Small cap round up: featuring Circassia, Severfield, Medica and more…

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 CV19 Market Recovery Portfolio 24.03.20  + 31.26%

This portfolio of 10 stocks has shown a very good performance over just two weeks.

Circassia Pharmaceuticals (LON:CIR) – massive change spurs price

The market seemed to be very pleased with Thursday morning’s announcement that the company has reached an agreement with AstraZeneca.

It is going to transfer the assets of the US licence for Tudorza and Duaklir to AZN.

Accordingly, it is terminating the development and commercialisation agreement and in so doing cancels out its debt to AZN and the ongoing costs.

This is a very big change in the company’s framework. It will change its name to Circassia Group, leaving it debt-free and with a strong revenue-generating business based around the expansion of the sales of its Niox respiratory diagnostic platform.

AZN retain their 18.9% equity stake.

The news turned the share price around significantly, with some 26.5m shares changing hands during the day and leaving them 5.65p better, up 43% at 25p.

My target price looks achievable again now.

Profile 23.01.20 @ 25p set an end 2020 Target Price at 40p.

Severfield (LON:SFR) – trading update due soon

We had a very good run with the shares of this leading UK structural steelwork fabricator straight after Boris won the General Election. They improved from an already well priced 73p to top out at 96p two months later.

But then along came Covid-19 and the market devastation in its wake.

The group’s shares fell to a low of 57.2p before closing this week at a healthier 67.8p.

So back to where we came in then.

However, I have been following closely this company for the last couple of decades.

I can remember playing the stock way back in 2003 at around 30p, they went up tenfold within four years, peaking at well over 310p by November 2007.

Lifetimes have passed since then, but still I am a fan of the company, its operations and its potential.

So ahead of the end-March 2020 year’s trading update in two weeks, I fancy them for another move upwards.

Yes, trading has been virus-suspended but the contracts still stand and so too will the company. They will regain their composure and their previous 2020 peak price.

Profile 12.09.19 @ 62p set an end-2020 target price at 88p*.

CMC Markets (LON:CMCX) – a lot more price action due?

After having hit 223p on Wednesday lunchtime, the online trading outfit’s shares are looking strong.

It appears that investors are suddenly realising that the company offers a counter-cyclical opportunity when markets turn ‘sick’.

The company has been extremely busy, with client-trading activity more than doubling in March alone.

We will get a full picture on 11 June when the group declares its results for the year to end-March 2020. Anticipation of good figures could spur the shares a lot higher than the 215.5p at which they close the week.

Profile 17.10.19 @ 120p set an end-2020 target price at 180p*.

Begbies Traynor (LON:BEG) – a big year coming?

Early next month will see this recovery and financial restructuring consultancy confirming that its April year end showed a strong financial position.

Times like CV19 create massive opportunities for companies like Begbies, so the coming year should see a strong advance.

Its shares close the week at 90p, after having touched 100p last Tuesday.

I have little worry about my target price being achieved.

Profile 26.11.19 @ 85p set an end-2020 Target Price of 110p.

Codemasters Group (LON:CDM) – racing certainty?

Last Tuesday saw the year-end trading update help to boost this video game developer’s shares up 10% overnight.

They leapt to 270p and have held fairly steady at that level subsequently.

Trading in the second half remained strong, helped significantly by the shift to digital delivery for its games – a boon in virus times.

With the F1 actual grand prix racing events on hold for some time to come, using this developer’s online version is the only safe way to participate in this exciting sport.

The cash-rich debt-free group will be announcing its finals to end-March 2020 in early June.

Three brokers, Liberum Capital, Shore Capital and Peel Hunt, each rate the shares as a ‘buy’, looking for 370p plus.

Profile 25.06.19 @ 225p set an end-2020 Target Price at 278p *.

Frontier Developments (LON:FDEV) – more games

This group is another leading independent creator of self-published videogames.

Set up in 1994 by David Braben, the company, which is based in Cambridge, uses its own development technology to create a wide range of innovative games.

Both Shore Capital and Liberum Capital rate the shares, as a ‘buy’, looking for them to hit 2,000p. They hit 1,424p yesterday morning but closed the week at 1,381.5p.

The group is currently working on new F1 games due to be launched for the 2022 F1 season. Competition for Codemasters?

Profile 01.10.19 @ 1,000p set an end-2020 Target Price at 1500p.

On The Beach (LON:OTB) – hatches battened?

This company is the only listed UK travel business that operates a fully ringfenced customer trust account in which customer funds are held until the point of travel.

That means that it does not have to rely on the forward funds from its clients for holidays booked just to exist.

Who would want to be in the holiday business today – completely trashed globally.

But it will bounce back, undoubtedly. Even though the margins will always be tight, there will always be operators offering their wares, but perhaps none as efficiently as OTB, in full flight mode. But, of course, full flight mode is closed down currently.

The company has cancelled its advertising programme, which I thought had been very effective, pre-virus. It is reducing and restricting costs in the current shut-down – even the CEO has foregone his salary.

Wednesday’s statement concerning its banking arrangements and efforts against Covid-19 gave the group’s shares a big fillip, lifting them from 201p on Tuesday night, before hitting a feverish 286.5p that day.

They close the week at a steadier 269.25p, with Liberum Capital still rating the shares as a ‘buy’, going for 440p.

I am now downgrading my target price to 350p.

Profile 28.03.19 @ 448p set a later downgraded Target Price of 550p.

Avon Rubber (LON:AVON) – certainly a pumped up price!

The effect of the recent US orders has been incredibly beneficial to the share price of this innovative technology group.

We should look forward to the May Day announcement of its interim results to 31 March 2020.

Hopefully its shares can maintain their current strength, having closed the week at 2,805p after 2,900p yesterday morning.

Profile 03.10.19 @ 1,700p set an end-2020 Target Price of 2000p with a 2250p TP further out**

Medica Group (LON:MGP) – directors buying

The group is the UK market leader in the provision of teleradiology services, providing outsourced interpretation and reporting on MRI, CT and Xray images.

It has the largest pool of consultant radiologists outside of the NHS and provides its outsourced services to more than 100 NHS Trusts and various private hospital groups.

The group announced its 2019 results last Tuesday morning. They showed a 19% advance in revenue to £46.5m, while adjusted operating profit of £11.3m, on a 24.3% margin, was an increase of 5.9% compared to 2018.

Dr Stuart Quin, the CEO, stated that “The company has a strong balance sheet and is well-placed to continue to deliver its high-quality service to support the NHS during this time of unprecedented pressure on healthcare resources.”

Always a good pointer is exactly what various of the insiders are doing.

On Wednesday it was announced the Chairman Roy Davis had increased his holding to 112,037 shares, by buying 75,000 shares at 102p on Tuesday.

The Business Development Director, Kevin Terrins, took his holding up to 1,595,166 shares after buying another 48,774 shares at 102p.

While the recently appointed CEO Stuart Quin bought 39,361 shares @ 101.6154p each.

The shares close the week steady at 104p – at which level they look far too cheap not to be tucked away in portfolios looking for sensible growth over the next few years.

Profile 07.01.20 @ 155p set an end-2020 Target Price of 215p.

(*denotes that Target Prices have previously been achieved)