Small Cap Catch-Up: Updates Due From Three Growing Electronics Firms
Solid State (LON:SOLI) – 17% CAGR In Sales To 2030
This £150m capitalised Redditch-based group designs and manufactures electronic equipment and supplies the value added electronic components and materials in the United Kingdom, rest of Europe, Asia, North America, and internationally.
It operates through Components and Systems divisions.
The Components division provides owed brand manufactured components, franchised components, and the provision of value-added services, such as sourcing and obsolescence management.
It is a specialist in designing-in innovative, valuable, technical solutions for customers seeking cutting edge, electronic, opto-electronic, electro-mechanical components, and displays.
The Systems division provides systems solutions, which include industrial computing and vision systems; custom battery packs providing portable power; energy storage solutions; and advanced communication systems, encompassing wideband antennas and radio products.
The company supplies opto-electronic components.
It serves the security and defence, medical, greentech, energy, transport, and industrial sectors.
The company issued a strong first half Statement at the end of last month stating that:
“The Board is very pleased with the ongoing delivery of Solid State’s growth strategy.
As a result of the strong start to the year, on a full-year basis, the Directors expect to deliver stronger than anticipated organic revenue growth, meaning the Group is expected to be marginally ahead of current consensus revenue and adjusted PBT expectations for the year ending 31 March 2024.”
Analysts John Cummins and Charlie Cullen at WH Ireland have a ‘fair value’ estimate on the group’s shares at 1550p.
For the current year to end March 2024 they see revenues of £155.1m (£126.5m), while pre-tax profits could come in at £12.5m (£10.8m), raising earnings to 85.1p (80.7p) per share.
Andy Chambers and Natalya Davies, analysts at Edison Investment Research, note the group’s strong organic growth in the first half, as well as its ambition to deliver compound annual growth of 17% in its sales up to 2030.
This is yet another group that has its Interims due to be published on Tuesday 5th December.
Its shares, which have been down to as low as 1010p just a month ago, have subsequently perked up considerably, closing last night at a much healthier 1325p.
They have been up to 1475p this year, while the consensus views suggest 1620p is around the right ‘value price’ – so Hold on for more positivity.
(Profile 15.08.21 @ 404p set a Target Price of 546p*)
DiscoverIE Group (LON:DSCV) – Shares Well Below ‘Value’ Estimates
Another company with Interim Results due to be published on Tuesday 5th December.
This £651m capitalised Guildford-based group, which supplies customer-specific electronic products and solutions to original equipment manufacturers, recently stated that the strong order book, which was ahead of last year, provided good visibility of demand.
It designs, manufactures, and supplies components for electronic applications worldwide, operating in two segments, Magnetics & Controls; and Sensing & Connectivity.
The company offers magnetic and power components, embedded computing and interface controls, and sensing and connectivity components for industrial applications.
It serves customers in renewable energy, transportation, medical, and industrial and connectivity markets.
Analyst Guy Hewett at Cavendish Capital has a Price Objective of almost twice the current price at 1110p.
He is looking for a small rise in both current year sales and adjusted pre-tax profits to £451.4m (£448.9m) and £47.2m (£46.3m) respectively, which would take earnings up to 35.6p (35.2p) and cover the 12.0p (11.5p) per share dividend.
He does see growth in the year to end March 2025, with £479.2m sales, £49.3m profits, 37.0p earnings and 12.6p per share in dividend and then around 5% improvements in the 2026 year.
Analyst Katherine Thompson at Edison Investment Research has similar current year hopes, while estimating the coming year at £477.3m sales, £49.8m profits, 37.1p earnings and a 12.5p dividend.
The group’s shares touched 958p in mid-June this year, but have a month or so ago were down to 586p.
Last night they closed at 677p – some 50% below consensus ‘value price’ estimates.
A firm Hold.
(Profile 08.08.19 @ 438p set a Target Price of 550p*)
CML Microsystems (LON:CML) – Progressing Its Growth Strategy
In two weeks, on Tuesday 5th December, this Maldon, Essex-based group will be publishing its Interim Results to the end of September.
The £63m capitalised group designs, manufactures, and markets a range of RF and microwave semiconductor products for use in the communications industries in the UK, the Americas, and the Far East and other global markets.
It primarily offers high performance radio frequency products and mixed-signal baseband/modem processors for wireless and satellite, network infrastructure, internet of things, broadcast, and aerospace and defence markets.
The group utilises a combination of outsourced manufacturing and in-house testing with trading operations in the UK, Asia and USA.
CML targets sub-segments within communication markets with strong growth profiles and high barriers to entry.
It has secured a diverse, blue chip customer base, including some of the world’s leading commercial and industrial product manufacturers.
As a business it is progressing its strategy of a combination of acquired and organic growth, which I hope that the imminent results will identify.
Analyst Martin Sullivan at Shore Capital Markets has current year estimates out for revenues to rise to £23.1m (£20.6m) lifting adjusted pre-tax profits to £4.4m (£3.6m) and boosting earnings to 27.3p (22.1p), easily covering a 13.2p (11.0p) dividend per share.
Ian Robertson, at Progressive Equity Research, who is also looking forward to these results, has £23.3m revenues, £4.2m profits, 19.8p earnings per share as his estimates.
In the last year the group’s shares have been as low as 340p and peaked at 596p in March this year.
On 10th August I wrote that:
“The group’s shares, now 432p, are well down on my late February Profile piece, however I have absolutely no worries about sticking my neck out now and saying that these shares are very much a good Buy.”
They closed last night at around 402p, which could well prove to be a bargain point for new investors.
Hold very tight.
(Profile 27.02.2023 @ 560p set a Target Price of 650p)
And Finally …..
I was interested to note that Michael Rosehill, the non-executive Director of Everyman Media Group (EMAN), has seen the stake held in the luxury cinema chain by Blue Coast Private Equity, of which he is a Director, been raised by 800,000 shares at an average 56.4p buying price.
That takes the BCPE position up to 21.7m shares, representing 23.8% of the equity.
EMAN, which is valued at £53m, should make £17.2m EBITDA this year on around £94m of takings.
The shares at 58.5p feel cheap to me.
(Profile 23.08.23 @ 59p set a Target Price of 73.5p)
I was also fascinated by the stake increase in Portmeirion Group (LON:PMP) by the Stockholm-based AB Traction, who earlier this week acquired another 2.18% of its equity and now hold 11.33%.
A month ago, when its shares were 240p, I fixed a new Target Price of 300p on the shares.
They closed last night at 275p, up 15p on the day. Christmas could be good news for the ceramics and homewares group.
(Profile 28.08.20 @ 376p set a Target Price of 480p*)
(Profile 20.10.23 @ 240p set a Target Price of 300p)
(Asterisks * denote that Target Prices have been achieved since Profile publication)
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