Small Cap Catch-Up: Self-Elevating, Logistics And Wet Wipes

Gulf Marine Services (LON:GMS) – Up 23% In Under Two Months, But Still A Lot More To Go For

This £163m capitalised Abu Dhabi-based group is a world leading provider of advanced self-propelled self-elevating support vessels.

Its fleet of 13 liftboats serves the oil, gas and renewable energy industries from its offices in the United Arab Emirates, Saudi Arabia and Qatar and is capable of serving clients’ requirements across the globe, including those in the Middle East, South-East Asia, West Africa, North America, the Gulf of Mexico and Europe.

Two weeks ago, it announced a continuing growth in demand for its services as it confirmed an extension to one of its important contracts.

In the middle of last week, it issued fresh guidance to the market announcing that it now anticipates adjusted EBITDA to be some $86m (previously: $83m to $86m) for the 12 months ended December 2023 and reconfirms its adjusted EBITDA guidance for the 12 months ending December 2024 at $87m to $95m.

The group also targeted adjusted EBITDA in the range of $92m to $100m for 2025.

Executive Chairman Mansour Al Alami stated that:

“Our vessels and services continue to experience robust demand, and we anticipate favourable conditions persisting in the foreseeable future.

We achieved a utilisation of 94% in 2023, our daily chartered rates averaged at US$30.2k and we ended the year with a backlog of US$315m.

As we proceed with our prudent deleveraging efforts to shift value from lenders to shareholders, we are also initiating plans to reward our shareholders.

Recently approved by the Board, our residual dividend policy aims to strike a balance between funding growth initiatives and providing returns to shareholders.

Management is currently assessing the timing for its implementation, a consideration that was not on the table until recently.”

Analyst Daniel Slater at Zeus Capital is estimating that the year to end December 2023 will have seen group revenues rise to $151.7m ($133.2m), lifting adjusted pre-tax profits to $27.3m, ($19.5m), and hoisting its earnings to 2.0c (1.7c) per share.

For the current year he looks for $162.8m in sales, $47.0m profits and 3.7c per share in earnings.

The group’s shares were very heavily traded in the two days ahead of the fresh guidance, raising the price from 12.40p at the start of last week to 14.15p just ahead of the mid-week statement.

Subsequently they peaked at 16.15p before closing on Friday night at 15.95p.

In less than two months they have beaten my late November fixed Target Price and they are now edging ever closer to the potential 50% hike that I suggested could be possible.

Despite the near 23% gain in that short time frame, I do believe that there is still a chunk of appealing upside to be going for over the next few months – with my aim of 19.50p being so achievable.

(Profile 30.11.23 @ 13p set a Target Price of 16p*)

(Profile 22.01.24 @ 15.95p set a new Target Price of 19.50p)

Wincanton (LON:WIN) – Take The Cash Now And Reinvest Quickly

Towards the end of May last year, I gave my updated comments about this supply chain logistics group, which counts Sainsbury’s, Waitrose, Halfords, Wickes and the Co-op amongst its thousands of customers.

I stated that I really liked the business, despite its uninspiring results for its trading year to end March 2023.

I commented that:

“However, I hope that its Management has got its act together enough to push the group back upwards again.

As far as I am concerned Wincanton is a ‘class act’ that deserves a good rating, however shareholders deserve better results to justify their faith in the group’s shares, currently looking just that little bit stronger at 244p.

Patient investors should hold tight.”

So, I am pleased to see that my view on the group has been echoed by a major player in the same sector.

On Friday morning the Marseilles-based CEVA Logistics surprised the market with a £566.9m cash bid for Wincanton, offering 450p cash per share.

CEVA is a world leader in third-party logistics, providing global supply chain solutions to connect people, products and providers all around the world.

It is part of the CMA CGM Group, which is a global player in sea, land, air and logistics solutions, serving more than 420 ports around the world across five continents, with a fleet of around 620 vessels, providing container shipping services around the world.

On the face of it the two groups make an excellent fit and, although not actually hitting my second Target Price, it is still a very useful gain for Master Investor subscribers who may still be holding the shares.

As always, I suggest that holders should not wait for the cash settlement from the bidder, but instead take the price bid by the market and reinvest the proceeds immediately.

The shares closed on Friday, up 48% on the day at 439.50p.

(Profile 07.05.19 @ 247p set a Target Price of 350p*)

(Profile 06.05.22 @ 412p set a Target Price of 500p)

Accrol Group Holdings (LON:ACRL) – Wet Wipes To The Fore

Last Thursday morning the UK’s leading independent tissue converter announced the acquisition of a wet wipe maker, in a small cash deal.

It acquired the Somerset-based Severn Delta, which is also a tumble dryer sheet manufacturer.

It looks to be a natural addition to Accrol’s business, which is in the supply of toilet tissues, kitchen rolls, facial tissues, and wet wipes to many of the UK’s leading discounters and grocery retailers across the UK.

Accrol now operates from five manufacturing sites supplying the UK tissue wet wipes market, which has a £3.0bn retail sales value.

The group’s Interim Results, which are due to be announced within the next week or so, are expected to show a strong first half performance.

Analysts Tom Fraine and Clive Black, at Shore Capital Markets, rate the group’s shares as having a value of 50p, compared to Friday night’s closing price of 34.60p.

Their estimates are for current year sales, to the end of April, show an easing to £205.0m (£241.9m), while its adjusted pre-tax profits could leap by over 63% to £10.6m (£6.5m), taking earnings up to 3.2p (1.8p) per share.

Based on this broker’s estimates, the shares offer a neat 44% upside.

However, until a lot more is seen about prospective business, it would be attractive enough to seek a 15% plus share price increase within the next few months.

(Profile 12.03.19 @ 22p set no Target Price)

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