Small Cap Catch-Up: DX, WNWD, BOWL and HERC

DX (Group) (LON:DX.) – A 9% Turn To Look For Within Weeks

H.I.G. European Capital Partners had until 5pm on Monday of this week to declare its intention to make an offer for this delivery and logistics group.

They did not make an offer, but instead issued a statement that with the support of DX’s management and Board, the private equity group has made substantial progress towards completing its confirmatory due diligence and preparing the documentation necessary to implement a firm offer.

To facilitate H.I.G. to finalise its due diligence, the company has requested, and the Takeover Panel has consented to, an extension to the Put Up or Shut Up (PUSU) Deadline.

In that case the £263m group could soon be in full receipt of the hinted 48.5p a share cash bid.

The shares, which are cheap anyway, closed last night at 43p which was up 0.5p on the day.

That was after a massive 5.5m shares were traded, more than three times better than the recent daily average.

Let us say that a bid came about at 48.5p, the market would probably bid 48p for stock to add to its books to take advantage of the cash turn.

Even buying at 44p would give a clear 9% uplift in price to go for.

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

Windward (LON:WNWD) – Use The War To Your Buying Advantage

If you recently missed out on the buying opportunity for this group, then now may well be the time to look to take out a position in the shares.

On Monday morning the Tel Aviv-based maritime AI company confirmed that the ongoing events in Israel are not expected to have a material impact on trading and the company’s offices globally remain fully operational. 

The company’s systems enable organisations to achieve business and operational readiness, with its AI-powered solution allowing stakeholders including banks, commodity traders, insurers, and major energy and shipping companies to make real-time, predictive intelligence-driven decisions, providing a 360° view of the maritime ecosystem and its broader impact on safety, security, finance, and business. 

Analysts at Canaccord Genuity rate the group’s shares as a Buy, with a Price Objective of 115p.

They have estimates out currently, looking for sales to rise 25% to $26.0 ($21.6m) while cutting losses to $8.6m ($12.7m).

For the next year they see sales of $31.2m helping to more than halve losses to just $4.1m.

This fast developing and highly technologically advanced company will, in my opinion, very soon show its ability for dynamic organic growth, such that its shares now down some 5p this week, at the current 62.5p look too appealing to ignore.

(Profile 03.04.23 @ 37.5p set a Target Price of 47p*)

Hollywood Bowl (LON:BOWL) – Trading Update Due

Is there a Trading Update due very soon from the UK’s largest ten-pin bowling operator.

It is also the second largest operator in the world.

This time last year the £418m capitalised company informed its shareholders of its business for the year to end September.

So, it is reasonable to expect the group to do similar again this year.

The half-year to end March saw a 20.7% lift-up in revenues, but only a 7.5% improvement in its adjusted pre-tax profits.

I have previously seen that Berenberg has a Buy rating on the group’s shares with an aim of 360p a share.

The consensus price objective across 7 analysts who follow the company is 350p, with each of them giving it a Buy.

Professional investors like the stock, especially abrdn, the investment management group, who hold a 17.1% stake in the group’s equity.

Other big holders include JP Morgan, Slater, Invesco, AXA, JO Hambro, Artemis, NFU, Schroder and Janus Henderson who in total must control well over 50% of the equity.

The group’s shares, after having been down to 216p in early August are currently treading water at around the 243.5p level.

The question now is whether the imminent Trading Update justify the faith of the analysts enough to lift the shares closer to my own Target Price?

(Profile 14.11.19 @ 240p set a Target Price of 300p*)

Bloomsbury Publishing (LON:BMY) – Giving Voice To The Unsayable

The big news this week from my favourite publishing group is that one of its authors, Jon Fosse, the Norwegian playwright, has been awarded the 2023 Nobel Prize for Literature.

The Nobel committee stated that he was awarded the citation “for his innovative plays and prose which give voice to the unsayable.”

He joins seven other Bloomsbury group authors to win the Nobel Prize.

The publisher a few weeks ago declared that it had launched one of the year’s most awaited children’s novels – Impossible Creatures – by Katherine Rundell.

Pre-orders for the book achieved the highest ever level for a hardback by the author.

In just over two weeks we will see the group declare its Interim Results to end August, which should show ongoing progress.

Current consensus market expectation for the year ending 29 February 2024 to be revenue of £273.1m and profit before taxation and highlighted items of £32.5m.

The shares, which have more than doubled in last three years, are currently trading at around 390p, compared with an average analyst consensus price objective of 545p.

The group’s equity is more than 85% held in institutional portfolios, which is a big pointer.

Nearly a year ago its shares were up to 492.5p and now look like a good pre-Christmas Buy to me.

(Profile 28.02.19 @ 231p set a Target Price of 257p*)

(Profile 27.03.19 @ 238p set a Target Price of 270p)

Journeo (LON:JNEO) – Balanced activity

Well, they almost got down to the 200p level that I predicted on 29^th September, just after the shares of this transport connectivity solutions group hit 243.60p.

Last Friday they dipped to a recent low of 204p, resting at 208p, before rising to 217p on Monday and closing last night at 226p.

The daily dealing volumes on Friday and Monday were several times the daily average, clearly indicating that expected profit-taking was mixed with cheap investment buying.

Readers by now will already know just how keen I am on this stock.

Its potential is massive, while its Management appears to be making the right moves to achieve more business, as well shown by the group’s recent acquisition of the Denmark-based MultiQ operation thereby enabling it to look to expand its Nordic revenues.

I repeat that analyst Andrew Renton at Cavendish Capital has a 338p Price Objective on the group’s shares.

He is estimating that the current year to end December will see revenues almost doubling to £41.7m (£21.1m) while adjusted pre-tax profits could be close to quadrupling to £3.7m (£1.0m), lifting earnings from 10.3p to 19.7p per share.

He sees even greater advances next year.

I would hope that the company will announce more business gains between now and the year end.

I’m holding tight. I do expect profit taking will continue, but will balanced out by gradual investor awareness of its value.

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

Hercules Site Services (LON:HERC) – Paying More Out Than It Earns

This labour supply company on Monday morning announced a five-year contract to provide Balfour Beatty Rail to provide a continue labour resource.

This contract kicks off a new division within the group, which is focused upon the provision of specialist rail labour on live track to clients.

CEO Brusk Korkmaz stated that: 

“This contract provides Hercules with an exciting new revenue stream which has strong potential for continued growth.

While we have previously provided personnel to deliver heavy civils and earthworks to pre-enable rail-based projects, this contract will see us recruit specialist rail labour on live track on behalf of a customer for the first time, opening up a wider range of opportunities for Hercules in the rail industry.

Given that we have worked with Balfour Beatty Group for many years, this news also demonstrates our ability to grow our total customer value due to the quality of the services we provide.

Additionally, it is important to highlight that the recent government announcement about the future of HS2 has no impact on our ongoing contracts for Phase One of HS2 between London and Birmingham.

Our work at this project continues to build momentum as we supply more contractors to site and with the launching of our new technical rail specialism, we are well placed to capture more value from future rail infrastructure projects.”

On Thursday of last week analyst Andrew Gibb, at Cavendish Capital, initiated a report on the group, with a Price Objective of 55p a share.

For the year to end September he estimates that the group saw revenues rise significantly to £73.2m (£49.5m) while its adjusted pre-tax profits collapsed to £0.2m (£0.7m) worth 1.3p (1.5p) per share in earnings, while the group will look to pay a dividend of 1.7p (1.7p) per share.

That is a very interesting situation, paying so much more in dividends than it actually earns, especially while its closing net cash estimate is a debit of £22.2m (£18.2m debit).

The £16.52m capitalised group was short of cash earlier this year when the shares were ‘spoofed’ higher., touching 73p just before a Placing ‘working capital’ raise of £1.7m @ 45p a share.

They are now almost half that price, closing last night at 25.5p.

I have previously stated that the shares had attractions – looking at those estimates I now have some serious doubts as to their value.

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

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