Small-cap comments on the latest from MCLS, CRU, GHS and BAG

McColl’s Retail Group (LON:MCLS) – Morrisons want more

Timing is such a gamble, no matter you do. So, my follow-up on this convenience stores outfit, suggesting that holders in at my original profile price could buy another four times the original number was fortuitous.

Last Friday saw a massive 265 points wiped off the indices, with prices slashed all over the market. It offered a cheaper buying opportunity not just on McColl’s but also on so many other stocks too. But I do remind you to stick to ‘value’ stocks in these tricky markets.

My piece was priced at 12.5p, the shares went as low as 10.25p on Friday. So, taking a purchase price of 11p for the day would have taken the average down to 15.75p a share.

The turnover in the shares that day was some 4.5m traded against a daily 1.3m average.

Next Wednesday will see the group declaring its Interim Trading Update which should bring us right up to date on current year trading.

The news on Monday morning that the massive Morrisons empire wants to tag more of McColl’s stores as Morrisons Daily has to be positive for the group.

From the original 300, the figure had already been increased to 350. The latest is that they wish to have 450 by November of next year.

One can assume that they are obviously working for both retail groups.

As Matthew McEachran at Singer Capital Markets says “at 12p the group’s shares trade on just 8 times 2022 earnings estimates, then on 3 times that for 2023.”

Barring any further calamities, I hope to see my latest price objective being achieved in fairly short order.

(Profile 26.04.21 @ 32.5p set a Target Price of 41p)
(Profile 26.11.21 @ 12.5p set a Target Price of 16.5p)

Coral Products (LON:CRU) – £13m cap and over £8m of cash making over £1m pre-tax

The interim results to end October saw a near 58% rise in sales at £7.1m and an underlying pre-exceptionals operating profit of £0.76m, worth 0.81p per share in earnings.

That will be enough to cover the 0.5p interim dividend, which is due to be paid this coming Friday.

Market capitalisation is under £13m, while its end period cash balance after spending over £0.5m on share buybacks was a very handsome £4.8m. That figure has subsequently been boosted, after the recent property sale, by another £3.5m.

I reckon that this plastic products group will do a lot better than the £1m market expectations in the current year to the end of April 2022.

Its shares touched 16.4p on Monday after the news. Now at 15.75p they really do offer some very encouraging upside.

I am very confident in my goal being reached.

(Profile 28.04.21 @ 14p set a Target Price of 18p)

Gresham House Strategic (LON:GHS) – time to change

This company used to invest in UK smaller public companies, applying private equity techniques and due diligence alongside a value investment philosophy to construct a portfolio focused in 10-15 companies.

But now it is all about to change.

After considering a range of different options the company is now going wind-down over the next 24 months and is now planning to seek bids for its various stakes.

GHS is also hoping to give its shareholders an initial return of capital.

Interestingly, it has become apparent that the company’s net asset value has been overstated by around £1.3m.
Instead of the in-house Gresham House team, it is now to be managed by Christopher Mills and his Harwood Capital outfit, on a no-fee basis.

I am disappointed that this is all occurring because I had high hopes for the investors in this company.
However, after hitting 1840p a share a month ago, the shares at the current 1625p have still done exceptionally well over the last year – now up nearly 65% since my profile.

My gut feeling is that holders could take out their original stake and hold the balance free of charge.

(Profile 16.10.20 @ 985p set a Target Price of 1300p)

AG Barr (LON:BAG) – busy with the fizzy

The full year profit for the IRN-BRU drinks group, to end January 2022, will be better than market estimates.

In its Trading Update issued earlier this week the group stated that:

“Our performance in both the ‘on the go’ and hospitality sectors remains particularly strong and our recent innovation launches have exceeded our expectations. In what remains a challenging supply chain environment, our production and wider supply chain have maintained their resilience and supported the growth in volume we are experiencing.”

The guidance is that the group will see revenues rise from £227m to £264m, while pre-tax profits will increase from £32.8m to £41m, worth some 29.3p per share in earnings and easily covering a 14.7p dividend per share.

This company is now really pumping up its cash generation, which should be a net £74m at year end.

Its shares are steady now at 524p. Hold.

(Profile 31.07.20 @ 444.5p set a Target Price of 525p)

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