Small-Cap catch-up: MACF, BMS, VTU and CTO

Macfarlane Group (LON:MACF) – looking very good value on hopes for 2022

The Trading Update issued ahead of this week’s AGM was good news.

Despite inflationary pressures, the protective packaging specialist has seen its management coping well with perceived current and future hassles.

It is already expecting its e-commerce retail sector sales to weaken over the rest of the year.

However, to balance that off it has been winning new business wins from within its industrial and hospitality sector customer lists.

Trading in the first part of the year has been good, with sales and profits ahead of the same period last year.

Against such a difficult scenario it is impressive to see that the group expects to meet market estimates.

Analysts Robin Speakman and Akhil Patel at Shore Capital Markets have positively estimated revenues for the current year to end December to rise to £278.5m (£264.5m), while adjusted pre-tax profits will be slightly better at £22.5m (£22.0m), with earnings at 11.3p (10.7p) and paying a 3.4p (3.2p) dividend per share.

Chairman Stuart Paterson informed shareholders that:

“We have consistently demonstrated our ability to address the challenges in the market and we are confident that the effectiveness of our strategy, the quality of our people and the resilience of our business model will ensure 2022 will be another year of growth for Macfarlane.”

I continue to rate this group. It is what I really like about the ‘Small-Cap’ sector – basic and necessary business that does not need to thrive on hype but instead upon selling into a marketplace that requires honest well-priced products.

Its shares deserve to be a great deal higher than the current 117p. They were trading up at 146p in late September last year, in my view that is where they should be headed in due course.

(Profile 08.07.20 @ 77p set a Target Price of 100p*)

Braemar Shipping Services (LON:BMS) – shares ready to sail away

Seeing the statement out earlier this week from shipping market peer group giant Clarkson reminded me that Braemar is due to be announcing its full year results, to end of February, on 25 May.

Clarkson is apparently going like a train, so I would expect to hear very similar comment coming from this shipbroking, investment, chartering and risk management specialist.

We have already been informed that it enjoyed strong trading in its last year, while its start to the current year has seen the strong trends being continued.

About this time last year, the group’s shares were trading up at 323p, since when the equity market has endured various ups and downs, as too have its shares.

Touching a 198p low late last November, they have subsequently improved to trade around the current 260p level.

I am a big fan of this group and the sector in which it trades, accordingly I consider that its shares are undervalued ahead of the full year results being published in less than two weeks’ time.

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

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

Vertu Motors (LON:VTU) – supply shortages continue but shares still look cheap

Now with some 160 sales and aftersales outlets, this group is one of the UK’s biggest automotive retailers.

It had a cracking year to end February 2022, with adjusted pre-tax profits leaping from £24.6m to £80.7m, on the back of a £3.61bn revenue.

However, this current year could well see profits being just over 40% of the 2022-year figure.

Analysts Mike Allen and Rachel Birkett, at the group’s brokers Zeus Capital, estimate profits of £35.4m on £3.68bn sales, worth 7.5p in earnings per share.

Shortfalls in the supply of both new and used vehicles are likely to continue for some time, with production hassles not helping.

But it has to be stated that this group is well placed with a strong balance sheet and management.

Over the next few years both sales and profits will improve again.

Its shares, which hit 75.8p in January this year, are now back to 48.5p and undervalued.

Its AGM is due to be held on 22 June, by when we could see its shares rising again.

(Profile 12.10.20 @ 30.5p set a Target Price of 40p*)

TClarke (LON:CTO) – data centres business growing fast

This group is a nationwide specialist in electrical and engineering services. It covers span design, installation, commissioning, and maintenance. It provides its services to the UK construction sector.

At Wednesday’s AGM, investors were told that trading for the 2022 has started strongly, with its orders flowing in very well.

On 30 April its high-quality order book stood at a record high of £585m, which compares with the end 2021 figure of £472m.

It would appear the growth of its data centre business, a relatively new activity for the group, has been building up impressively. It is expected to account for a third of the group’s business by the end of this current year. More growth from this side can be expected.

Market estimates for the group this year centre around £410m of sales and an EBITDA of £13.9m, pumping earnings up to 21p per share.

Those estimates compare with the current 153.5p share price for this £666m capitalised group.

The group’s interim results, to end June, will be announced on 14 July.

Its shares peaked at 186p late last September, a level at which I consider they will be trading very soon.

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

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