Small Cap catch-up featuring RPS, CODE, CARR and others

RPS Group (LON:RPS) – an early Christmas present

On Monday the WSP Group Holdings, one of the world’s leading professional services groups, gave an early Christmas present to the shareholders in the RPS Group.

It has offered 206p a share in cash for each RPS share, in a recommended £591.1m bid.

That cash price represented a massive 76% improvement on the RPS closing price of 117p and a substantial 94% increase on the volume-weighted average price of 106p over the previous 90-day period.

Wow that is a very generous offer and Master Investor readers who got in to the shares in May last year upon my Profile on the group, will be up a clear 134% in just over fifteen months – an absolutely cracking return on your investment.

And what is more the two companies coming together looks to be a superb fit.

RPS is a diversified and well-recognised global professional services firm of some 5,000 talented employees including consultants, designers, planners, engineers, and technical specialists. As an established, technology enabled consultancy that operates across a range of sectors, RPS provides specialist services to government and private sector clients with a focus on front-end consulting.

Whereas the WSP Group, the Toronto-quoted group with around 57,500 professionals, is one of the world’s leading professional services firms. It provides strategic advisory, engineering, and design services to clients in the transportation, infrastructure, earth & environment, building, power, energy, water, mining, and resources sectors.

The Chairman of RPS, Ken Laver, stated that:

“This is a compelling offer from WSP which fully values the business and its future prospects. It represents a highly attractive premium to recent trading levels and provides certain value in cash today for RPS Shareholders.”

The RPS Group shares are currently trading at around the 205p selling level, which looks to me to be a ‘no-brainer’ instant sale into the market, as opposed to waiting for various Authority approvals.

Take the cash now and reinvest it immediately into some of the many ‘cheap’ situation stocks that are currently on offer.

(Profile 05.05.21 @ 88p set a Target Price of 110p*)

Northcoders Group (LON:CODE) – time to pick up more stock

On Tuesday morning this software coding training programme provider that it had been awarded another useful contract.

The company has secured £4m of funding from the Department of Education to teach software development and also for its Data Engineering unit. To be used to grant scholarships to train individuals on their market-leading bootcamps.

The group’s CEO, Chris Hill, stated that:

“I am delighted that Northcoders been able to secure this additional £4m government funding through the Department for Education. As well as providing the company with additional revenue visibility, it also demonstrates how well-regarded our technology training courses are in the UK.

“With one of the company’s core values being to improve diversity and inclusion within the tech industry, Northcoders are pleased to continue to offer these scholarships that provide accessibility to people from all walks of life across the UK whilst helping address the significant UK digital skills gap.”

Analyst Nick Spoliar at WH Ireland, the group’s broker and NOMAD, sees revenues doubling in the current year to end December, from £3.0m to £6.5m and then increase even further next year to around £10.5m.

During those years adjusted pre-tax profits could rise to £0.8m then up to £3.2m in 2022 and 2023 respectively.

That will see earnings rise to 9.6p this year and then 36.6p next year.

Spoliar has a ‘fair value’ out on the shares of 320p, which is very conservative in my view.

I just love this situation stock, as far as I am concerned, I see that it is now firmly on an upwards run and that it shares, currently at 283p, could easily hit 500p within the next year or two.

Short to medium-term investors should be picking stock up at around the current levels.

(Profile 28.01.22 @ 296p set a Target Price of 370p*)

Carrs Group (LON:ARR) – despite its price pressures it is plodding onwards.

It is never going to set the world alight, but I do like the strong conservative feel that it portrays.

Carr’s is an international leader in manufacturing value added products and solutions, with market leading brands and robust market positions in Agriculture and Engineering, supplying customers in over 50 countries around the world.   

Its Speciality Agriculture division manufactures and supplies feed blocks, minerals and boluses containing trace metals and minerals for livestock.

The Agricultural Supplies division manufactures compound animal feed, distributes farm machinery and runs a UK network of rural stores, providing a one-stop shop for the farming community.

Its Engineering division designs and manufactures pressure vessels, manufactures precision components from specialist steel alloys, manufactures robotic manipulators, and provides engineering design, assembly, and installation services for the nuclear, defence and oil & gas industries.

In the first 22-weeks to 30 July the group’s overall trading performance was up to expectations.

On the Speciality Agriculture side, despite raw material prices rising, it has managed to improve its sales margins as those price rises were passed on to its customers. The UK and Ireland markets were good, while in the US the drought-reduced cattle herds did impact business.

Agricultural supplies traded well in retail and machinery.

In Engineering it had a strong order book but performed below expectations, due to supply chain delays and ongoing completion costs.

At the beginning of the year the group embarked upon a strategic review of its operations, the report is due soon.

Anne Margaret Crow at Edison Investment Research has estimates out for the current year to the end of August to show revenues up from £417.3m to £477.6m, while pre-tax profits could be £17.3m (£16.6m), with earnings slightly lower at 12.7p (13.2p) per share. However, she expects the dividend to rise from 5.0p to 5.2p per share.

Cautiously she looks for £478.6m of sales for the coming year, with £17.9m profits worth 12.9p in earnings and easily covering a 5.4p dividend per share.

The group’s shares are currently bouncing around the lower part of the 120p to 160p range, now at 133p. At that level they are trading on a modest 10.4 times price-to-earnings ratio and yielding a healthy 3.9%.

Having profiled the group twice now at around the 152p level, I remain hopeful that such steady value will appeal to other investors.

Perhaps the report will shake things up a bit.

(Profile 11.07.19 @ 153p set a Target Price of 200p)

(Profile 17.01.22 @ 152p set a Target Price of 185p)

And finally …

Next week we should be seeing the latest Interim results being announced by Tribal Group (LON:TRB) – that is on Tuesday 16 August.

The provider of software and services to the international education market has recently been winning new contracts.

Sales momentum is currently positive but there may well have been a first-half impact on margins due to a major customer implementation.

Analyst Harold Evans at Singer Capital currently has a Buy out on the shares, now 87.5p, with a 142p price objective.

(Profile 11.11.20 @ 65p set a Target Price of 80p*)

On Thursday 18 August Capital Limited (LON:CAPD) – should be declaring its Interim results

From its late June low of 75p the group‘s shares have been on a steady climb back up again, now at 95.6p ahead of the figures.

The high of 108p peaked in early April may appear to be a market target but I am now wary of more shares being unloaded onto the market as the price moves.

Tamesis Partners have a current year revenue estimate for the mining services group of $274.9m, which would be a record figure. In mid-July they had a price objective on the shares at 160p each.

(Profile 23.07.19 @ 48p set a Target Price of 76p*)

(Profile 22.10.19 @ 60p set a Target Price of 100p*)

(Profile 03.08.20 @ 77.5p set a Target Price of 100p*)

And on Friday 19 August my favourite shipbroking group Braemar Shipping Services (LON:BMS) is due to hold its AGM for its year to end March 2022, however we have not yet seen the published accounts – an unusual situation.

The restructuring of the group by its relatively new management is proceeding at quite a pace, hence the accounts hassles on implanting new acquisitions into the fold.

I still see the shares as significantly undervalued at just 260p.

(Profile 05.12.19 @ 185p set a Target Price of 250p*)

(Profile 20.05.20 @ 99p set a Target Price of 150p*)

(Asterisks * denote that Trading Prices have been achieved since Profile Publication)