Small-cap round-up: featuring Alumasc, Augean, Devro and more…

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Small-cap round-up: featuring Alumasc, Augean, Devro and more…

In this weekly summary, Mark Watson-Mitchell updates his readers on previous company profiles and other news of interest from the exciting world of small cap stocks…

Alumasc (LON:ALU) – brokers upgrade estimates after update

My star of the week so far goes to this building products group, after announcing its first-half trading update. Already we knew that it was going better than expected in Q1, so the Q2 extension of that trend has been well received.

The group’s shares were marked up 24% yesterday morning to 142p.

It reported an increase of 11% in sales to £45.6m and a strong interim pre-tax profit of £6.0m, which was way up over last year’s £2.3m.

Brokers finnCap immediately upped their estimates for the current year to end-June to £87m sales, £8.9m profits, adjusted earnings of 19.9p for the year (8.2p) and a dividend of 5p per share (2p).

The interims will be declared on Thursday 4th February – it should be a very positive set of figures and statement. 

Unsurprisingly the brokers significantly increased their price objective from 130p to 178p. They closed last night at 138p up 24.5p on the day.

(Profile 13.02.20 @ 116p set a Target Price of 145p)

(Profile 08.06.20 @ 80p set a Target Price of 105p*)

Augean Group (LON:AUG) – not yet reached capacity

Monday’s trading update from this leading specialist waste management group reported that trading had recovered strongly through its second half to end-December. 

That was despite the effects of Covid-19 coupled with very much lower oil prices, which saw its North Sea Services side go into a decline.

Analyst Richard Hickinbotham at the group’s brokers N+1 Singer is looking for last year’s £90.2m of revenues to have pushed a little better to £93.9m this year and then up to £107.1m next year. 

Adjusted pre-tax profits of £15m in 2020 should progress to £17.3m this year and £21.0m next year, with earnings going from 15p to 17.3p then 21p respectively.

The finals are due to be declared early in March.

In the meantime, the shares at 215p feel capable of rising to 250p fairly soon.

(Profile 31.10.19 @ 158.5p set a Target Price of 200p*)

(Profile 10.06.20 @ 185p set a Target Price of 235p)

Devro Group (LON:DVO) – upper end of expectations

Monday’s trading update for the year to end-December, from this collagen products manufacturer, suggests that the full-year outturn was better than even the management had expected.

Estimates are now for the results, due on 2 March, to show towards £40.5m in operating profits.

The shares improved 8p to 161p on the news, and they closed last night even better at 167.25p.

(Profile 28.04.20 @ 149p set a Target Price of 180p*)

Begbies Traynor (LON:BEG) – a big deal in insolvency

With so many companies going bust, this year should prove to be a good earner for this business recovery, financial advisory and property services consultancy.

On Monday it announced its largest insolvency acquisition to date, paying £20.8m for CVR Global. In the process it added the group’s first overseas offices, in what should prove to be a value-accretive acquisition that is immediately earnings enhancing.

The deal was liked by the market as it added 14p to the group’s share price, closing last night at 111p.

(Profile 26.11.19 @ 85p set a Target Price of 110p*)

(Profile 21.04.20 @ 93p set a Target Price of 110p*)

U and I Group (LON:UAI) – selling off some assets will increase its cash 

This property regeneration group is a recent newcomer to my list of small-cap profiles. On Monday it declared its interim results to end-September.

They showed a first-half loss of £50.2m and a net asset value of 193p per share. Its net debt was down from £154.1m to £110.5m, with its balance sheet gearing down to just 46%.

There are steps underway to increase the group’s liquidity, to simplify and refocus the business.

Analyst Tom Musson at brokers Liberum Capital rates the shares as a ‘buy’ with a lowered price objective of 100p per share. He reckons that there is longer-term value in the group’s asset base and a strategy of turning that NAV into cash will significantly reduce the current 60% share price discount.

The shares were up to 73p on the announcement but have since eased to close last night at 67.5p.

(Profile 13.01.21 @ 63p set a Target Price of 80p)

Time Finance (LON:TIME) – slowly ticking better

The times they are ‘a-changing.’ 

They certainly are for this little alternative finance group, previously known as 1pm.

Yesterday, it announced its interim results to end-November last. They were fairly robust and showed that the restructuring that is ongoing, together with the re-branding, should be very beneficial to the group as a whole. 

That it has a strong and improving balance sheet with good liquidity will also show its advantages.

Analyst James Fletcher at brokers Cenkos Securities sees upside for the group’s shares and rates the shares, now at 25p, as a ‘buy’.

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

MPAC Group (LON:MPAC) – time buy before the finals?

A week ago, the shares of this high-speed packaging and automation solutions group reacted well after the full-year trading update. 

They touched 530p in response to better-than-expected trading for 2020, together with encouraging outlook predictions for this year. Subsequently they have seen some profit-taking take the shares down to 485p, before closing last night at 500p.

It always has been a ‘roller coaster’ in price, due to the large ‘dealing spread’. Even so, there are several onlookers predicting an early try to 600p as their price aims.

It was certainly a winner for my profiles list over the last year or so, and I see no reason to be out of the shares just yet.

In fact, ahead of the 1st March finals there could still be buying opportunities.

(Profile 19.12.19 @ 182p set a Target Price of 235p*)

N Brown Group (LON:BNWG) – time to snap up a bargain?

This group’s shares, which traded up to 80p each earlier last week, have fallen back to 63p in reaction to its trading update announcement for the 18 weeks to 2 January.

Between two- to three-week delays in the delivery of some of its stock lines has hit this digital retailer of fashion and footwear. It appears that a shortage of shipping containers out in Asia has not helped, nor too are higher prices on goods to trade.

Even so, I do feel that this group is on the right track currently. Its transformation is naturally a slow process if it is being handled efficiently. 

The recent fundraising will help to reduce group borrowings as it goes forward in 2021 – with year-end debt expected to fall from just under £500m to around £300m.

We have had a very good run with this profile stock, more than doubling in six months, but there is a lot more to come yet, so the current price could attract new investors to snap up a bargain.

(Profile 06.07.20 @ 36.15p set a Target Price of 50p*)

Halfords Group (LON:HFD) – both pedalling and motoring away

Another of our stocks that is close to doubling in price is this motoring and cycling products and services retailer and provider.

Cycle product retail sales grew in the thirteen weeks to 1 January some 35.4%, while its motoring product sales were off 8.4%. Its Autocentres were 21.1% better in the quarter.

As it goes into Q4 the group is confident of its financial strength and its responsive agility to cope with the effects of lockdowns – however, all revenue and profit guidance is suspended, perhaps until its pre-close trading update in March.

Liberum Capital rate the shares as a ‘buy’ looking for 350p as their objective.

The shares have been an excellent performer over the last six months, touching 303.5p at their best, and they are now 296.5p.

They could ease back in profit-taking, before recovering ahead of the March statement.

(Profile 02.07.20 @ 156.5p set a Target Price of 180p*)

Avingtrans (LON:AVG) – awaiting a good statement next month

After having touched 300p by the end of November, I really thought that these shares were proceeding on the right track towards my price objective.

However, the market does not seem to agree, as they closed last night at 277p on very thin volume, following last Wednesday’s trading update.

The group, which designs, manufactures and supplies critical components, modules, systems and associated services to the energy, medical and industrial sectors, issued a comment that it had ‘continued to perform well in the first half of the financial year and is trading in line with market expectations.’

That was, perhaps, not enough of a fillip for the market, with the shares trading in a 258p to 277p range.

Hopefully, we will see better comment when the group announces its interims to end-November on Wednesday 10 February.

Analyst Richard Hickinbotham at brokers N+1 Singer, reacting to the ‘in-line trading update’ sees current year sales increasing £5.1m to £119m and adjusted pre-tax profits of £7.4m against £6m previously, taking earnings up from 16.9p to 19.8p in the process.

I remain totally bullish about the group and its prospects and suggest that any dips in the price should create attractions for investors.

(Profile 04.11.20 @ 260p set a Target Price of 325p)

Portmeirion Group (LON:PMP) – throwing a good one

Analyst Sahill Shan at N+1 Singer reacted to this pottery and homewares group’s full year to end-December trading update by suggesting that the outcome will prove ahead of expectations.

Increasing his company’s forecasts, Shan now goes for sales of £87.2m for last year and £89.7m for this year, producing adjusted pre-tax profits of £1.2m, then £6.4m, worth 8.4p and 36.6p per share in respective earnings.

This is a class company with a global sales reach. I consider that its shares, at 590p still have attractions.

(Profile 28.08.20 @ 376p set a Target Price of 480p*)

Dekel Agri-Vision (LON:DKL) – higher palm oil prices and production

Recently this West-African focused agriculture group issued a positive full-year production update, and it has also announced a 7-year bond debt refinancing.

The company has stated that it had enjoyed a strong year-on-year crude palm oil production and sales price performance in its final three months of last year. 

The strong momentum has given the company confidence that its full-year 2020 financial results will show a material improvement on the previous year.

After hitting 6p last week, the group’s shares closed last night at 5.5p. 

Brokers Arden Partners are very bullish about the group’s prospects, rating the shares as a ‘buy’ with a price target of 7.6p.

(Profile 23.09.20 @ 2p set a Target Price of 3.5p*)

Card Factory (LON:CARD) – into share price doldrums

Understandably the lockdowns have really hit this retail group quite badly since I profiled the company in early August last year. 

The shares have been up to 48p subsequent to my comments, but its recent trading update was depressing.

Store sales were down 38%, while online orders were up 137% in the eleven months to end-December.

Until all of its stores are open, the shares could well stay in the doldrums at around the current 37.8p.

(Profile 05.08.20 @ 42p set a Target Price of 60p)

SDI Group (LON:SDI) – the imaging is getting a lot better

Analyst Gavin Wood at Progressive Research has recently prepared and published a 37-page report on this scientific digital imaging products group.

For the year to end-April this year he is estimating the company’s sales to grow from £24.5m to £32.6m, producing an adjusted pre-tax profit up from £4.3m to £5.8m.

He concludes: ‘SDI Group has delivered an impressive performance so far in FY21, benefiting from the diversity of its products and end-markets, while strong cash generation has enabled acquisition activity to recommence, despite pandemic-related disruption during 2020. We believe SDI Group has demonstrated its capability to deliver ongoing robust growth and is now well-positioned to extend its growth track record of the last seven years.’

In just over ten weeks the group’s shares have risen from 76p to 130p two weeks ago. They closed last night at 120p. 

I consider that they are currently on a roll and the group’s ‘buy and build’ strategy offers some much bigger upside potential.

(Profile 28.10.20 @ 76p set a Target Price of 95p*)

Accrol Group Holdings (LON:ACRL) – ready to wipe away the competition

Firing on all cylinders is the way that Zeus Capital sums up this toilet tissue and kitchen roll maker and distributor.

Last Wednesday’s interim results to end-October showed a very good performance on all aspects of its business. Apparently, margins are improving, cash flow is strong, while net debt has been falling quicker than expected.

Zeus is going for sales to increase from £135m last year to end-April to £151m this year, then £185m in the coming year. Adjusted pre-tax profits are forecast to improve from £4.7m to £8.5m, then double to £17.5m in the next year.

The brokers are very bullish and suggest that the group, as it is progressing now, could end up with a value of 122p a share.

After 75.1p was reached in its price early last week, the group has since seen its shares come back down to 67p on profit-taking. 

These shares look like they’re going higher.

(Profile 12.03.19 @ 22p set no Target Price)

(* denotes that Target Prices have been attained since publication)


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Comments (1)

  • tolle says:

    Accrol is very interesting. IPO , loaded with debt, then downward spiral. The replacement management team (still in place) have done well. Turning it around from basket case to growth case. Just bought another company instead of buying new machinery to enhance existing lines. The wood pulp required to wipe the floor (as you put it) is priced in dollars. In lead up to brexit and after pound has been strong against cable. This has also helped bottom line. They have not hedged against dollar, so there is a risk if pound falls. After the recent fund raise , three directors had shares which were not locked in. They all sold significant percentages of these ex lockdown shares. This is surprising (to me at least) given their bullish expansion plans. The last two points are they only downside risks I note.

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