Small Cap Catch-Up: Luxury Cars, The Cloud, Cruise Ports And Legal Services

Aston Martin Lagonda Global Holdings (LON:AML) – Yew Tree’s Incredible ‘Covered Short’ Play

Well, you have to take your hat off to Lawrence Stroll and his investing colleagues in the Yew Tree Consortium.

In mid-May they sold some 42m shares in the luxury car maker to Geely Holding at 335p each, at the same time Geely also agreed to subscribe for around 28m new shares in AML at the same price.

That overall agreement increased Geely’s stake in the group to around 17%.

Last Thursday Yew Tree agreed to purchase a further 3.27% of the group, some 26m new shares in the company, taking its stake to 26.23% of the AML equity.

Executive Chairman Stroll stated that:

“The Yew Tree Consortium is delighted to increase its ownership in the Company by 3.27%. 

This additional investment demonstrates the Yew Tree Consortium’s continuing confidence and belief in the future of Aston Martin. 

The Company has delivered a major turnaround since the Yew Tree Consortium’s initial investment three years ago. 

We have rebuilt this iconic company, transforming it into an ultra-luxury brand, with a portfolio of highly desirable, performance-driven cars. 

This increased investment demonstrates our continuing, long-term commitment to the Company, our conviction for the future and the shareholder value the Company will deliver.” 

We do not know, as yet, the terms of the investment agreement because the regulatory announcements with respect to this purchase by the Yew Tree Consortium will be made in due course.

The group’s shares closed at 261p on Thursday evening.

So, could this have been a really excellent bear tack by Yew Tree – sell at 335p and buy back two-thirds at say 265p? Or even at the 297.20p at which they peaked on Friday after the news.

After some 2m were traded on Friday, the shares actually closed the day 10% higher at 285.80p – which would have made that sale and buyback a really cracking trade.

Well done Lawrence and Yew Tree.

Now let us see just how well the car maker will trade out in the balance of this year to end December, before going strongly forward through into 2024 and 2025.

I remain a big fan of the situation, having faith in Stroll and his Management Team to drive new levels of operational excellence to support the group’s growth going forward.

The shares look to be a good short-term buy at these levels, while never discounting the strong possibility that the China-based Geely Holdings will bid for the entire £2.75bn capitalised group before the profits start to really roll back in again.

Remember that the shares touched 396p at the end of July this year, at 285.80p they just have to offer some massive upside opportunity.

(Profile 10.05.23 @ 213.5p set a Target Price of 265p*)

Beeks Financial Cloud (LON:BKS) – Build, Connect, Analyse

My Profile at the start of March this year on this cloud computing and connectivity provider for the financial markets was far too early, however I still rate its shares as a potential winner.

Using innovative trading solutions and a growing network of global data centres, Beeks supports its operations and ecosystems by delivering low-latency compute, connectivity and analytics, on-demand.

Its cloud-based Infrastructure-as-a-Service (IaaS) model allows financial organisations the flexibility and agility to deploy and connect to exchanges, trading venues and cloud service providers at a fraction of the cost of building their own networks and infrastructure. 

The £65.6m capitalised company has cross-connects to some 200 trading venues and it leverages 3rd party data centres across the globe.

In the middle of last month its Colo 2.0 system for the Johannesburg Stock Exchange went live, some three months after winning the contract.

The group will be holding an Investor Meet presentation this coming Thursday.

Early last month, when declaring the group’s end-June year’s Trading Update, CEO Gordon McArthur stated that: 

“FY23 was a year of double-digit growth and one in which we continued to expand the pipeline across each of our offerings.

With two Exchange Cloud contracts now secured following the addition of the JSE in the year, and many more in discussion, we remain confident in the opportunity ahead, as we capitalise on our unique cloud computing offering for the global financial services industry.

We have entered the new year with high levels of revenue visibility and strong momentum and thus remain in line with management expectations for FY24, with further upside potential from new client wins.”

Analysts Kai Korschelt, Hayley Palmer and Minal Patel at Canaccord Genuity Capital Markets rate the shares as a Buy, with a Price Objective of 220p.

Prior to Friday morning’s notice of results announcement they were estimating £25.0m (£18.3m) sales, with £3.1m (£2.1m) adjusted pre-tax profits, generating earnings of 4.7p (5.0p) per share.

For the year now underway their indications are for £30.0m revenues, £4.1m profits and 5.5p per share in earnings.

They rate the group’s shares as an undervalued growth stock, reckoning that Beeks’ IaaS offering continues to benefit from the capital market trading ecosystem’s move to the cloud, combining attractive double-digit organic growth and a high/>80% recurring revenue share.

The shares touched 152p five days after my Profile before subsequently just continually falling away, closing on Friday night at only 89p, which now makes them a particularly attractive developing stock not to be missed.

(Profile 01.03.23 @ 145p set a Target Price of 180p)

Global Ports Holding (LON:GPH) – Shares Up 7.14% On Friday

The shares of the world’s largest independent cruise port operator responded very well on Friday to the news that the company had issued $330m of secured private placement notes to insurance companies and long-term asset managers at a fixed coupon of 7.87%.

Impressively the Notes received an investment grade credit rating from two rating agencies and will fully amortise over 17 years, with a weighted average maturity of some 13 years.

The additional capital will be used to continue the group’s expansion, while lowering its interest expenses and lengthening its debt maturity.

Analyst Greg Johnson at Shore Capital Markets considers this funding as positive, looking for the current year to end March 2024 to record revenues of $149.4m ($117.4m), more than quadrupling adjusted profits to $12.5m ($3.0m) and generating 4.5c in earnings against last year’s loss of 21c per share.

We should be getting the half-timers being declared next month, with, hopefully, a corporate update to help shift the shares into a higher gear.

Remember the analysts have a 400p a share ‘fair value’ out currently, compared to Friday’s closing price of 240p (up 16p on the day).

Hold very tight.

(Profile 13.07.20 @74.8p set a Target Price of 100p*)

DWF Group (LON:DWF) – Sell In The Market And Reinvest Today

I have been asked by several readers what to do with holdings in this legal services group which is currently subject to a bid from Inflexion Private Equity Partners.

My view is that you should just sell your holdings into the market at around 99p a share and reinvest immediately.

If you don’t do so you will have to wait until closer to the end of the month to get your proceeds, during which time you could well miss out on turns showing through elsewhere in the market.

So reinvest now – I suggest that both SRT Marines Systems (LON:SRT) and Windward (LON:WNWD) would be two good buying choices.

(Profile 01.06.20 @ 67p set a Target Price of 100p*)

(Profile 28.06.23 @ 56.5p set no Target Price but noted significant undervaluation)

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