10.1p earnings, with even greater growth expected in 2026. 

As the group’s inflationary pressures continue to diminish, over the next couple of years I see its shares responding to the expansion of its estate – if they don’t then the group will be wide open to either a Trade Predator or it will succumb to a Private Equity bid. 

The shares have risen well from my mid-October article when they were 186p, looking for them to quickly break through the 200p level again. 

Now at 230p, I hold firmly to my suggestion that they will rise above my previously achieved Target Price. 

(Profile 03.09.19 @ 205p set a Target Price of 275p*) 

And Finally ….. 

A cracking Trading Update from Journeo (LON:JNEO) on Tuesday helped to shake its shares up a bit. 

Touching 235.70p at one stage, up over 21p, they closed at 230p for an overall 6.5% gain on the day. 

I have clearly spelt out before my attraction to this transport sector solutions group and its massive prospects.  

Analyst Andrew Renton at Cavendish Capital has a 385p Price Objective on the group’s shares, anticipating that the company will almost quadruple its adjusted pre-tax profits this year, from £1.0m to £3.9m, lifting earnings up to 20.6p (10.3p) per share. 

Hold tight they will go higher. 

(Profile 07.04.21 @ 95.5p set a Target Price of 120p*) 

I was totally encouraged to see the shares of Billington Holdings (LON:BILN) break above the 400p level again on Tuesday, hitting 408p before closing at 405p.  

It does look as though there is a gentle head of steam building up to take them even higher. 

Quality always comes to the fore. 

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

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

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