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…
Well, we started off the week with some good news. Synnovia (LON:SYN), the specialist manufacturer of industrial components and consumables is the subject of a £48.8m takeover bid.
The Barker Partnership, which already controlled 29.9% of Synnovia’s equity, has bid 125p cash for the balance shares. With various offers to sell it has effectively some 57.7% of the company already in its control.
That compares with the price of just 87.5p before the bid, and with the 102p price of my profile way back in early March.
That is a good price, a good profit, so just take it and run. After all there are so many other great opportunities in the market currently.
And then Miton Group (LON:MGR), the fund management outfit, announced that it was to merge with the much bigger Premier Asset Management (LON:PAM). The news boosted Miton’s shares 10p to 51p, which is 6p short of my end April 57p profile price.
The new Premier Miton Group, which will administer Miton’s £4.7bn and Premier’s £6.7bn funds under management, will generate around £76m annual revenue and should make some £25m of profits.
This deal makes a great deal of sense and clearly shows that there is quite a lot happening under the surface of the fund management sector, without the hassles of the Woodford debacle.
I like this merger and consider that holders of Miton shares should hold tightly, their value inside the grouping will show through. In fact, I would probably add to holdings at the cheaper levels, I see them up to 70p/75p equivalent.
Bloomsbury Publishing (LON:BMY) – I was pleased to see that Montanaro Asset Management has just added another 500,000 shares to its holding in my favourite publishing group, now upping its stake to 3,250,000 shares representing 4.31% of the equity.
Hopefully that is a propitious investment for the fund managers, ahead of the end-August interims being announced at the end of next month (29October).
For the year to end-February 2020 broker estimates suggest that revenue could rise £6m to £168.5m and that the company could see a healthy rise from £12.05m to £15.5m pre-tax profits, worth 16.2p per share in earnings.
The prospective year could gain £174.5m in sales and £17.5m in profits, with earnings jumping to 18p per share.
And don’t worry about the dividend – its unbroken track record will continue with around 8.4p for this year against 7.96p last year, while the 8.8p for the prospective year to end February 2021 will obviously please shareholders.
The shares at around the current 238p have hardly moved since my late February and end-March profiles of 231p and 238p respectively. However, I still strongly hold out my target price of 300p. I have followed this company for decades and have never been disappointed by the quality of the company and its management.
Audioboom Group (LON:BOOM) – the global podcast company has tied up a partnership with Voxnest Inc, whereby the latter will now be its exclusive advertising technology partner.
The deal is expected to really boost ads for Audioboom’s vast compendium of some 250 show podcasts, as well as for its other podcast partners.
Hopefully this will help to increase the group’s cashflow and also its customers using the Audioboom podcast carrying service.
I profiled the company in early July at 210p, since when the shares have been a lot higher but have subsequently drifted back to the profile price.
Still in the very formative stages, this company’s shares remain a highly speculative situation, awaiting the anticipated sales jumps and the economies of scale to lower costs, while turning in some attractive earnings.
Property developer Nick Candy, directly or otherwise, now controls 26.08% of the company’s equity.
Tentatively I put out a target price of 300p per share by the end of next year. Just a few items of good news could see that being hit very quickly.
Solid State (LON:SOLI) – I have to say that I was very pleased to see that finnCap, one of the manufacturer and distributor of computing, power, electronic and communications products company’s brokers, has increased its target price from 546p to 610p.
Trading for the first four months of the year has been very strong and well ahead of budget. The company, which also distributes electronic components, said that profits will be boosted by stronger than expected margins.
I only profiled the company in the middle of last month. Then at 404p, they are now trading at around 474p and getting very much closer to my 546p target price, so the bullish news from the company and the new finnCap target price is very much in our favour. My target should be easily beaten, possibly within the next few months.
Pelatro (LON:PTRO) – in just under three weeks, on Thursday 26 September, this multichannel marketing hub software company will be announcing its interim results to end June.
Let us hope that the imminent news will be sufficiently inspiring enough to start to kick the shares into some good price action.
I profiled the company in the middle of July at 76p, with a 125p target price. Currently just 71p they hopefully will very soon look to be an exciting purchase at the current price.
Accrol Group (LON:ACRL) – the results to end April were reported on Tuesday and they showed much as expected, with sales up just £1.4m at £116.7m, but with a much reduced loss of £14m against £24.1m last time. Net debt has dropped from nearly £34m to £27m.
However, the accompanying statement was really quite bullish, with a clear emphasis that the toilet tissue and kitchen towel company, was now profitable, cash generative and ready for growth.
I profiled the company way back in mid-March at just 22p, they are now trading at around the 31p level after those results. Until I have been updated upon the strength of brokers’ estimates for this year, I will not be putting out a target price, other than suggesting that the shares could easily hit 40p on recent performance.
STV Group (LON:STVG) – the interims to end-June were declared on Tuesday and were better than many in the market were expecting.
They showed that the Scottish broadcasting group had seen its pre-tax profits come in at £9.1m against the 2018 comparative loss of £4.3m and that was on a revenue slightly lower at £54.9m against £57.7m previously.
Earnings per share improved from a 10.9p loss to 19.7p by the halfway stage. The interim dividend was lifted 5% to 6.3p per share. Net debt was £4.2m higher at £42m.
What I liked in the accompanying statement was that the company recognises that Brexit will result in market turbulence in the second half year. It accepts that while it will affect the wider UK media market, the impact on STV’s profitability will be “mitigated by advertising trading arrangements, on-going tight management of the cost base and a continued focus on progressing the growth plan”.
I profiled the company in late April at 370p. The shares have been down to 343p in late July and close to that again earlier this week. However, they are now trading at around the 362p level and I would hold on tightly to the shares.
Brokers Shore Capital rate them as a ‘buy’, while Peel Hunt agree with a 480p target price.
Cohort Group (LON:CHRT) – last Tuesday this independent technology company announced an excellent piece of contract news.
EID, its 80%-owned Portuguese subsidiary, has just won a €16.7m agreement to supply tactical radios and ancillary equipment for the Portuguese Army. EID, which designs and manufactures advanced communications systems for the defence and security markets, is expected to deliver against this contract from now and up to 2026.
Hopefully more good news can be expected when the company holds its AGM on Tuesday 17 September.
I profiled the company at 446p in early August, with a target price of 607p. The shares are now trading at around 478p, at which level I really do consider that they offer massive upside.
Watkin Jones (LON:WJG) – the developer and constructor of multi-occupancy residential properties for the student accommodation and ‘build to rent’ sectors, will be holding an investors and analysts visit around its recently completed Stratford student property development on Tuesday 5 November.
Obviously, the group will be giving various presentations on that day, but more importantly it will then also be announcing its trading update for the year to the end of this month.
I rate this group highly and it is in a strong growth phase. Its shares, now only 216p, have been a pathetic performer since my mid-May profile at 225p. However, I maintain my 300p target price.
The SimplyBiz Group (LON:SBIZ) – which provides independent technology, compliance and business services to the UK’s financial institutions and financial advisers, will be announcing its results for the half-year to end June next Tuesday.
This group has over 3,700 sector member firms taking its services. Earlier this year it made an excellent acquisition in buying the Defaqto business, which operates a technology based fintech platform for some 8,500 financial advisers, providing ratings on 21,000 financial products and funds, licenced by 230 brands.
I am confident about this expanding group and its potential to drive organic and acquired growth in both revenue and profits.
My early April profile highlighted the shares at 208.5p, they subsequently climbed to 245p before easing back to 191p in early August. They now trade at just 202p, I keep hold of my 300p target price.
Futura Medical (LON:FUM) – since I profiled the company way back in mid-March, when the shares were standing at just 15p, the company’s market capitalisation at £87m has almost trebled, now with them trading at 42.5p each.
The group’s interims to end June are due to be reported next Wednesday. I do not expect any impressive financial performance, however, I would be very pleased to get a good update on the progress of the products under development.
I was particularly perked up by the publishing a couple of weeks ago of a major report entitled ‘The Erectile Dysfunction Drugs Market: Global Demand Analysis & Opportunity Outlook 2027’. It details an anticipated annual compound growth rate of 5% in that market during the decade from 2017 to 2027.
It also includes comment upon the competitive scenario of the key players in the market, namely Pfizer, Eli Lilly, Bayer, VIVUS, Teva Pharmaceutical, SK Chemicals, Meda, Apricus Biosciences and Futura Medical.
This report clearly shows that tiny Futura is a recognised player in the marketplace and that it should benefit from the rising awareness of growing medication in that growth market.
This report gives me added confidence that the company has the ability to develop strongly and compete with the bigger players – who, of course, could well turn out to be potential bidders for our AIM quoted minnow.
I really do think the recent reduction by Chase Nominees, on behalf of the Greater Manchester Pension Fund, of the holding in Chemring Group (LON:CHG) from 4.99% to 3.87% is a wrong move.
The high technology products manufacturer and services provider to the aerospace, defence and security markets, might well be in the sights of a potential bidder. The sector is buzzing currently, following the recent US bid for the Cobham Group.
Admittedly the shares have been a dull performer since my June profile at 177p, now at just 180p, but even so, I maintain my target price of 300p a share for Chemring because I really do rate the company highly.
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