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 shares…
CentralNic Group (LON:CNIC) – strong second quarter gives encouragement, a purchase for any growth portfolio
On Monday of this week, this global internet services group announced a very positive first-half trading update.
It appears that the company, which derives significant recurring revenues from selling domain names and providing services, saw its Q2 revenues rise strongly.
A 63% jump in revenue to around $174m is anticipated by the company. The reason that its revenues are reported in dollars reflects the group’s totally global business spread.
That in turn leads its broker and NOMAD Zeus Capital to anticipate $348.4m of group revenues for the full year to end-December.
Their analyst Bob Liao reckons that there will be profit upgrades before the year end.
He currently has EBITDA estimates for this year showing $41.4m against $30.6m last year, worth some 10.4c per share in earnings.
Over at Edison Investment Research its analysts Richard Williamson and Russell Pointon are expecting to upgrade their estimates after the interim results are announced on Tuesday 31 August.
Interestingly, they are currently going for only $323.4m of revenues this year, with $39.5m of EBITDA and $26.7m of pre-tax profits, worth 9.93c per share in earnings.
I will just let the analysts fight it out between themselves – for my part I am convinced that this £222m capitalised group has significant and strong revenue and profits growth ahead of it over the next few years.
Its shares at just 96.5p are trading at less than 13 times current-year earnings – that is far too low a rating, especially considering the valuations that the market puts on other less strong groupings who do not have anywhere close to 99% annual recurring revenues.
I would have thought that 18 to 20 times earnings would be closer to a proper value for these shares. I have already predicted that they will trade at 125p/150p within the next couple of years – so take your own view now and decide whether they are going into your growth portfolios.
(Profile 12.07.21 @ 89p set a Target Price of 110p)
Journeo (LON:JNEO) – this is yet another cheap stock
The trading update from this information systems and transportation sector technical services provider was really quite bullish for the group’s shares.
Sales were up 7% in the first half to £7.2m and net cash ended the period at £1.3m.
Monday’s announcement was accompanied by news of another contract award, this one for real-time passenger information systems and services for the Aberdeenshire County Council worth £0.8m.
The group’s order books seem to be expanding quite well currently.
Its brokers WH Ireland now have a 150p ‘fair value’ estimate out for the group’s shares. Its analysts, John Cummins and Matthew Davis, are estimating £0.8m of pre-tax profits for the year to end-December, worth 8.7p in earnings per share.
For next year £1.3m profits and 14.5p in earnings per share is what they predict.
At the current 102.5p the group’s shares look to be excellent value and capable of climbing back up again and way higher than my already previously achieved price objective.
Could be worth a top up.
(Profile 07.04.21 @ 95.5p set a Target Price of 120p*)
Safestyle UK (LON:SFE) – brokers rate the shares as cheap
Now at just 54p the shares have yet to reflect the good news that came out in this week’s trading update for its first half year to 4 July.
It reported strengthening demand, with first half sales now 13% ahead of 2019, up from around 10% ahead in the first four months.
Sector analyst Charlie Campbell at Liberum Capital rates the shares of the UK’s market leader in making and retailing PVCu replacement windows and doors, as a ‘buy’ looking for them to rise to 80p.
He forecasts sales for the year to end December to rise from £113m to £144m and for the losses of £5.2m last year to be replaced by profits of £6.5m, worth 4.4p per share in earnings.
Campbell is predicting a £12m net cash position at the year end, which would be a strengthening of the group’s balance sheet.
Zeus Capital analysts Andy Hanson and Rachel Birkett noted that the stronger first-half revenue growth and improving margin has underpinned their upgrades.
They see £144m of sales and £6.9m of adjusted pre-tax profits, worth 4.2p in earnings.
However, where Liberum go for a current-year dividend of 0.5p per share, Zeus goes for 1p.
We shall see just how both brokers react to the interim results when they are declared on Thursday 23 September.
Whatever they do will probably not change my opinion about the group’s shares – I rate them as very cheap and an excellent participation in the increasing new build and home improvement and remediation markets against such a strong property sales sector.
(Profile 06.01.21 @ 36.5p set a Target Price of 48p*)
Coral Products (LON:CRU) – insider adds to holdings
Last Friday this undervalued Manchester-based plastic products group’s Chief Executive, Joe Grimmond, added another 50,000 shares @ 13.4p to his now 6,343,337 share position, representing some 7.65% of the group’s equity.
At just 13.6p these shares still have strong investment appeal, especially after the group itself has been buying-in its own shares, now up to 2.995m shares held in treasury.
(Profile 28.04.21 @ 14p set a Target Price of 18p)
The Brighton Pier Company (LON:PIER) – dull weather will pick up traffic at the group’s venues
As we see reports of dull days, rain showers, even flooding in some parts of the country, it occurred to me that the Brighton Palace Pier must have been doing good business, so too at all of its mini-golf centres and at its latest acquisition, the Lightwater Valley Attractions family theme park set upon 175 acres of the North Yorkshire countryside.
Whether its Eclectic Bars division has been doing well in poor weather, I simply cannot say, but I would imagine that the 18-to-35 year-old clients must still be drawn to the various centres, in search of post-lockdown drinking sessions.
It would be reasonable to think that the group is beginning to see a significant uplift in its takings.
Analyst Peter Renton at brokers Cenkos Securities is estimating a near doubling of current year sales to £30.7m (£16m) by end-June 2022, generating a healthy return to adjusted pre-tax profits of £3m against an estimated £0.5m loss for the last year. That would see 6.4p per share in earnings.
The company’s shares at 59p look to me to be a cracking opportunistic purchase at these lower levels.
(Profile 30.06.21 @ 61p set a Target Price of 75p)
(Asterisk* denotes that Target Prices have been achieved since profile publication)
Profile company results, meetings and updates expected within the next few days:
|Wed 28||Card Factory (CARD)||AGM|
|Hargreaves Services (HSP)||Fins|
|International Personal Finance (IPF)||Ints|
|Smiths News (SNWS)||T/U|
|Staffline Group (STAF)||AGM|
|Ted Baker (TED)||AGM|
|Thu 29||CMC Markets (CMCX)||AGM+T/U|
|discoverIE Group (DSCV)||AGM|
|Palace Capital (PCA)||AGM|
|Mon 2||SigmaRoc (SRC)||AGM|
|Tue 3||Barr (A.G.) (BAG)||T/U|
|Joules Group (JOUL)||Fins|
|Wed 4||Morgan Sindall Group (MGNS)||Ints|
|Thu 5||Dekel Agri-Vision (DKL)||AGM|
|Secure Trust Bank (STB)||Ints|
|Fri 6||Cake Box Holdings (CBOX)||AGM|