Small Cap Round-Up: Bricks, Time, Rocks and a Peach

Brickability (LON:BRCK) – with bad news now discounted it presents an ‘excellent buying opportunity’

The UK’s leading brick factor declared a Trading Update for its first half-year to end September on Wednesday morning.

It is expecting a 58% increase in sales for H1 to £353m and an interim EBITDA of £25m (£18m).

CEO Alan Simpson stated that:

“The strong first half performance is testament tothe Group’s diversity, strength and ability to meet changing demands, manage pressures and seize opportunities. We have an experienced management team, a diverse business model and a strong balance sheet; however, we remain vigilant of market pressures.”

Analyst Andrew Gibb at Cenkos Securities rates the group’s shares as a Buy.

He reckons that a lot of bad news has already been discounted in the group’s share price. He notes that the underlying growth and the benefit of recent acquisitions as it proceeds in its H2.

Gibb believes that the group, whose shares have fallen some 30% on the year to date, should reflect its strong position within its sector and the fact that all four divisions within the group are growing with good order books.

He is looking for the current year to end March 2023 to lift revenues to £612.6m (£520.2m) while adjusted pre-tax profits could improve to £39.5m (£34.7m), raising earnings to 10.6p (10.1p) and covering a 3.2p (3.0p) dividend per share.

Gibb clearly states that current levels represent an excellent buying opportunity.

The shares closed last night at 74p on just 7 times current year earnings, which is far too low for such growth.

(Profile 16.04.20 @ 39p set a Target Price of 55p*)

Time Finance (LON:TIME) – shares could easily double in price

Alternative finance provider Time informed investors, in the middle of this week, that for the fifteenth month in succession its own-book lending portfolio had grown to another record – now at an historic high of £145.1m.

The average own-book deal size, which is also continuing to increase, currently stands at approximately £25,000, compared with £14,000 when the medium-term strategy was launched.

CEO Ed Rimmer stated that:

“Our Medium-Term Strategy has a clear focus on substantially increasing own-book lending and strengthening the Group’s balance sheet. I am therefore delighted to see real traction being gained in both areas over the last half year. This has resulted in the Group’s own-book lending portfolio now standing at record-high levels; marks the portfolio’s full recovery, and more, from the COVID pandemic, and should result in growing income and profit streams for the Group over the life of these deals.

“Equally pleasing is that the increase in the portfolio continues to be driven by both the Group’s Invoice Finance and ‘Hard’ part of the Asset Finance divisions. This is very much In line with our strategy as both of these areas operate in the more secured lending space.”

Analyst Andrew Renton at Cenkos Securities has a Buy out on the £15.5m capitalised group’s shares.

He estimates current year revenues to rise to £25.0m (£23.6m) while adjusted pre-tax profits could lift to £3.5m (£3.0m), raising earnings to 3.0p (2.6p) per share.

The big kick will come next year when an increase in revenues to £29.0m will help to push profits up to £5.0m, worth 4.1p per share in earnings.

On the basis of Renton’s estimates, the shares of Time Finance are an absolute steal at the current 16.25p, trading on a mere 5.4 times current year and just a miniscule 3.9 times prospective price-to-earnings.

These shares could easily double within the next year or so.

(Profile 23.12.20 @ 21.5p set a Target Price of 30p*)

(Profile 07.01.22 @ 23.5p set a Target Price of 30p)

SigmaRoc (LON:SRC) – strong momentum together with acquisition opportunities

Yesterdays Q3 Trading Update by this quarried materials group declared a 19% uplift in revenues at £394m, while its underlying EBITDA at £77m was up 5%.

Max Vermorken, CEO of SigmaRoc, commented:

“Every quarter this year has been challenging and Q3 was no different. However, the Group’s unique structure, decentralised operating model and diversified end markets have allowed it to be agile in the face of these challenges. As a result, we remain on track to deliver our expectations for this year and retain solid and broadly based order books across the Group.”

Analyst Charlie Campbell at Liberum Capital has a price objective of 130p on the group’s shares, which he rates as a Buy.

For the current year his estimates are for sales of £516m (£272m), profits of £58.5m (£26.8m) and earnings of 6.6p (5.0p) per share.

I rate this £292m capitalised group as an ideal example of ‘an acquisition vehicle’.

A key element of its growth strategy is ongoing performance enhancement – it has shown an average EBITDA boost of 19% on its businesses since acquisition.

The shares closed last night at just 44.35p – a level that shows significant upside.

(Profile 04.09.20 @ 49p set a Target Price of 65p*)

Revolution Bars Group (LON:RBG) – really looking Peachy

On Tuesday this operator of 69 premium bars significantly increased its estate.

It has paid £16.5m cash, from its own resources, for the 21 food-led pubs within the Peach Pub Company.

The deal looks to be a very sensible expansion of this undervalued group, insomuch as it gives it a better balance of operations, as well as diversifying while adding growth potential.

CEO Rob Pitcher stated that:

“This is an exciting and transformative opportunity for Revolution. It broadens our guest base, balances our day part sales and seasonality whilst providing another avenue for growth both organically and by acquisition.

Peach is a quality business with great pubs offering a premium experience. It has rebounded strongly from the dark days of the pandemic. Central to this success has been a strong people focused culture with clear values that are focused on making the right choices for guests and our teams, a very similar approach to that taken at Revolution.”

On the same day the group declared its results for the 52 weeks to 2 July this year.

They showed sales of £140.8m (£39.4m), and pre-tax profits of £2.1m against the previous £26.3m loss.

Analysts Nigel Parson and Michael Clifton have new estimates out for the current year for £173m sales, just £1.3m profits and earnings of 0.5p per share.

The broker has a price objective of 36p on the shares, which closed last night at just 10.15p offering a useful buying opportunity.

(Profile 13.10.21 @ 24.25p set a Target Price of 31p)

(Profile 17.10.22 @ 10.62p set a Target Price of 15p)

And finally ………

CentralNic Group (LON:CNIC) – 300p consensus Target Price

I noted a piece from Simply Wall Street issued on Tuesday evening stating that for the internet services group:

“the consensus outlook for revenues in 2022 has improved.

• 2022 revenue forecast increased from US$612.9m to US$698.4m.
• EPS estimate increased from US$0.04 to US$0.06 per share.
• Net income forecast to grow 311% next year vs 23% growth forecast for IT industry in the United Kingdom.
• Consensus price target of UK£3.00 unchanged from last update.

Share price rose 11% to UK£1.32 over the past week.”

Gradually the market will realise just how undervalued the shares of this money-machine are currently, although the price will ‘back and fill’ the trajectory is still upwards.

They closed last night at 130p.

(Profile 12.07.21 @ 89p set a Target Price of 110p*)

(Asterisks * denote that Target Prices have been achieved since Profile publication)