Small-Cap catch-up featuring SNWS, PIER, GFRD, and RPS

Smiths News (LON:SNWS) – on 2.7x pe and 14.0% yield

Following last Thursday’s announcement of its post-close Trading Update, the UK’s largest newspaper and magazine distributor’s valuation has been upgraded by analyst Andy Murphy at Edison Investment Research.

In November he is looking for the £72m group to report revenues down slightly at £1.08bn (£1.11bn), with pre-tax profits of £31.3m (£31.9m), earnings of 11.1p (11.3p but an almost trebled dividend payment of 4.2p (1.5p) per share.

The group took a big hit when McColl’s went into administration, despite that Murphy has increased his valuation on the shares from 92p to 94p per share – not too much of an increase you might say, but they are a mere 29p in the market!

We will obviously get more detail in November, when the company reports its full figures.

In the meantime, its shares at 30.25p are trading on 2.7 times price-to-earnings and yielding a potential 14.0% for the year.

Now that is cheap.

(Profile 24.07.20 @ 20.25p set a Target Price of 27p*)

(Profile 24.06.21 @ 39.5p set a Target Price of 55p)

The Brighton Pier Group (LON:PIER) – market is too bearish

Well, it appears that this entertainment venue business did well in the first twelve months of its extended trading period to end December this year.

Revenues in the year rose from £13.5m to an impressive £40.1m, which was some 25% better than the 2019 pre-Covid levels.

Pre-tax profits were up from £4.1m to £7.3m, generating earnings of 15.4p (11.3p) per share.

In that year the group’s net debt fell from £13.3m to just £5.0m. By the end of August it had fallen even further, down to just £2.0m clearly identifying the basic cash generation by the group as a whole.

It seems that all sides of the group’s operations did better than expected – but will that continue?

That is the big question.

In describing its outlook for the period to the end of this year the management is influenced somewhat by the uncertain performance of the UK economy and the discretionary spend of the group’s various customers.

CEO Anne Ackord stated that:

“The group’s strong recovery following the COVID pandemic has resulted in sales of more than £40m for the first time in the group’s history.

This exceptional period has benefitted both from pent-up customer demand and from hospitality-targeted Government recovery packages. The ongoing cash-generative nature of the group’s diverse businesses and strong balance sheet add resilience to The Brighton Pier Group.

Nevertheless, as we enter into unchartered waters, economic headwinds make it difficult to predict both costs and consumer demand, so our outlook for the future must be one of caution.”

Analyst Peter Renton at Cenkos Securities, the group’s NOMAD and broker, still rates the £21m capitalised group’s shares as a Buy.

They fell from 70p to as low as 55p on Monday, in reaction to the results news.

They closed last night at 60p which in my view still undervalues the group. However, I question the management’s way of reshaping its results presentation – the fallout from which has effectively devastated the share price.

(Profile 30.06.21 @ 61p set a Target Price of 75p*)

Galliford Try Holdings (LON:GFRD) – is this giving money away?

Analyst Joe Brent, at Liberum Capital, is very bullish about this buildings and infrastructure group.

Rating them as a Buy, he has set a price objective of 270p on its shares, which is some 70% higher than the current share price of159.5p.

On Wednesday of last week, the group reported its results to end June – they showed revenues up from £1.12bn to £1.24bn, while its pre-tax profits rose 68% to £19.1m (£11.4m), earnings were up from 9.5p to 16.0p per share, with the dividend of 8.0p against 4.7p previously.

Brent values the sum of the group’s parts at 270p, some 43p a share for its PPP investments, about 158p a share for its net cash position and the balance in assessment of its trading performance.

His current year estimates for the period to end June 2023 is £1.39bn revenues, £23.3m profits, 16.67p earnings and a dividend of 8.34p a share.

Considering that the group’s shares are only 155p, trading on under 9 times current year earnings and yielding a potential 5.4% – backed by so much value – they are excellent value for any growth portfolio.

I stick firmly with my own price aim.

(Profile 02.02.22 @ 178p set a Target Price of 220p)

Iofina (LON:IOF) – an excellent dollar play

The interim results from this specialist in the exploration and production of iodine and manufacturer of specialty chemical products did not please the market.

For the six months to the end of June the group reported revenues down 4% to $19.2m ($19.9m) while its pre-tax profit fell 34% to $2.6m ($3.5m).

After the results were announced on Monday, the group’s shares fell 15% to 22.25p on the back of some 4m shares traded, almost eight times the average daily figure.

However, on looking at the estimates from analyst Jonathan Wright at brokers finnCap, I would suggest that the market may well have misread the announcement.

Wright is going for sales to increase to $41.9m ($39.0m) for the year, lifting adjusted pre-tax profits to $6.5m ($4.9m), with earnings of 2.5c per share.

The coming year is seen by finnCap to lift takings up to $48.1m, profits to $8.2m and earnings to 3.2c per share.

Wright has an increased price objective of 33p per share.

The shares of Iofina represent a very interesting under-rated dollar play.

(Profile 29.07.20 @ 13.5p set a Target Price of 18p*)

Billington Holdings (LON:BILN) – time to buy more

Looking for trebled adjusted pre-tax profits for the year to end December, from £1.3m to £3.9m, that is the analyst’s estimates for this structural steel, safety solutions and protective coatings group.

David Buxton at brokers finnCap raised his estimates and his price objective on the back of the group’s interims announced yesterday.

On speaking with the company’s CEO and CFO I came away equally as bullish as I was last week when I mentioned the company ahead of the results.

Buxton now has a 320p aim against 270p previously.

His profit estimate for this year is worth 26.4p in earnings and paying a dividend of 8.0p per share.

For the coming year his figures are for £115.0m sales, £4.8m profits, 32.1p of earnings and a healthy 10.0p dividend.

In my view this group’s shares are significantly undervalued at the current 215p, which is why I would even suggest holders could average at this price level.

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

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

And finally …..

RPS Group (LON:PRS) – a 165% gain in sixteen months but is there more to come?

The recommended cash bid of 222p a share for the professional services group from Tetra Tech looks to have sealed the deal on a near 8% higher offer than that of WSP. But has it?

The RPS Board has now withdrawn its recommendation for the WSP bid, understandably.

The group’s shares are suggesting a higher offer may well ensue, with its shares climbing 15% since Monday’s bid to close at 234p.

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

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