Small Cap Round-Up: Brus and Builds

Equals Group (LON:EQLS) – ready to penetrate the 100p barrier

After an excellent start to this payments group’s Profile selection way back in February 2019, which saw the shares rise from 89p to 131p inside the ensuing four months, by early April 2020 (early-stage Covid) the had collapsed to just 19p.

For a year or so they traded the 20p to 35p range, before starting to slowly show signs of distinct price recovery to hit 98p in July this year, not quite breaking through the 100p barrier again.

It has tried five times to do so over the last four months.

Now I think that the next few weeks will see a clear break upwards, with that barrier being taken with ease.

Employing some 285 staff, the company, with offices in London and Chester, is a technology-led international payments group.

Established way back in 2007, it listed on AIM in 2014.

On Monday morning it issued a Trading Update for the 11 months to end November, showing a 61% revenue advance in the period to £63.5m.

Its Solutions side, only launched in early 2021, reported a 297% increase to £13.9m for the eleven months.

Other revenues lifted 38% to £49.6m.

The group’s CEO Ian Strafford-Taylor stated that:

“We are extremely pleased to see a 61% increase in our revenues in the 11 months ended 30 November with all segments performing strongly. Our revenue growth has continued in the face of difficult macro environments and this augurs well for 2023 and beyond. We continue to invest in people, products and technology to drive our growth strategy and look forward to updating the market in early January with our full year trading statement.”

The indications clearly show that the group will be beating previous market expectations.

Analyst Robin Savage at Zeus Capital suggests that the current year revenues could well hit £70m, however, for the meantime he has kept to his estimate of £65.0m (£44.1m), with adjusted pre-tax profits rising from £4.7m to £9.5m, lifting earnings up to 5.0p (3.2p) per share.

His estimates for 2023 and 2024 are respectively, £78.0m then £94.0m revenues, with profits of £13.5m then £17.0m, generating 6.0p then 7.0p per share in earnings.

It is the possibility of such estimates being achieved that, in my view, will spin the shares up to trade in the 100p to 125p range in early 2023.

They closed at 91p last night, looking ready for lift-off.

(Profile 14.02.19 @ 89p set a Target Price of 100p*)

RBG Holdings (LON:RBGP) – buying more to ‘hatch’

I applaud CEO Nicola Foulston in backing up her optimism for her professional services group’s progress in the next year or so.

The £70m company’s shares were hit for six by poor results from its litigation finance side, issued on Monday collapsing the price to a 57.5p low during the day before closing at 64.5p, down 19p on the day.

With her big wallet Nicola waded into the market and cleared out 250,000 shares @ 64.65p each, boosting her holding up to 11.76m shares (12.34%) in the group’s equity.

The Update noted a £4m hit to the group, following which analyst James Tetley at Singer Capital Markets reassessed his estimates for the current year to end December, to £49.5m (£47.2m) revenues and lowered adjusted pre-tax profits at £6.9m (£10.7m) and earnings of 5.8p (8.9p) per share.

Yesterday the group’s shares closed up 8% on the day at 70p.

(Profile 05.02.21 @ 80p set a Target Price of 100p*)

(Profile 17.10.22 @ 88.5p set a Target Price of 120p)

Inland Homes (LON:INL) – Nice One Nish

My Profile Selection prices to date have shown that I have been unable to properly read just what is going on with this group – which I still really like as a business.

I also have reservations about the various pieces of advice that they may well have received from their brokers and public relations experts.

Group investors have not benefitted to date, are times about to change?

Nish Malde, interim CEO, and his fellow Directors at the £43.6m ‘brownfield’ housebuilding and property development group, look to have pulled off a bit of a coup.

Former CEO of the massive Galliard Homes development group, Don O’Sullivan, has been appointed to the Inland board as the new CEO.

That is massive news for the somewhat beleaguered development business.

O’Sullivan has the experience and the weight enough to impress bankers, advisers and investors alike as he sets to his task of shaking up the company and taking it stridently into 2023 and beyond.

Inland shares closed at 19.25p last night.

(Profile 13.08.19 @ 68p set a Target Price of 110p)

(Profile 24.10.19 @ 77p set a Target Price of 110p)

(Profile 29.10.21 @ 46.5p set a Target Price of 60p)

AG Barr (LON:GAG) – Latest Cash Acquisition Gives Energy

The announcement on Monday morning that the IRN-BRU maker had acquired the Boost drinks business for an initial £20m consideration, certainly perked up the market’s interest.

The group’s shares rose to 543p at one stage, up 38p in response to the news.

By Monday evening they closed 33p better on the day at 538p.

The instant euphoria on the deal became somewhat dissipated by last night as a little bit of profit-taking reduced some of the steam.

Analysts Darren Shirley and Clive Black at Shore Capital obviously rate the House Stock.

They nudged up their estimates on the group.

For the year to end January 2023 they look for sales to rise from £269m to £307m, helping to lift adjusted pre-tax profits to £42.6m (£41.5m), picking up earnings to 30.4p (29.3p) per share.

For the coming year the brokers go for £385m revenues, £45.1m profits and 32.2p earnings per share.

This £579m group is a ‘class act’ whose shares, at 518p, represent a very appealing medium-term investment.

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

CMO Group (LON:CMO) – This One Could Take Years to Recover in Price

Last Friday’s Trading Update by the UK’s largest online-only retailer of building materials confessed to a human-error in the cost and consequent pricing update procedures at its Total Tiles division.

Swift correction was implemented, the mistake led to an overestimation of margins in this branch of the group’s business.

The impact is a £0.7m reduction in the group’s EBITDA.

The £23.6m group’s CEO Dean Murray stated that:

“While the one-off revision in stock valuation in our Total Tiles operation is frustrating, it is an isolated issue which the Board has taken immediate and decisive action to rectify.

We have a differentiated and proven model which continues to take market share. We have also continued to grow sales across the Group in the second half, further underlining the success of our pure play online model in disrupting the marketplace.

Whilst we remain mindful of the economic backdrop, we are confident that both individuals and tradesmen will continue to become ever more digitally savvy and that our proposition will continue to gain traction”

Although analyst Charlie Campbell, at the group’s brokers Liberum Capital, dropped his price objective on the group’s shares from the previous 57p to 45p after the statement, he still rates the shares as a Buy.

His current year estimates to the end of this month are for sales of £84.0m (£76.3m), with pre-tax profits falling from 31.5m last year to £0.6m this year, worth 0.6p (2.1p) per share in earnings per share.

However, for the coming year he sees £88.3m sales, £1.3m profits and earnings of 1.4p.

Jumping ahead to 2024 Campbell has £98m takings, £1.6m profits together with 1.8p earnings as his estimates for the year.

Way back in May this year I dropped my Target Price to 150p from 200p – I now realise it should have been reduced by 80%, not 25%.

The shares had peaked at 219p in July last year, but at this rate that price may never be seen again.

If you still hold, I am afraid that it will be a very long haul for any price recovery.

The shares closed last night at 28p.

(Profile 08.11.21 @ 165p with a Target Price of 200p, dropped to 150p on 09.05.22)

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