Small cap round up: bricks, books, bowls and aviation
Brickability Group (LON:BRCK) – certainly not putting a lid on growth, so much more to come yet
I really like the way that this ‘buy and build’ group has expanded over the last few years.
Yesterday it announced yet another acquisition – for £6.5m it is purchasing Beacon Roofing, whose customers are mostly national house builders and developers in the South-East of the UK.
To the end of January this year the company turned over £8.9m, upon which it had an EBITDA of £1.1m.
The consideration is made up by £4.5m cash and £2m deferred against performance – all out of Brickability’s own resources – so no equity issue needed.
The brick and roofing group’s brokers, Cenkos Securities, rate the shares as a ‘buy’ – with their analyst Kevin Cammack estimating that the year to last night will have seen revenues jump from £181.1m to £470.0m. That should see adjusted pre-tax profits almost double from £15.0m to £28.6m, with earnings of 8.3p (5.6p) per share.
Cammack states that Cenkos are ‘firm buyers of the shares’ – they are right to do so.
They closed last night at 94p, way below the 114p at which they topped out last September. There is so much more to come from this ever-growing group.
(Profile 16.04.20 @ 39p set a Target Price of 55p*)
Bloomsbury Publishing (LON:BMY) – always a good read
On Wednesday this independent publishing group issued a Trading Update for the year to the end of February.
It had previously reported at the end of January that it was doing well. This week it increased its market guidance – with it expecting to show revenue returns ‘comfortably ahead’ while its profits for the year are ‘materially ahead’ of the upgraded market expectations.
We will have to wait until May for sight of the actual final results.
When the January update was issued the group’s shares moved convincingly from 328p straight up to 389p.
Since then, there has been somewhat of a turmoil in the markets, impacted by the Ukraine War, with the shares falling back to 338p in the first week of March.
However, upon consideration of even better figures to now be anticipated, the shares are back up to trade around the 415.5p level.
I really do rate this company, it is a quality business with excellent management.
Pre-tax profits for 2022 are now expected to be well over £22.3m upon sales in excess of £212.5m for the year. An advance of some 12% is possible in the 2023 year.
Having never been disappointed by its progress since I first met the company when it was floated in 1994, I have no hesitation in continuing to be confident of this group making even more progress in the years ahead.
Its shares are a very strong hold.
(Profile 28.02.19 @ 231p set a Target Price of 257p*)
(Profile 27.03.19 @ 238p set a Target Price of 270p*)
Ten Entertainment Group (LON:TEG) – really beginning to knock the pins down again
Operating 46 family entertainment centres during the last couple of years cannot have been too much fun.
Its management have, however, coped extremely well and the results for the 52 weeks to 26 December, announced last Tuesday, reported record breaking sales growth.
It also declared a return to profitability and confidently predicted a continuation of the positive momentum into the current year.
Analyst Anna Barnfather, at the group’s brokers Liberum Capital, sees revenues increasing again this year, to £107.1m (£67.5m), while pre-tax profits could multiply over six times to £19.6m (£3.1m).
Those estimates could generate 21.7p in earnings (3.9p) per share, enabling the group to bowl back into the dividend lists with a payment of some 8.9p (nil) for this year.
She is even more bullish for the 2023 and 2024 years.
The Liberum ‘buy’ rating goes for an increased price objective of 370p.
Having been down to 217p in early March, the shares closed last night at 264.5p – at that level I reckon that they could show a further advance in price to well over 300p within months.
A very good hold, with excellent upside.
(Profile 02.10.20 @ 135p set a Target Price of 170p*)
Menzies (John) (LON:MNZS) – ‘taking off’ with the cash
I think that this bid situation is all over now, barring getting cash paid into investor’s accounts.
The aviation services group has now succumbed to a 608p a share cash bid from the Kuwait based National Aviation Services, worth some £571m in value.
The merger of the two companies will probably help to create the world’s largest global operators in that sector.
They will be able to handle over 600,000 aircraft a year through 250 airports in 57 countries globally.
That is not too bad an example of growth by the former bookseller that changed its business course way back in 1980.
It is also a very good gain for readers who got into the stock earlier on.
(Profile 17.12.19 @ 450p set a Target Price of 530p*)
(Asterisks * denote that Target Prices have been achieved since Profile publication)
Why would investing inbrickability bother me. Well it’s not much above its flotation price from years ago its main customers are suffering, the house builders. Look at Taylor wimpy, 130p, recent high 200p. Mr market eat does not think the outlook is good. Interest rates are rising to batter consumer demand, and they hope inflation (seperate discussion). The supply chain problems … Getting supply of wood, aluminium, even screws is difficult post covid (half of Shanghai locked down). No product, no revenue, lower margins. Ok, brickabilty don’t make bricks (unlike michelmersh) but the making of bricks requires kilns and loadsa energy to make them. Energy, just what you don’t want as energy prices soar, a product which needs loads of energy brick prices surge, consumers and builders resist , when there is product, and margins are cut to get revenue.
Does this feel like a company (or sector) you really want to be in? As the dragons den would say, I’ll pass …. For the reasons above ….