Small Cap Catch-Up: Marine Domain Awareness, Newspapers And More
SRT Marine Services (LON:SRT) – Looking For A 1200% Plus Leap In Earnings
I am looking forward to seeing just what CEO Simon Tucker has to tell shareholders in his group when it reports its Interim Results on Monday 20th November.
The group, which is a global provider of integrated maritime surveillance systems and digital navigation safety transceivers, develops and supplies automatic identification systems (AIS) based maritime domain awareness technologies, products, and systems.
Its systems are used by coast guards, fishery authorities, infrastructure and vessel owners for the purposes of managing and controlling their maritime domains.
Their applications include security, safety, search & rescue, law enforcement, fisheries management, illegal fishing detection, environment monitoring and general navigation safety.
The company offers systems, such as DAS-Digital ATON, a system that enhance port and waterway traffic control and navigation safety; NAIS-National Vessel Tracking System, a vessel identification and tracking system solution; MDM-Coastguard, a maritime domain surveillance system; VMS-Fisheries, a system for monitoring, managing, and controlling fishing vessels; and VTS-Ports and Waterways, a monitoring, managing, and controlling system for maritime infrastructure, ports, and waterways.
It also provides AIS Aids, VMS, search and rescue, vessel, and navigation transceivers; small boat trackers; fishing buoy trackers; base stations; display and data solutions; satellite data solutions; OEM AIS transceivers; and AIS transceiver modules, as well as develops and sells maritime communication products and systems.
The company’s solutions are used in a range of maritime applications, such as maritime safety, security, management, and efficiency in waterways, ports and infrastructures, coasts, and open ocean.
It serves mariners, infrastructure owners, coast guards, and fishing authorities in the United Kingdom, rest of Europe, the Middle East, North America, South East Asia, and internationally.
The first half of the current year to end March 2024 is expected to show that the group has been spending time, effort and capital getting itself ready to deliver in the second half against some very big orders.
The Systems side of the £77m capitalised group has an Order Book of some £160m value, while its Transceivers division is also building new business at quite a pace.
In early October upon the Half Year Trading Update, CEO Simon Tucker stated that:
“For the first time we benefit from a substantial contract order book of £160m, with well-formed implementation schedules which in turn provide much improved financial reporting visibility and thus confidence for this financial year.
Of course, this scale of growth and the nature of our customers are not without timing risks and challenges, however our many years of experience and diligent preparations during this period are enabling us to manage and mitigate these risks and continue to be the reliable supplier of transceivers and surveillance systems that customers around the have come to expect from SRT.”
Analysts Kimberley Carstens and Michael Hill at Cavendish Capital are very positive about the group’s prospects.
Their current year estimates suggest a 230% leap in revenues to £70.9m (£30.5m) while looking for a mega-turnaround from last year’s adjusted pre-tax loss of just £0.2m to a massive £8.1m profit, which should see earnings per share leap more than twelve times to 3.8p (0.3p).
The good times will, it is predicted, charge through into the next year to end March 2025, with sales improving a further 48% to £104.8m and with adjusted pre-tax profits over 59% better at £11.8m, worth an increased 60% plus at 6.1p earnings per share.
It is against such a potential booming Order Book and boosted profits and earnings that I call the shares of SRT as being one of my favourite stocks for 2024.
Cavendish’s Carstens and Hill have a 100p Price Objective on the group’s shares.
I am now setting a new Target Price on the group’s shares – looking for them to rise over 50% from the current 39.75p – with my aim at 60p in 2024.
(Profile 14.09.20 @ 39.5p set a Target Price of 50p*)
Smiths News (LON:SNWS) – A Cracking Near 9% Yield
This group, which can trace its foundation back to 1792, is today the UK’s largest newspaper and magazine wholesaler, with some 55% of the market.
On behalf of the major national and regional publishers, it distributes newspapers and magazines delivering to around 23,000 retail outlets across England and Wales.
The speed of turnaround and the density of Smiths News’ coverage is critical to one of the world’s fastest physical supply chains.
It also operates some ancillary businesses, such as: Smiths News Recycle, which collects plastic and cardboard waste from Smiths News’ customers for recycling; Dawson Media Direct which supplies airlines and travel points with news and media; and Instore, which offers field marketing services to retailers and suppliers across the UK.
For the 52-week period to 26th August the overall revenue increased by just 0.2% to £1.092bn (£1.089bn), that was driven by strong cover price rises and additional sales from the FIFA World Cup and other one-off news events like the Royal Succession.
However, pre-tax profits were 3.9% better at £32.3m (£31.1m), generating 10.8p (10.8p) per share in earnings, which capably covered an unchanged 4.15p per share dividend.
Apparently, the new financial year has started well, while the group’s cost reduction programme continues to progress, giving the Board confidence in looking to deliver results for the current financial year in line with market expectations.
CEO Jonathan Bunting stated that:
“Smiths News has delivered another good performance against a challenging macro-economic backdrop.
We have worked tirelessly to maintain service, find sustainable cost savings and secure new long-term publisher contracts.
As a result, we are well placed to continue delivering reliable profits and cash, meeting the needs of all stakeholders, through a combination of market leadership, sound finances and exceptional people.”
We should be seeing the full details of the last trading year when the group publishes its Annual Report & Accounts on Friday 15th December, while the AGM is expected to be held at the end of January next year.
Analysts Natalya Davies and Andy Murray at Edison Investment Research have a discounted cash flow valuation of 89p on the shares.
The group is expected to announce more contract renewals in the next few months, helping to secure its revenue streams up to 2030 and beyond.
It may never set the investing world alight, but I have to say that I have always liked the basis of this £118m capitalised group’s business.
Its cash generation is fabulous, while the yield on its shares, currently trading at 47.25p, is a magnificent 8.9%.
A very strong Hold.
(Profile 24.07.20 @ 20.25p set a Target Price of 27p*)
(Profile 24.06.21 @ 39.5p set a Target Price of 55p*)
And Finally ….
Stocks On The Move –
Look out on Monday morning (13th) for the Q3 Results to end September from Team Internet Group (LON:TIG) – the shares, which touched 137p in late September and eased back to 115p a month later, have been edging forward to last night’s close of 127p ahead of the news. Zeus Capital is very keen on the £341m valued company subsequent to the re-branding (from CentralNic) stating that the mix of strong growth, high revenue visibility, operating leverage and high cash conversion are undervalued by its shares’ low multiples.
(Profile 12.07.21 @ 89p set a Target Price of 110p*)
Following the recent Habitat agreement, there has been some gentle ongoing investor interest in the shares of the Sanderson Design Group (LON:SDG), with the price hitting 122.5p last Tuesday. I featured them earlier this month at just 106p and they closed last night at 113p, but I do feel that they are heading higher.
(Profile 24.04.23 @ 135p set a Target Price of 168p)
Did you note the sudden move upwards in the price of Frasers Group (LON:FRAS) shares earlier this week – hitting 849p at one stage on the back of nearly 1m shares being traded. By last night some profit-taking had set in, with them drifting back to 811p before closing at 834p.
(Profile 28.07.23 @ 798p set a Target Price of 1000p)
Global Ports Holding (LON:GPH) touched 265p at the start of the week, while a Trading Statement for the six months to end September must be due shortly. The shares are now 251.5p. Analyst Greg Johnson at Shore Capital has a ‘fair value’ on the shares at 400p.
(Profile 11.11.22 @ 81.5p set a Target Price of 100p*)
Iofina (LON:IOF), the iodine and specialty chemical products group, since the Q3 Update in late October, has seen its shares move ahead from 21.5p to touch 26.5p yesterday. Remember that Canaccord Genuity now have a Buy rating on the stock, looking for 40p.
(Profile 29.07.20 @ 13.5p set a Target Price of 18p*)
It was interesting to note that Cinch, the online motor specialists, has added to its stake in the £295m capitalised multiple-franchised Vertu Motors (LON:VTU) and is now holding 14.13m shares (4.15%), it would not surprise me to see that position being substantially increased in due course. The shares closed up 11.5% better last night, 9p up on the day at 87.6p.
(Profile 12.10.20 @ 30.5p set a Target Price of 40p*)
Very good to see that Saudi Arabia’s Public Investment Fund has increased its holdings in Aston Martin Lagonda Global Holdings (LON:AML) – it now has 168.85m shares, some 20.50% of the luxury car maker’s equity. While Mercedes Benz reduced its position by 0.84% to just 8.90% of the equity. Part of the Lucid Group – Atieva, Inc has now declared a 3.44% stake, 28.35m shares. The iconic brands shares closed last week at 212p, dipped to 200p during the week, before closing last night at 211p.
(Profile 10.05.23 @ 213.5p set a Target Price of 265p*)
(Profile 30.10.23 @ 213p set a Target Price of 275p)
(Asterisks * denote that Target Prices have been achieved since Profile publication)
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