Small Cap Catch-Up: Updates Abound
Michelmersh Brick Holdings (LON:MBH) – I Really Like This Company
‘Britain’s Brick Specialist’ should be announcing its full 2023 results on Wednesday 26th March.
After its 23rd November Trading Update, we already know that the £95m capitalised Haywards Heath-based group was working at full capacity in its final quarter, operating to deliver against its order book.
The company stated that:
“The contraction in the construction industry has continued into the second half with the challenging fundamentals of the broader economy weighing on consumer sentiment and demand in our end markets.
We continue to focus on controlling our input costs and the efficiency of our facilities within this environment.
The diversity of our customer base and broad product channels remains a core strength of the Group and, alongside the benefits of our quality opening order book at the start of this second half, these have been important factors in supporting the resilience of our trading performance to date.”
Analyst James Wood at Canaccord Genuity Capital Markets has a Buy rating out on the group’s shares, looking for 180p as his Price Objective.
He estimates that the year to end December 2023 will have seen sales increase to £83.5m (£68.4m), helping to nudge adjusted pre-tax profits ahead to £12.8m (£12.5m), with earnings fractionally lower at 10.4p (10.6p), but still amply covering the unchanged 4.3p per share dividend.
For the year now underway he goes for £85.7m sales, £13.4m profits, 10.7p earnings and 4.5p per share in dividend.
This company, as I have stated before, is undervalued.
It is the UK’s fourth largest brickmaker, yet its valuation is way below those of its peers.
A week ago, the company’s shares scored a one-year peak at 105p.
They closed last night at only 101.5p, almost halfway towards my Target Price, which I remain confident in my prediction being achieved on valuation terms alone.
(Profile 16.08.23 @ 91p set a Target Price of 115p)
Everyman Media Group (LON:EMAN) – Expect Further Growth
Analyst Mark Photiades at Canaccord Genuity Capital Markets continues to be very bullish about the prospects for this premium cinema group.
After yesterday’s announcement of its Trading Update for the 52 weeks to 28th December 2023 reported that it is still pushing forward with its growth.
CEO Alex Scrimgeour stated that:
“We have delivered robust, double-digit growth in both revenue and EBITDA against a challenging economic backdrop, delays to new openings and both writers’ and actors’ strikes.
Further operational progress has been made with improvements in all key metrics, illustrating that our proposition remains as relevant as ever.”
Photiades now has estimates for 2023 of £90.9m (£78.8m) takings, but with increased adjusted pre-tax losses of £2.9m (£1.3m loss).
For the current year he goes for £108.0m sales and just a loss of £0.8m.
Jumping forward for 2025 the analyst estimates £136m in revenues and a breakthrough into profits of some £2.4m, worth 1.83p per share in earnings.
He maintains that the £58m capitalised luxury cinema group’s shares are worth 200p each, compared to last night’s close of just 62p.
In my opinion these shares are still very cheap and destined to climb within the next few months.
(Profile 23.08.23 @ 59p set a Target Price of 73.5p)
Premier Foods (LON:PFD) – Q3 Shows Well On Track
At the beginning of November last year, I mentioned that the shares of one of the UK’s largest food businesses should be at least 30% higher than the then price of 117.5p.
That mention was following the St Albans-based group having acquired FUEL10K, a breakfast foods company.
The shares are now trading at around 140p, valuing the enterprise at £1.2bn in the market.
Yesterday the foods group announced its Q3 Trading Update for the 13 weeks to 30th December 2023, they reported the group’s biggest ever Christmas and also making significant market share gains.
The group reported that sales in new categories more than doubled, with Ambrosia Porridge pots and Mr Kipling and Angel Delight Ice-cream both standout performers.
Meanwhile, The Spice Tailor continued to grow strongly, achieving distribution gains in target markets.
CEO Alex Whitehouse stated that:
“With another strong period of trading behind us, and great plans for the coming months, we are well on track to deliver on profit expectations for this year.”
Analysts Clive Black and Darren Shirley at Shore Capital Markets are keen on the stock, suggesting a 200p valuation as being justified.
For the year to end March they see revenues increasing to £1.12bn (£976m), with adjusted pre-tax profits of £152.3m (£137.2m) and increasing earnings to 13.6p (12.9p) per share.
For the time being I will be very happy to see my aim of over 152.75p being achieved.
(Profile 29.06.20 @ 67.5p set a Target Price of 101p*)
(Profile 01.11.23 @ 117.5p set a Target Price of 152.75p)
H&T Group (LON:HAT) –Strong Underlying Demand Continues
Yesterday morning saw the UK’s largest pawnbroking group update on its 2023 year’s trading.
It announced that despite higher operating costs, the performance in the fourth quarter of the year was robust.
On Tuesday 12th March the group expects to report record profits for 2023, up some 40% year on year.
CEO Chris Gillespie stated that:
“The Group made significant progress in 2023, delivering record profits and strong growth.
Demand for our core Pawnbroking product continues to grow and is attracting increasing numbers of customers who are new to pawnbroking.
We were delighted to welcome record numbers of retail customers in the pre-Christmas period.
However, as has been widely reported, customers were cautious in their spending, and this has impacted our performance for 2023.
We believe, despite this challenging backdrop, that we have the right product offering and have continued to invest in our store estate and our technology platforms.”
Analyst Gary Greenwood at Shore Capital Markets has downgraded his views on the group, looking for £26.6m (£19.0m) pre-tax profits, 48.4p (37.2p) earnings and 17.0p (15.0p) dividend per share.
For the current year he sees £33.5m profits, 57.4p earnings and an uplifted dividend of 19.0p per share.
Further ahead, his figures for the 2025 year suggest £36.8m profits, 63.0p earnings and a 21.0p dividend.
In over-reaction to yesterday’s Update, the group’s shares collapsed 23% to a day’s low of 305p at one point, before ending the day 12.3% lower, off 51p at just 347p.
At the current level they trade significantly below the market average, while the brokers have a 515p ‘fair value’ on the shares.
I have not lost any confidence in their future performance.
Hold very tightly, however if you have spare cash then take out some more at these very cheap levels.
(Profile 06.07.22 @ 332.5p set a Target Price of 400p*)
Zytronic (LON:ZYT) – Setting A ‘Gamblers’ Target Price
A reversal of corporate fortunes often brings out the stock watchers and spurs them into action.
On Tuesday 9th January, the Blaydon-upon-Tyne-based touch sensor manufacturer announced its final results for the year to end September 2023.
They showed a 30% drop in sales to £8.6m and a £2.0m pre-tax loss (£0.7m profit).
The shares fell back from 80p overnight, crashing to 55p in subsequent reaction.
The company is a world-renowned developer and manufacturer of a unique range of internationally award-winning optically transparent interactive touch sensor overlay products, which are used with electronic displays in industrial, self-service and public access equipment.
Chairman Dr Chris Potts stated that:
“The Group benefits from a strong balance sheet and has good visibility over its cost base over the next twelve-month period.
With reinvigoration of the Group’s business development function and differentiated technology and products, there are grounds for cautious optimism over the medium term.”
I have followed this group for years, in 2017 its shares peaked at over 605p.
Way back in January 2021, when they were 122.5p, I set a Target of 155p on the shares, ten months later they hit 190p.
But nothing goes in the same direction for ever!
Admittedly to see its shares now at just 59p does give them a certain appeal.
Analyst Caroline de la Soujeole, at Singer Capital Markets, has concluded that:
“We think it is reasonable to envisage broadly stable YoY sales trends in FY24e overall (2H weighted) and good progress being made in returning the business to an EBITDA break-even position.
We await the presentation of the strategy review before reinstating formal forecasts and recommendation.”
The broker notes that, given evolving industry dynamics, the group’s management have committed to set out a clear strategy for recovery and perspectives on its future direction in due course.
The company ended its 2023 year with £4.7m cash in its balance sheet, which compares to the current £6.12m market valuation.
As I stated above, poor corporate results often bring out buyers.
And so too with Zytronic – as shown by the addition of some 131,000 more shares to the joint holding of Gavin and Sian Smith – taking their position up to 444,493 shares, representing 4.37% of the ZYT equity.
I know that it is only a ‘tiddler’ but I actually fancy that little holding as being a potential winner, especially if the group’s Management gets its act together and wins a great deal more orders from its pipeline of opportunities.
I now set a gambler’s Target Price of 70p on the group’s shares, which could so easily be achieved with the announcement of some good corporate news within the next few months.
(Profile 27.01.21 @ 122.5p set a Target Price of 155p*)
(Profile 24.01.24 @ 59p sets a Target Price of 70p in 2024)
(Asterisks * denote that Target Prices have been achieved since Profile publication)
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