Small Cap Catch-Up: Sensors, Data and Bowling

Transense Technologies (LON:TRT) – Profits Set To Quadruple This Year

On Wednesday morning we will see this Oxfordshire-based developer of specialist wireless sensor systems, which are used to enable real-time data gathering and monitoring, reporting its interims to end December 2022.

I am expecting them to show clearly that very much bigger profits are on the way for the full year to end June 2023. 

The £15m capitalised group’s products include – the patent protected Surface Acoustic Wave (SAW) sensor technology, used to improve equipment power, performance, reliability and efficiency; iTrack, its Tyre Pressure Monitoring System, which is licensed to Bridgestone Corporation, the world’s largest tyre producer, under a ten-year deal in June 2020; and a range of intelligent tyre monitoring equipment under the Translogik brand.

The group’s customer target sectors include aerospace, automotive (high performance and off-road) and complex machine control.

It seeks to win business by leveraging its excellence in innovation, know-how in commercialising technologies, industry partnerships and through exposure to global growth markets.

At the beginning of December last year, the group’s AGM Trading Update was very positive.

“For the first five months to end November the group noted that Trading continues to be profitable with positive operating cashflow. Net cash at 30 November was approximately £0.80m (30 June 2022: £1.06m), reflecting a further investment in share buybacks of £0.1m and a substantial increase in Translogik inventory to satisfy both existing and pipeline levels of demand.

Commercial development opportunities across all three segments of the company’s business show good prospects for further growth as the financial year progresses.”

Analyst Ian Jermin, at brokers Allenby Capital,

reckons that the group’s shares are undervalued and based upon forecast profits and cash flow

are worth 150p each, compared to Friday night’s closing level of just 93p.

Jermin currently has estimates out for group revenues to rise 36% to £3.59m, while its adjusted pre-tax profits will more than quadruple to £1.17m (£0.27m) taking earnings up to 7.9p (5.4p) per share.

For the coming year his figures suggest a 27% increase in sales to £4.55m, with a 44% leap in profitability to £1.68m, worth 11.5p per share in earnings.

Impressively this year and next will see significant cash generation, leaving £1.76m net cash at end June and then up to £3.19m cash at the end of June 2024.

Based upon those forecasts from Allenby Capital, the group’s NOMAD and Broker, it is understandable why Jermin is calling the shares ‘undervalued’ after all they peaked at 122p in November 2021.

After the interims come out this Wednesday, I will expect to see the broker revise his estimates for this year and next.

In the meantime, I do feel that the group’s shares are a good ‘punt’ with big upside possibilities, perhaps back up to their previous peak.

(Profile 17.09.21 @ 102p set a Target Price of 127.5p)

Made Tech Group (LON:MTEC) – Interims Due Thursday Could Provide Buying Opportunity

Another group announcing its interim results this week is this £59m digital, data and technology services business.

On Thursday morning it will be reporting its figures for the six months to the end of November last year.

The group’s Trading Update at the start of this month has already given us a very clear pointer of growth.

It has guided that its half-time revenues expanded 76% to £20.6m (£11.7m) and that it saw a 23% lift in its sales bookings to £32.6m (£26.5m), while the group’s contracted backlog was 53% higher at a record £47.8m (£31.3m).

Furthermore, it has already this year picked up another £27m of contracts, securing business from the DVLA, the Cabinet Office and also the Department of Levelling Up, Housing and Communities.

At the time CEO Rory MacDonald stated that: 

“We are delighted to have delivered another period of strong growth. It is pleasing to note that our contract sizes continue to grow as we become more established in the market. These wins, together with the new Home Office contract announced in November 2022, demonstrate Made Tech’s ability to deliver digital technology successfully, and highlight the strength of our reputation in this growing market.

As a result, the Group remains on track to meet market expectations for the full year and deliver value to shareholders over the long term.”

The trio of analysts at Singer Capital Markets – Harold Evans, Kevin Ashton and Tom Like – rate the group’s shares as a Buy, looking for a price objective of 76p a share.

Their estimates for the full year to end May 2023 are for sales of £43.0m (£29.3m), adjusted pre-tax profits of £3.4m (£2.3m), worth 2.3p (1.6p) per share in earnings.

For the coming year their estimates are for £50.0m revenues, £4.1m profits and 2.6p earnings.

I see this group’s shares, which were just 26.75p each before the latest Trading Update, now being on a good momentum roll, closing at 39p on Friday night.

They could well ease back on some understandable profit-taking, however they appear to me to be an excellent purchase for the year, especially if they fall to 35p or thereabouts.

(Profile 24.08.22 @ 34p set a Target Price of 45p)

Hollywood Bowl Group (LON:BOWL) – £7.5m Purchase Of Canadian-Based Bowling Centres Immediately Earnings Enhancing

This group, which is one of the world’s largest operators of bowling centres, has bought another three centres in Canada, taking its total there up to nine.

The deal for the three entertainment centres, which operate in the Calgary market, is immediately earnings enhancing.

The £7.5m cash purchase identifies the group’s growth strategy in the fragmented Canadian market and shows the strong progress already being made by Splitsville, which was its first acquisition in Canada made last year.

Furthermore, the £413m capitalised group has identified a pipeline of acquisitions as well as new site opportunities in the Canadian market – with returns in line with Hollywood Bowl’s financial investment criteria.

The Hollywood Bowl Group is one of the largest operators of bowling centres in the World and is the UK’s largest ten-pin bowling operator, with a high-quality portfolio of 69 centres across the UK under the Hollywood Bowl and Puttstars mini-golf brands.

It specialises in operating large, high quality bowling centres, predominantly located in out-of-town multi-use leisure parks (typically co-located with cinema and casual dining sites) and large retail parks.

The centres are designed to offer a complete family entertainment experience with each centre offering bowling lanes or mini-golf courses alongside on-site dining, licensed bars, and state-of-the-art family games arcades.

CEO Stephen Burns stated that:

“We are delighted to have made these acquisitions. They mark an important step towards our planned expansion of the Splitsville brand in Canada, where there is significant demand for affordable, family-friendly leisure experiences.

These are our first centres in the important Alberta market, we are looking forward to applying our knowledge and experience to these centres.

We are focused on enhancing the customer experience as we invest in and grow their businesses over the coming years.”

After having hit 273p earlier in February, the shares of this highly cash generative group are now just 241p, at which level they are a more than entertaining investment for those seeking growth.

(Profile 14.11.19 @ 240p set a Target Price of 300p*)

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

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