Small-Cap catch-up covering houses, data, jobs and bowling centres

MJ Gleeson (LON:GLE) – Trading Update next Monday should be positive

Next Monday this housebuilding group will be reporting its Trading Update for the full year to the end of June.

The company, which is the UK’s leading low-cost, affordable housebuilder and land promoter, has already confirmed that it has achieved its medium-term target of doubling home sales over the last five years, having completed the sale of 2,000 homes during the last year.

The market is looking for some £367.7m of revenues for the year against £288.6m in 2021 and £147.2m in 2020.

In the last year adjusted pre-tax profits are estimated to have risen to £49.1m (£41.7m), generating 67.8p (58.1p) in earnings and easily covering a dividend of 18.0p (15.0p) per share.

For the current year analyst James Tetley, at the group’s joint broker Singer Capital Markets, goes for £418.9m of sales, £55.4m profits, 73.2p earnings and a 21.0p dividend per share.

With its shares, now trading at around 521p, I consider that this £300m group is undervalued.

Rated at just 7.7 times historic earnings, just over 7.1 times current year earnings, on a 3.4% historic and a healthy 4.0% current year yield.

I know that my price objective is still way off mark, but I have no worry that it will be achieved in due course.

By the way Singer has a ‘buy’ rating out on the shares looking for 1000p as its valuation.

(Profile 11.04.22 @ 613p set a Target Price of 750p)

D4T4 Solutions (LON:D4T4) – continuing to be a winner

The Small Cap Awards 2022 voted this group as the ‘Technology Company of the Year’ just last week.

That was before the data solutions provider this week announced its final results to end March.

They were excellent and beat market expectations. They showed an excellent £14m annual recurring revenue, up 32% from £10.6m, some 57% of the group’s total revenue for the year.

Adjusted pre-tax profits were £3.3m (£4.4m), dropping earnings down to 7.1p (9.5p) per share, easily covering the 2.92p (2.81p) dividend.

However, there was a proposal to issue a special dividend of 12.5p per share, reflecting the group’s stronger cash balance.

Commenting upon the outlook for the company, Peter Simmonds, the non-executive Chairman stated that:

“We start the new financial year in a good position with products well aligned with market requirements and trends, a strengthened management team, a healthy cash balance, and most importantly a strong pipeline of sales opportunities.

I’m delighted to say that the Board is highly confident in the group’s strategy and our ability to deliver results and create significant shareholder value in the coming years.

Therefore, we will continue to invest wisely where we see opportunities for good returns on investment.”

Analysts Lorne Daniels and Kimberley Carstens, at the group’s NOMAD and joint broker finnCap, reflect upon the group’s underlying growth and its improving margins by putting out a price objective of 450p on the company’s shares.

They estimate that the current year to end March 2023 will see revenues rising to £28.0m with adjusted pre-tax profits recovering to £4.1m, worth 8.4p in earning and covering the 3.1p dividend per share.

Further rises are predicted for the 2023/2024 year, with £32.3m revenues, £5.3m profits, 10.9p earnings and a 3.2p dividend per share.

I am encouraged by the group targeting even higher ARR rates, with 65% being a near-term aim.

The company has done well, despite its various hassles and I continue to have faith that it will see its shares climb back above the 410p level peaked last year.

(Profile 09.04.20 @ 170p set a Target Price of 215p*)

SThree (LON:STEM) – net fee income growth is impressive

The interim results to end May this year will be reported by this specialist staffing business on Monday 25 July.

The expectations are that the group will show that it is recovering strongly from its pandemic pressures.

The company could well be seeing its contractor order book growing apace, helping to boost group profits for the current year to end November.

Sanjay Vidyarthi at Liberum Capital rates the group’s shares as a ‘buy’, estimating sales rising from £1.33bn to £1.53bn, upon which it derives its net fee income.

It could make £71.5m pre-tax profits (£60.0m), generating earnings of 35.38p (30.80p) and covering a 12.63p (11.00p) dividend per share.

For the coming year the analyst goes for £1.65bn sales, £79.8m profits, 39.30p earnings and a 14.04p dividend per share.

Ahead of the interims Liberum raise their price objective from 635p to 675p a share.

Considering that the shares closed last night at around the 365p level, I would suggest that they are a very strong hold.

We have seen them very much higher, they peaked at 610p in September last year and will be back up there again fairly soon.

(Profile 23.07.21 @ 473p set a Target Price of 560p*)

Ten Entertainment Group (LON:TEG) – slowly bowling over

The Trading Update issued on Wednesday, by this bowling and family entertainment centres group, reported that the 26 weeks to 26 June had shown an incredible 52.6% sales growth in its first half.

With new centres being opened and more being acquired this group is expected to see even further advances.

Come 21 September the actual interims will be reported, but already the market is getting the real flavour of this company’s potential.

Dispelling the uncertainties in the wider economic environment, the £154m capitalised group states that it has a proven track record of offsetting inflationary pressures and that it is confident that they are manageable within its business model.

Analyst Anna Barnfather, at Liberum Capital, rates the group as a ‘buy’ and fixing a price aim of 370p on its shares.

She is going for the current year to end December to show sales of £114.4m (£67.5m), while adjusted pre-tax profits are estimated to rise more than seven-fold to £23.0m (£3.1m), taking earnings up from 3.9p last year to 25.4p this year, enabling a dividend of 11.7p per share (nil).

Even further ahead she looks for £128.1m sales, £28.1m profits, 31.1p earnings and a 14.2p dividend per share for the 2023 trading year.

On those estimates you can easily understand why Liberum have such a high price objective.

I believe that this group will shine through yet again

(Profile 02.10.20 @ 135p set a Target Price of 170p*)

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