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…
The Covid-19 Market Recovery Portfolio + 33.28%
Since 24 March this portfolio of ten stocks has convincingly outperformed the FTSE – which is up just 5.87% in the same period.
Braemar Shipping (LON:BMS) – now offering very big upside
This international provider of shipbroking, financial advisory, logistics and engineering services is doing well out of the much higher rates being charged for tanker charters, due to the sudden glut of oil globally.
Cheap buyers have been taking advantage of significantly lower prices for the crude, so with land-based storage units all full up the natural thought was get out and hire the tankers that carry the stuff around the world, then use them as additional storage units until the traders are ready to take their profits.
Of course, just how long this will carry on for is unknown, but the charters appear to be getting longer than normal for such situations.
On the corporate finance side, the company is expert in fixing funding for vessel owners and in such times as present it can do very well in helping clients.
On the logistics side, it appears that less freight coming from China has had its impact but cost savings are being implemented.
We will have to wait until early June to see just how well the group traded in the year to end-February 2020.
If it matches 2019’s £9.4m pre-tax that would give historic earnings of 22p per share.
For the current year finnCap, its brokers, are looking for a slip to £7.7m pre-tax worth 18p per share in earnings, before recovery next year.
With its shares currently on their backside at 105p they offer tremendous upside, with the brokers looking for 205p.
Profile 05.12.19 @ 185p set an end-2020 Target Price of 250p.
Capital Drilling (LON:CAPD) – still very undervalued
The price of gold is only about $150 away from hitting its peak of $1917.90 achieved way back in August 2011.
Such strength is good news for the clients of this mining services group, with some 90% of them in the hunt for the precious metal.
The group has been picking up more long-term contracts and its fleet utilisation rates are on the increase.
Operating remotely in the African markets, the company’s operations have not been interrupted by Covid-19.
The growth of its business in West Africa together with a widening of its service offer will produce further opportunities for growth.
I remain totally confident in the potential of this company and still consider that its shares are significantly undervalued, even at the current 58p. They went as low as 29p just over a month ago, and my target price is 100p.
Profile 23.07.19 @ 48p set an end-2020 Target Price of 76p.
Profile 22.10.19 @ 61p set an end-2020 Target Price of 100p.
DX* (LON:DX) – sassy share buying
Some years ago, I made a fair amount of money on trading the shares of Nightfreight, a logistics company controlled by Russell Black.
One of my recent profile companies is this provider of delivery solutions, in the parcel freight and courier sector.
It is a very interesting business and capable of significant growth.
So, when I saw that Russell Black, one of its non-executive directors had bought another 266,000 shares at almost 7.5p each, taking his holding up to 2.41m, I have to say that I was very pleased.
The group is an essential service provider. It should turn over about £307m for the year to end-June, and make a pre-tax loss of £2.9m, according to its brokers.
However, it is the turn-around into profits of nearly £3m next year and then £6m for the following year, that will get investors anxious to participate in such growth.
Russell has the right idea and, as far as I can see, he is on to a winner.
The shares now at 8.88p appear destined to climb back up to trade the 13p/14p level within months. They were 16.25p in June last year and could well be matching that price in a year’s time.
Profile 20.02.19 @ 12.5p set an end-2020 Target Price of 15.5p.
Totally (LON:TLY) – don’t underestimate this little company
It was interesting to note that Harwood Capital notified that it has a 3.27% stake in this outsourcing provider into the NHS and private health care sector.
The finals for the year to end-March 2020, which are due to be announced in July, are expected to be ahead of market consensus but on a lower than expected turnover.
With year-end cash of almost £9m and no debt funding, the group looks strong.
It has taken on a number of big new contracts, while others have been extended.
The Covid-19 outbreak may well prove to be highly beneficial for the group, especially as its services are largely based upon offering ‘out of hospital services’.
Those services include care in the community, GP surgeries, patients’ homes, prisons and other public sector organisations, places of work as well as mobile locations and urgent care solutions.
The group has a very keen strategy to build itself up within the fragmented healthcare market and is looking to further capitalise on the attractive opportunities that its disruptive, outcome-based, outsourced healthcare service model offers, to deliver value to shareholders as it continues to build critical mass.
As it continues to deliver critical front-line services across the UK and Ireland, I see this group expanding significantly in the next few years – its potential is massive.
At the current 13.5p its shares, which were 16.25p in late February, will move upwards before and after its July results.
I am confident in my share price target being achieved.
Profile 12.03.19 @ 12p set an end-2020 Target Price of 18p.