Small Cap Catch-Up: SRT Marine, Sanderson Design And Some Stakes
SRT Marine Systems (LON:SRT) – Take Immediate Advantage Of The Share Price Fall And Average Now
A few weeks ago, I waxed lyrical about the potential for this global maritime surveillance, monitoring and management systems provider.
My timing was wrong and I have egg on my face!
But my opinions are now even stronger.
Last Friday morning the group declared its Half Year Trading Update to the end of September, showing a £5.5m revenue to be expected, while it will see a pre-tax loss of some £4.5m.
Now we know why the shares had been slipping away last week ahead of the announcement.
They were down 7% last Wednesday on the back of some 530,629 shares traded on the day.
I wish I had known, otherwise, I would have withheld my strong push on the shares on Wednesday 13th September, declaring them a ‘Stonking Purchase’.
Of course, if I had known that certainly would have been a case of ‘Insider Information’.
However, they fell back to a 38.5p low on Friday after the news, which was quite a shock.
By the close of trading some 1,409,216 shares had changed hands on the day, which is some 4.7 times the average daily dealing volume.
The shares closed at 41p, off 7p on the week, which was a disappointment, but only in the very short term.
In just over a month’s time, on Monday 20th November, the group will be presenting its actual interim results, at which time I would imagine that a strong operational report will help to show investors just how much of a little cracker this company really is, especially at only 41p.
I refer readers to my previous Profile description on 13th September to see just what the company does for a living and also what its prospects are going into next year.
On Friday boss Simon Tucker informed shareholders that:
“For the first time we benefit from a substantial contract order book of £160m, with well-formed implementation schedules which in turn provides 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 Markets, the group’s brokers, commented that they continue to look for 100p a share as their price objective.
They went on to note that their FY24 and FY25 forecasts were reiterated, with the group remaining on track for end March FY24 forecasts of £70.9m revenue and £7.4m pre-tax profits, generating 3.8p per share in earnings.
Based on a conservative number of milestone equipment deliveries as part of the £160m forward contract order book, they note that the timing of revenue is dictated by the delivery of specific project milestones and therefore by the project delivery schedule.
The 1H24 has been a significant period of preparation in advance of subsequent deliveries (and revenue milestones) in the second half.
They stated that management expects continued progress on SRT-MDA Systems contracts characterised by lengthy contracting processes.
Their estimates for the year to end March 2025 are for £104.8m in sales, £11.8m adjusted pre-tax profits, worth 6.1p per share in earnings.
Come November, further details on current contract hopefuls could well see observers upping their expectations for the next few years ahead.
The prospects pipeline is worth some £1.4bn, so just a slice would be highly meaningful for the group going forward.
Based upon such broker estimates and while the shares are looking so much lower in price, I really would suggest that holders should take advantage and double up holdings.
If you don’t already own the stock, then just look at the mid-September Profile and easily convince yourselves that the shares offer an excellent growth opportunity.
(Profile 14.09.20 @ 39.5p set a Target Price of 50p*)
Sanderson Design Group (LON:SDG) – Broker Repeats Buy Stance
Ahead of the luxury interior furnishings group reporting its interim results to end July next Wednesday morning, analyst Matthew McEachran, at Joint Broker Singer Capital Markets, published a Corporate Client Buy Note on the company.
The company designs, manufactures and markets wallpapers, fabrics and paints, while also deriving licensing income from the use of its designs on a wide range of products such as bed and bath collections, rugs, blinds and tableware.
McEachran has fixed a price objective on the globally-operating group’s shares of 210p – which compares very favourably with Friday night’s closing price of 106p.
The analyst considers that if forecasts are sustained (with the assumptions looking fair), the valuation is far too cheap and detached from any near peers, on just 8x P/E (6x ex cash) to Jan’24 or 3x EV/EBITDA to Jan’25.
The £75.8m capitalised group has a very strong balance sheet, with some £18m cash in the bank expected by the end of January next year.
(Profile 24.04.23 @ 135p set a Target Price of 168p)
Everyman Media Group (LON:EMAN) – ‘Insiders’ Buying More Stock
Last week two ‘insider’ share purchases were notified in the UK’s leading boutique cinema chain’s equity.
Following on from the group’s recently issued first half report on the 27th September, two days later CEO Alex Scrimgeour bought another 56,678 shares @ 52.9p each, taking his holding up to 307,652 shares, some 0.34% of the equity.
Then on Monday of last week, 2nd October, Blue Coast Private Equity bought 500,000 shares @ 53.5p, taking its total up to 18,403,639 shares, some 20.18% of the company’s stock.
Blue Coast, with a portfolio of businesses including real estate, private equity, hotels & leisure and other consumer driven businesses, is a privately owned business with the financial strength to make decisions based on unique opportunities as well as long term trends.
The Blue Coast team sources, owns and operates a diverse portfolio of private and public assets from its headquarters in London, with offices in Europe and the US.
Chartered Accountant Michael Rosehill, Non-Executive Director, is the Blue Coast man on the cinema group’s Board.
I feel that these two purchases are extremely useful pointers to what other investors should be doing, especially with the second half year already assumed to show massively increased takings following the Barbie and Oppenheimer releases.
Analyst Mark Photiades, at Canaccord Genuity Capital Markets, rates the £52.5m capitalised group’s shares as a Buy, with a 200p price objective.
He estimates that the company will show takings, to end December this year, rising to £94.4m (£78.8m) helping to reduce the expanding group’s adjusted pre-tax losses to £0.9m (£1.3m loss).
For the next year the analyst goes for £114.5m revenues and £0.7m losses.
However, jumping into 2025, which is not far away now, he estimates £139.9m sales and a break into £2.6m adjusted pre-tax profits, generating 1.96p of earnings per share.
The shares closed last week at just 57.5p, which looks to me to be a highly investable situation stock that has the ability of developing very well.
(Profile 21.08.23 @ 59p set a Target Price at 73.5p)
Transense Technologies (LON:TRT) – Dowgate Wealth Increasing Stake Again
This Oxfordshire-based group is a developer of specialist wireless sensor systems used to enable real-time data gathering and monitoring.
At the end of last month, it announced its final results for the year ended 30th June, showing substantial increases in its revenue and profitability, and further considerable progress in the development of commercial pipeline opportunities.
The group’s directors considered that there are positive market drivers across all key target market sectors which provide ample opportunity to expand, despite current uncertain economic conditions, and the company is investing in technology, equipment and human resources in order to build strategic and sustainable long-term shareholder value.
Obviously impressed by the group and its potential Dowgate Wealth has recently added another 1.42% to its stake in the group and now holds 7.0% of the equity, some 1,087,300 shares.
The £17.7m capitalised group’s shares, which a week or so ago peaked at 120p, are fractionally lower, closing at 107p on Friday night.
Hold tight.
(Profile 17.09.21 @ 102p set a Target Price of 127.5p)
Boohoo Group (LON:BOO) – Frasers Group Now Biggest Holder
It was interesting to note that Mike Ashley’s Frasers Group (LON:FRAS) is now the biggest holder of the fashion group’s equity.
On Friday morning it was announced that it has added another 3.01% to its holding, taking the total up to 170.43m shares, representing 13.44% of the votes.
Last Tuesday saw the multi-brand business with over 17m active customers, declaring revenues for the first six months of its trading year to end August showing a 17% drop to £729.1m (£882.4m) and swinging it into massive adjusted pre-tax losses of £9.1m (profit £6.2m), while increasing net debt to £35.0m (£10.4m).
The online clothing retailer’s shares fell to 27.77p that day, before recovering slightly to close at 31.50p on Friday night, no doubt helped by news of Ashley’s ongoing share-buying.
The group has now identified £125m of cost-savings, which should help its bottom line to improve in due course.
I like Frasers Group’s policy of taking meaningful positions in retail groups that are in need of help – so it will be good to know just what Ashley’s strategy is going into 2024.
As I stated on 13th March this year, the City still questions whether Boohoo’s Management has the ability to build the number of active customers back up again – it fell 12% in the first half from 19.2m at the same time last year – while also coping with the ongoing ‘macro headwinds’.
Analyst Rachel Birkett, at the group’s brokers Zeus Capital, has estimates for the full year to end February 2024 of revenues at just £1,509.8m (£1,768.7m) with adjusted pre-tax losses falling severely to minus £21.5m against £1.6m down last year.
She sees the £400m capitalised group’s net debt rising to £72.1m against cash of £5.9m previously.
I am keen on Frasers, but certainly not keen on Boohoo Group, which is one of the heaviest shorted companies on the market with a current 6.89% of its equity being called lower.
(Profile 13.03.23 @ 55p calling them lower and setting no Target Price)
(Asterisks * denote that Target Prices have been achieved since Profile publication)
The problem with SRT is that they have been serial disappointers in the past with, if my memory serves me well, claims to contracts which took much longer to materialise than expected. This may well be unfair but I imagine this is how the market perceives them and why their success is not being reflected in the share price.