Small cap round up: featuring Capital Drilling, Sureserve, TClarke and more…

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Small cap round up: featuring Capital Drilling, Sureserve, TClarke and more…
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Master Investor Magazine 60

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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…

Capital Drilling (LON:CAPD) – an excellent ‘gold play’

Are we missing a big trick?

With the recent global market turmoil, the price of gold has, understandably, been a quite strong performer.

In the last year it has risen over 28% at its best, now at around the $1,600 per ounce value it has driven the world’s producers to dig deeper and supply even more of the yellow metal.

That is good news, I would have thought, for a company like Capital Drilling, which is now a leading mining services business providing complete drilling solutions for surface and underground projects ranging from grade control drilling, underground drilling, blast hole, exploration, delineation and directional, shot loading and firing, on-site safety monitoring systems, directional software and surveying, and geophysical logging, and mineral analytic services.

Currently over 44 of its 93 drilling rigs are operating in West Africa, which accounts for nearly 50% of all the African continent’s gold exploration expenditure. It has established operations in Botswana, Burkina Faso, Côte d’Ivoire, Egypt, Mali, Mauritania, Namibia, Nigeria and Tanzania.

As the price of gold stays so firm it is obvious that the producers will work hard on getting more to the surface, to take advantage of the better pricing.

And that just has to be very good news for Capital Drilling.

The 2019 final results are due to be announced on Thursday of next week (19 March). It is not so much last year’s figures that will count, but more how it is faring so far in 2020.

I remain very bullish about this £66m valued group’s shares, now at only 43p. They have been up to 74p within the last year and I remain convinced that they will be up there and above before too long.

This morning Allianz Global declared that it has taken a 5.21% stake in the company. A wise purchase in my view.

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.

Sureserve (LON:SUR) – a bullish AGM statement coming?

I recently profiled the shares of this compliance and energy services group ahead of the finals.

They moved up from my profile price of 36p to 51p, just above my target price for the end of this year.

Subsequent profit-taking pulled them back to rest at around 45p, before the virus hit the markets for six.

Now at around 36p we are back to the original level. The finals were excellent and this current year should see an even better performance.

I expect that the AGM statement next Wednesday will be as bullish as I am about its prospects.

Profile 14.01.20 @ 36p set an end-2020 Target Price of 50p.

TClarke (LON:CTO) – looking forward to next week’s results

Next Thursday will see this very professional building services group announce its 2019 finals.

I am convinced that its management will have been pleased with Rishi Sunak’s big spending budget announcement this week.

This £46.5m valued group gets itself involved in almost all UK business sectors, the majority of which will have seen a potential uplift from the overall ‘big spend’.

It spreads five main market sectors – infrastructure; residential; technologies; mechanical and electrical contracting; and finally, facilities management.

It is involved in providing building services and solutions, not for the shell of a building or the internal fabric and decoration, but instead for practically everything else.

Its areas of expertise are in powering a building, heating it, lighting it and, importantly, making it intelligent.

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Master Investor Magazine 60

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Estimates for 2019 suggest that a £340m turnover was possible, giving some £10m of underlying operating pre-tax profits (£7.80m), worth 17.5p (15.38p) per share in earnings, while also easily covering a 4.50p (4.00p) per share dividend.

The shares are currently trading at around 109p. They were 137p at the start of this year.

Ahead of next week’s figures I am very bullish about its prospects.

Profile 10.12.19 @ 120p set an end-2020 Target Price of 165p.

SimplyBiz Group (LON:SBIZ) – just the business

The end-2019 results saw revenue up 24% at £62.8m and pre-tax profits more than double from £4.23m to £10.84m, while earnings were 13.4p per share (11.62p previously).

It was last year that the group made its impactful £15m acquisition of the totally complementary DeFaqto group.

Despite other exterior hassles the group’s Board is expecting both headline and underlying growth to remain strong in the current year and beyond.

From well over 250p in late December, this business support and financial market services provider has seen its shares endure the market collapse fairly well.

They started the week at 174p then fell back to 155p before bouncing up to 200p on Tuesday’s results announcement before falling back again to the current 159p.

I continue to rate highly the potential of this expanding group’s shares.

Profile 04.04.19 @ 208.5p set an end-2020 Target Price of 250p.

STV Group (LON:STVG) – good results and prospects

Despite revenues for the 2019 full-year falling just 2% to £123.8m, the Scots broadcast media group reported an adjusted pre-tax profit 11% better at £21m.

However, the actual pre-tax profit was a staggering 853% better, up from £1.9m to £19m.

Adjusted earnings were 13% up at 46.4p per share, while the dividend was 5% better at 21p.

The current year has started well with viewing share rising, similar with advertising revenue (although April will see a drop).

The STV Productions side should break into profits this year and the Board appears confident of the group’s prospects (virus permitting).

The shares responded quite well to the results. Just 446p a month ago, they fell away to 396p by this time last week before the market fell catastrophically. They bottomed at 325p on Monday before recovering to 374p at one time on Wednesday.

They close the week at around the 362p level. Just like going back to square one after touching a high of 455p in mid-January. How times change! Hold tight.

Profile 25.04.19 @ 370p set no Target Price.

And Finally…

Costain Group (LON:COST) – an extra £100m will help

The results from this infrastructure solutions group were very disappointing.

For the year to end-December 2019 it announced revenues down from £1.4bn to £1.2bn, while underlying pre-tax profits were down from £52.5m to just £14.6m, with earnings falling from 38.2p to 13.5p per share.

Even the dividend was slashed, from 15.15p to only 3.8p per share.

Net cash at the year end was almost halved from £118.8m to only £64.9m.

Delayed starting dates made a very heavy impact upon the figures, so when coupled with staggered contract order confirmations, it proved very unfortunate.

The group announced a £100m fully underwritten fundraising straight after the results, in order to help it capitalise on both its capabilities and the new orders that it has already secured this year.

The shares, which touched 179p on Monday of this week, were smashed down to a current low of just 76p.

Stand back and let the group recover into its strength, which it will do in time.

Brokers Peel Hunt have retained their Buy advice on the company’s shares, with a 225p price being sought.

Profile 05.09.19 @ 151p set an end-2020 Target Price of 250p.

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