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 Group (LON:ALU) – always pay attention to the ‘insider dealing’
Well, now we can see why the directors of this £32m valued building products supplier were buying the shares of their own company in late July.
Admittedly, their purchases were made after the 23 July trading statement which showed that sales in the final month of the group’s trading year had been strong.
On Tuesday of this week the group announced its final results for the year to end-June showing the pre-warned fall back in sales and profits, to £76m and £3.7m respectively. Earnings came out at 8.2p per share, giving a more than four-times cover to the 2p dividend.
Brokers finnCap are now looking for the current year to see some useful recovery to £86m in revenues and a healthy £6.4m pre-tax profit, pushing earnings out at a whopping 14.3p per share and a dividend of 5p.
My goodness, that makes the shares, now only 84p, an absolutely stonking recovery purchase. Which is, no doubt, why the company’s brokers are looking for 130p as the fair price for the shares. That is a mega-55% upside.
I look forward to the late-October AGM for a bullish current trading statement, enough to help kick the shares over the 100p level at least.
(Profile 13.02.20 @ 116p set a Target Price of 145p)
(Profile 08.06.20 @ 80p set a Target Price of 105p)
SigmaRoc (LON:SRC) – great interims and growth prospects
Monday’s interim results statement by this ‘buy and build’ construction materials group were excellent.
For the six months to end-June, revenues were up 83% at £54.5m and pre-tax profits were 51.4% better at £5.3m. Earnings came out at 1.98p per share.
The first-half performance was robust, with the company maintaining its positive growth momentum, while being margin aware.
That trend continued into July and August. The group expects the recovery trends experienced through the third quarter to be maintained over the remainder of the year. As a result, it expects the full-year 2020 financial performance to reflect further significant year-on-year progress.
Brokers Liberum Capital have significantly upgraded their estimates for this year and next. Revenues are expected to be £14m better than their previous forecasts for 2020 and up from £110.8m to £138.1m for next year.
They jacked up their pre-tax profit forecast by 62% from £6.1m to £9.9m for this year and then up from a previous £12.9m for next year to £13.7m – that should see earnings per share of 3.4p this year and 4.3p next year.
That puts the shares out on quite modest ratings for a company with such an effective acquisition strategy.
Now at 50.5p, the shares, which now have a 60p price target put out by the group’s brokers, look very capable of early appreciation and I am obviously more bullish than its brokers.
(Profile 04.09.20 @ 49p set a Target Price of 65p)
MPAC Group (LON:MPAC) – shares really on the move up again
Almost like old times – yesterday the shares of this packaging and automation solutions company touched 330p before closing, after a busy trading day, up 20p at 315p.
It was just before the Covid-19 lockdown that the shares were at that level, after peaking at 377p earlier in the year.
The recent upwards move has followed last week’s interim results announcement and this week’s $15m acquisition of the Ohio-based Switchback Group. Similar to MPAC, it is a machinery maker dealing in the same food, beverage and healthcare markets.
Thoughts are that this could make an ideal base for MPAC’s own US marketing.
Great synergy, with good sales and profits added.
The market obviously likes the deal and the group’s shares – are they heading back up to 377p again?
(Profile 19.12.19 @ 182p set a Target Price of 235p*)
‘On the move’
Medica Group (LON:MGP) – Ahead of next Monday’s interim results announcement, this teleradiology services group has been notified that Aberforth Partners has now declared a 5.87% stake in the company.
The institutional investor joins Gresham House Asset Management, who have also been adding to their holding over the last few months. The shares closed at 125p.
(Profile 07.01.20 @ 155p set a Target Price of 215p)
STM Group (LON:STM) – Wow, did you see the dealing volume yesterday? It was nearly seven times the daily average, with 532,941 shares traded against the normal figure of 78,163.
As a matter of interest, it is well worth noting that this cross-border financial services group has some £700m of assets under its administration (AUA) on just its life assurance business, while the group as a whole has a total of a massive £8.7bn of AUA.
The shares closed last night at just 37p, still a long way from my easily attainable short-term price objective.
(Profile 27.05.20 @ 33.7p set a Target Price of 50p)
Cake Box Holdings (LON:CBOX) – Have I been around the market for too long? I hope that my old age has not brought cynicism.
When I see a statement that one or two directors are selling a chunk of shares “in response to demand from investors and to increase the liquidity of the company’s shares” – I get turned off.
Why? Because I have seen so many company bosses dumping swathes of their holdings and using just such a statement to cover the reasons for their disposals.
Cake Box founder and CEO Sukh Chamdal placed off 3.75m shares @ 170p, leaving him with a 31.97% stake in the specialist cream cake shops franchise chain.
Even Pardip Dass, the CFO, put his hand out too by selling off 225,000 @170p.
Hopefully, David Horner and his Chelverton Asset Management are happy with the deal – they acquired 2.137m shares (5.34%).
Why not just state that the founder needed to reduce his position for personal financial reasons? Nobody would doubt his reasons, especially holding a balance 32% stake in the group. To me it is unnecessary ‘market verbiage’.
The shares closed last night at 175p.
(Profile 30.07.19 @ 180p set a Target Price of 240p)
And finally ….
TT Electronics Group (Lon:TTG) – up 38% in one day!
The shares of this performance-critical engineered electronic products group responded very well to yesterday’s news of the launch of a ‘ground-breaking’ Covid-19 screening device.
It has been involved in the production of “the Virolens screening device uses microscopic holographic imaging and artificial intelligence software technology to detect the presence of the virus from a non-intrusive saliva swab test within 20 seconds. The device does not need to be administered by healthcare professionals and is expected to be used in airports, offices, sports venues and many other locations where people need to be in close proximity to each other.”
The shares jumped a massive 72p to close up 38% on the day at 262p. Don’t chase them just on this news.
(Profile 27.02.20 @ 201p set a Target Price of 250p*)
(*denotes that a Target Price has been attained since profile.)