Small Cap Catch-Up – Deliveries, Cruising, Labour and Air Supply

DX (Group) (LON:DX.) – Continued Growth But Shares At Half Value

The news that this delivery group is continuing to grow should help investors start to see that its shares are really quite undervalued.

The £176m company has carried on opening new depots as part of its £25m ongoing investment programme – the latest being at Bracknell and at Swindon.

CEO Paul Ibbetson stated that:

“These new depots support DX Express’s continuing growth, and in particular Parcels’ expansion. Our Parcels activity has grown significantly in the last two years, and these new depots will increase capacity, improve efficiency and enhance the division’s customer service levels. We will be opening additional new depots over the remainder of the current financial year.”

The company is a provider of a wide range of delivery services to both business and residential addresses across the UK and Ireland.

It was first established in 1975 as a Document Exchange service to the legal sector, today it now provides one of the widest ranges of overnight delivery services in the market, as well as logistics services.

Items that DX transports range from confidential documents and valuable packages to large, awkward-to-handle freight, unsuitable for automated conveyor.

The Group operates through two divisions, DX Freight and DX Express.

DX Freight comprises DX 1-Man, and Logistics/2-Man, with the division being only one of a small number of operators that provides an overnight delivery service for irregular dimension and weight freight.

DX Express comprises DX Parcels and DX Exchange and Mail, with the division specialising in the express delivery, including pre-9am, of parcels and documents.

Analyst Guy Hewett at brokers finnCap has a price objective of 57p on the shares, now 28.5p.

He estimates that the current year to end June should see revenues rise to £465.1m (£428.2m), while adjusted pre-tax profits could rise to £25.4m (£20.6m), generating earnings of 3.7p (2.8p) per share and enabling a 1.5p dividend payment.

For the coming year he goes for £484.1m sales, £29.9m profits, 4.2p earnings and a 1.7p dividend.

These shares look cheap trading on a current year 7.7 times pe and just 6.8 times prospective.

They should make an excellent addition to any portfolio, I see the shares rising to at least 40p soon.

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

Global Ports Holding (LON:GPH) – Awaiting Finance And Capital Strategic Review

The nine months to end December reported a 227% increase in adjusted revenues at $173.9m, while its adjusted EBITDA was 1253% better at $59.1m.

The world’s leading independent cruise port operator must have been delighted to see the cruise market continuing to recover after the Pandemic slashed its business.

The group is now expecting the year to the end of this month to report EBITDA in excess of $65m.

Analyst Greg Johnson at Shore Capital has a ‘fair value’ of some 400p a share on a ‘run-off based valuation’.

For the current year his estimates suggest sales of $117.7m ($40.3m) and an adjusted pre-tax loss of $3.3m ($43.4m), with a loss per share at 7.3c (54.7c).

However, for the coming year he is estimating $154.9m revenues, a $15.5m profit and 5.6c in earnings per share.

The group is estimated to end this month with a group debt of $493.5m.

The £103m capitalised group saw its shares peak at 183.5p in late January this year.

They are now 164p and are a firm hold ahead of the results of the group having undertaken a strategic review of its capital and financing structure.

(Profile 11.11.22 @ 81.5p set a Target Price of 100p*)

Hercules Site Services (LON:HERC) – Now A Cheap Buying Opportunity

Was it a quick market rig ahead of raising fresh capital a few weeks ago?

From around 45p a share in early January, this construction industry labour supply group witnessed its shares rising to a 73p High six weeks later.

The equity is exceptionally tight at the best of times, so when the mid-February price spurt took over it was even more noteworthy.

They touched 73p the day before a £1.7m fund raising Placing at 45p a share on 27 February.

The net proceeds of the Placing will be used to provide working capital to support organic growth in the company’s labour supply division, as it continues to deliver key infrastructure, civil engineering, utilities, groundworks, highway and railway projects across the UK.

CEO Brusk Korkmaz stated that:

“After achieving record revenues and positive year-on-year growth in 2022, Hercules continues to build momentum and deliver on its strategy. Turnover growth has been in the region of 50% per annum for two years now, and we believe a third year of similar growth lies ahead. This is because we are well positioned to benefit from the buoyant conditions in the infrastructure sector and trading at the start of 2023 has commenced positively.

We recently introduced two new income streams in the Labour Supply business, being the supply of security personnel, and white-collar placements, and both have received their first contracts and are progressing well. With a strong 2023 pipeline in place, these funds will support further organic growth in our Labour Supply division, which represented over 67% of our revenue in 2022.”

That the shares have subsequently collapsed back to 39p, without any subsequent market support, is perhaps disappointing.

Analyst Tania Maciver at SP Angel has a Buy rating on the shares, with a price objective of 80p.

She is looking for a 50% year-on-year advance in sales to £74.2m and a 53% hike in EBITDA to £3.5m for the year to end September 2023.

That compares to the group’s current £25m market capitalisation.

So, the price fall is actually a cheap buying opportunity.

(Profile 04.05.22 @ 52p set a Target Price of 64p*)

Volution (LON:FAN) – Broker Looks For 450p

At the halfway stage, to end January 2023, this air quality solutions group reported sales up 8.5% at £162.3m (£149.6m), while adjusted pre-tax profits were 6.0% better at £31.8m (£30.0m), earnings were 8.6p (8.2p) and the interim dividend was 2.50p (2.30p) per share.

Analyst Charlie Campbell at Liberum Capital has a Buy rating on the shares, looking for 450p.

His estimates for the current year to end July are for sales of £324m (£308m), £62.9m (£60.9m) profits, 24.5p (24.0p) earnings and a dividend of 7.5p (7.3p) per share.

After the interims Liberum upped their previous estimates by some 5%.

For the coming year it is looking for £337m sales, £65.5m profits, 25.2p earnings and a 7.6p per share dividend.

At the current 412p this group’s shares are a very firm hold.

(Profile 23.05.19 @ 174p set a Target Price of 250p*)

(Profile 25.01.21 @ 301.5p set a Target Price of 350p*)

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

Mark Watson-Mitchell: