Small Cap catch-up highlighting Time Finance, TClarke and more

Time Finance (LON:TIME) – A Ticking Share Price Bomb!

Following yesterday’s interim results, the brokers to this alternative finance provider upgraded their estimates.

The group’s full year results are now expected to be significantly ahead of market expectations.

Analyst Andrew Renton at Cenkos Securities is now going for the group’s revenues to increase to £25.7m (£23.6m) for the year to end May 2023, helping to almost treble pre-tax profits to £3.2m (£1.1m) and generating 2.9p (1.0p) of earnings per share.

On those estimates alone the group’s shares at just 22.70p are good value, despite yesterday’s 10.7% price rise.

But when you see Renton’s estimates for the coming year you will soon realise just how undervalued the group’s shares are currently.

He is looking for total revenues to rise to £29.0m, pushing profits up to £4.6m, worth 3.9p per share in earnings.

When investors have taken a look at this £21m group I believe that they will view, like myself, that the shares are totally undervalued on such a low rating.

I stick firmly to my Target Price of 30p, which should be achieved within months.

(Profile 23.12.20 @ 21.5p set a Target Price of 30p*)

(Profile 07.01.22 @ 23.5p set a Target Price of 30p)

Van Elle Holdings (LON:VANL) – Digging Deeper For Piling Specialist Drives Record Revenues

Capitalised at £55m, Van Elle is the UK’s largest specialist geotechnical engineering contractor.

The company provides a range of ground engineering techniques and services including – ground investigation, general and specialist piling, rail geotechnical engineering, modular foundations, and ground improvement and stabilisation services.

It is focused on three end markets: residential and housing, infrastructure and regional construction.

Van Elle Holdings has a market-leading reputation and with 122 rigs it is the UK’s largest rig fleet operator.

The interim results to end October 2022 showed revenues of £80.8m (£60.1m), with pre-tax profits of £3.3m (£1.9m) generating halftime earnings at 2.6p (1.4p) per share.

The group’s order book at the end of December was £38.3m, however in the short-term the Housing sector is due to deliver lower volumes, while the group’s Infrastructure and Construction markets remain healthy.

CEO Mark Cutler stated that:

“Strong trading momentum was sustained throughout the Period despite a challenging macro environment. All divisions operated at high activity levels throughout.

Van Elle is well positioned to benefit from opportunities across its breadth of end markets and diverse customer base. The Board therefore remains confident in the delivery of our medium-term strategy, and in achieving market expectations for the full year.”

Analysts Andy Hanson and Carl Smith at Zeus Capital have estimates out for the current year to end April 2023 for revenues of £144.2m (£124.9m) and adjusted pre-tax profits of £5.2m (£3.6m), generating 3.9p (2.7p) earnings and covering a 1.2p (1.0p) dividend per share.

They see lower sales for the coming year, falling to £134.1m, but with improving profits of £6.0m, worth 4.2p per share in earnings and with a 1.7p per share dividend.

For the 2025 the analysts estimate £136.1m sales, £6.6m profits, 4.6p earnings and a 1.9p dividend.

The Zeus Capital valuation estimate is 63.1p per share.

Despite the difficult trading environment, the company has been digging deep and its margins are driving higher profits, justifying the current price of 50.5p.

(Profile 29.03.21 @ 37.5p set a Target Price of 47p*)

discoverIE Group (LON:DSCV) – Ahead Of Expectations

The Third Quarter Trading Update from this designer and manufacturer of customised electronics to industry announced on Wednesday, showed a positive trading momentum throughout the period.

The £800m capitalised group, which supplies customer-specific electronic products and solutions to original equipment manufacturers, stated that the strong order book, which was ahead of last year, provided good visibility of demand.

The group declared that it was on track to deliver full year underlying earnings ahead of expectations.

Analyst Guy Hewett at brokers finnCap upgraded his current year earnings estimates to 33.1p per share.

For the year to end March 2023 he is going for group revenues of £433.3m (£379.2m), adjusted pre-tax profits of £43.8m (£37.6m) taking earnings up to 33.1p (29.4p), covering a dividend of 11.3p (10.8p) per share.

The coming year could see £445.8m sales, £44.6m profits, 33.7p earnings and a dividend of 11.9p per share.

Hewett’s price objective is 1220p.

At the current 835p the group’s shares reflect that it has coped with the headwinds and is continuing to progress.

(Profile 08.08.19 @ 438p set a Target Price of 550p*)

TClarke (LON:CTO) – Ongoing Strength

The 2022 trading year for this building services group was helped by a strong second half showing.

The group expects to report a 30% improved turnover of some £425m and pre-tax profits of about £10.3m (£7.8m).

The group’s order book has seen further increases to £555m (£534m), while year-end cash was £22.5m (£20.3m), with net assets of the group being around £38m compared to its £62m market capitalisation.

Analyst Andrew Gibb at Cenkos Securities, the group’s broker, rates the shares as a Buy, looking for them to reflect the medium-term growth opportunities and its market position.

His estimates for the current year are for £500m revenues, £10.5m profits and 18.9p per share in earnings, enabling a well-covered dividend of 5.9p per share.

The group’s shares were 10p better yesterday after the news, closing at 140p.

I see them rising back up through the 165p level again.

(Profile 10.12.19 @ 120p set a Target Price of 165p*)

Fuller Smith & Turner (LON:FSTA) – Pub Group Issues Warning

Earlier this week the pubs group delivered a profit warning, but brokers Peel Hunt are looking for a re-rating when the train strikes subside and inflationary pressures ease.

The group reported that during the four-week Christmas and new year period, like-for-like sales fell 5% against pre-pandemic levels.

However, analyst Douglas Jack is keeping his price objective of 600p on the shares.

He stated that:

“Fuller’s is blaming the train strikes for its performance. It has stated many times in the recent past that it benefits from having a balanced portfolio of pubs inside and outside London.”

Reflecting the group’s higher interest costs the analyst has downgraded the group’s pre-tax profit estimates for 2023 by 35% and then down 20% for 2024.

The ongoing strike action will dampen sales, while it is apparent that demand from the group’s customers is still good.

The shares at the current 491.5p look expensive for a while yet.

(Profile 17.08.20 @ 600p set a Target Price of 700p*)

Audioboom Group (LON:BOOM) – Shouting Louder

With its shows being downloaded more than 130m times each month by 34m unique listeners globally Audioboom is ranked as the fourth largest podcast publisher in the US by Edison Research.

It has operations and global partnerships across North America, Europe, Asia and Australia.

The group’s platform allows content to be distributed via Apple Podcasts, Spotify, Pandora, Amazon Music, Deezer, Google Podcasts, iHeartRadio, RadioPublic, Saavn, Stitcher, Facebook and Twitter as well as through a partner’s own websites and mobile apps. 

On Monday of this week the company reported its 2022 Trading Update, showing revenues up 25% at $75.5m, while its current year advertising bookings are already contracted at $44m.

Chairman Michael Tobin stated that:

“The challenging economic conditions in which Audioboom operated during 2022 prevented even stronger financial growth in line with our initial expectations. However, with Q4 revenue of US$18.4m being 14% up on Q3, and all three of our KPIs showing positive quarterly growth in the final quarter, I am confident that the business is not just showing good resilience, but is moving forward, fully primed for further growth as the advertising market improves across 2023.”

Analyst Michael Hill at brokers finnCap has a price objective out on this group’s shares, almost four times higher than the current share price. Looking for 1500p against the closing price last night of 400p looks fanciful – but there again perhaps not considering that they have been as high as 2278p less than a year ago.

But that was based upon a lot of garish US-inspired price-spoofing, in my view.

Getting down to basics though sees Hill estimating $82.8m (est $75.5m) revenues for the year to end December 2023, with adjusted pre-tax profits of $3.6m (est $3.2m), taking earnings up to 20.2c (est 18.0c) per share.

The shares, which touched 470p each just twenty days ago, are now trading well below that level and could well be worth a gambling punt on upward price action, despite the very high rating.

(Profile 09.07.19 @ 210p did not set a Target Price)

Cohort (LON:CHRT) – Investor Presentation Next Wednesday

This £220m independent technology group which comprises six military, electronics and intelligence development operations spread across the UK, Germany and Portugal is an old favourite of mine.

I was interested to note that Equity Development is arranging for Cohort’s senior management to give an Investor Presentation that covers the group’s ambitions and recent interim results, as well as giving experienced insight into the defence threats currently facing the world.

The event will take place at 11.00am on Wednesday 1st February.

The group’s shares are currently 531p each and not yet reflecting the company’s return to growth that should see it reporting revenues to end April 2023 of £165.9m (£137.8m) and pre-tax profits of £17.6m (£14.7m), with earnings of 35.0p (31.1p) and a dividend of 13.4p (12.2p) per share.

For the coming year analysts Andy Chambers and Natalya Davies at Edison Investment Research are estimating £179.7m sales, £19.6m profits, 36.5p earnings and a 14.7p dividend.

Hopefully the presentation will help to alert investors to the group’s growth prospects and drive the shares higher again.

(Profile 06.08.19 @ 446p set a Target Price of 607p*)

Staffline Group Holdings (LON:STAF) – Solid 2022 Performance But Broker Slashes Target

The recruitment and training group reported a stronger second half in 2022, enabling a solid showing for the year.

Revenue increase of 0.4% was driven by new client wins, including BMW and the MOJ during the year, while the group’s underlying operating profit was up 12.6% at £11.6m.

The group reported that trading across the year had remained solid, particularly in the second half, with underlying operating profit marginally ahead, and cash flows substantially ahead of market expectations.

The principal activities of the company include the provision of recruitment and outsourced human resource services to industry and the provision of skills and employment training and support.

CEO Albert Ellis stated that:

” These results not only reinforce Staffline’s position as a market leader in terms of organic growth but underscore the clear benefits of its highly cash generative business model.

As the UK cost of living crisis deepens and the much-publicised global macro headwinds continue to swirl, there is no question that our core markets have become more challenging.

Whilst we are mindful of the challenges ahead, we firmly believe Staffline, supported by our sizeable market footprint, sector diversity, and unrivalled track record in service delivery and innovation, remains well placed to capitalise on considerable market opportunities and further grow our market share.”

Analysts Joe Brent and Alex O’Hanlon at Liberum Capital, the group’s NOMAD and joint broker, still rate the group’s shares as a Buy, but dropped their target price from 100p to just 60p a share.

For the year to end December their estimates are for £947m (£943m) sales, while pre-tax profits are in at £9.0m (£7.9m), with earnings of 4.75p (7.12p) per share.

For the current year they are now going for £998m sales, easing profits down to £6.8m, worth only 3.12p per share in earnings.

In the light of the current environment the £55m group could well be treading water for a while. Its shares at 33p could be doing likewise.

(Profile 14.06.21 @ 64p set a Target Price of 80p)

And finally ………

Inland Homes (LON:INL) – An Absolute Disaster

The Trading Update from this AIM-listed housebuilding and development group was far more than disappointing.

The major slowdown in the UK housing market has hit the ‘brownfields’ developer for six, with it now expected to report a £91m mega-loss for the year to end September 2022.

It had previously been leading the market to anticipate a £37.1m negative.

That compares to the group having made a £13.2m profit the year before.

As regular readers will know by now, I have been a long-term fan of the Inland key players, having followed them closely since the early part of this century. They built up and sold off, very successfully, the Country & Metropolitan Properties group before setting up Inland Homes.

The deterioration in the UK housing sector together with substantially higher mortgage rates, coupled with the rising cost of living generally has helped to decimate its market place.

The £41m capitalised group’s shares are now down to 11p and looking friendless – sorry.

I have to admit that my record for Master Investor readers on this stock is totally appalling.

However, at this price I would be loathe to sell, even now the group’s net assets are probably worth over three times that price.

(Profile 13.08.19 @ 68p set a Target Price of 110p)

(Profile 24.10.19 @ 77p set a Target Price of 110p)

(Profile 29.10.21 @ 46.5p set a Target Price of 60p)

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