Small-cap round-up: featuring Codemasters, Iofina, IDOX 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…

Codemasters (LON:CDM) – will Monday’s interims give us a clue?

Next Monday sees this ambitious games developer announce its interim results for the half year to end-September.

The world-leading racing games publisher, which has been in business for some thirty years, could soon lose its independence if the bid from Take-Two Interactive Software goes ahead.

That US company Take-Two believes that the combination of Take-Two and Codemasters would bring together two world-class interactive entertainment portfolios, with a highly complementary fit between Take-Two’s 2K publishing label and Codemasters in the racing genre. 

The bidder considers that it can boost Codemasters’ performance by leveraging Take-Two’s global distribution network and 2K’s core operating expertise in publishing, including live operations, analytics, product development, and brand and performance marketing.

The bid values the Codemasters shares at 485p each, through offering 120p cash and 365p worth of Take-Two shares in exchange for control.

There are many professional investors in the City that consider that the current bid undervalues Codemasters and they anticipate a higher offering to actually secure the takeover.

It would appear that Ubisoft Entertainment has just issued a €600m Eurobond. I am informed that that the French gaming giant has stated that the net proceeds of the bond will be used for general corporate purposes as well as potential future acquisitions.

The shares are currently trading at around the 482p level. That is a clear gain of 114% in 17 months – beats having your money on deposit.

I have absolutely no idea what is the right thing to do – hold or sell? 

Will next Monday’s interims statement help my decision?

(Profile 25.06.19 @ 225p set a Target Price of 278p*)

K3 Capital Group (LON:K3C) – an excellent price move in one month

Well, what an excellent price move has been enjoyed over the last month by investors in this multi-disciplinary professional services firm.

The group’s shares have advanced from 147.5p to touch 202.5p yesterday in early dealings, just pennies over my price objective of one month ago.

Best known for its Knightsbridge business sales side, the group has quickly bedded down its recent acquisitions randd and Quantuma.

We should get some positive news from the company in a few weeks when it announces its trading update for the first half-year to end-November.

I am very happy with this group and its potential. Accordingly, I see its shares now 194p, rising far higher than my declared aim.

(Profile 21.10.20 @ 147.5p set a Target Price of 200p*)

Iofina (LON:IOF) – iodine mouthwash getting strong test results

I note that Stephen Challacombe, one of the world’s leading experts on infection in the mouth and nose, believes that iodine could be used as an intriguing new weapon against coronavirus.

He is a professor of oral medicine at King’s College, London, specialising in the immunology of the mucous membranes. 

He claims that using iodine mouthwash can help to save lives.

Several tests have shown that after 15 seconds of contact with a weak solution of povidone-iodine it was successful in killing off 99.99% of the virus. Tests are now ongoing to see how long Covid-19 can be kept at bay.

Could a daily gargle become part of a self-help regime?

And Iodine is what Iofina is all about. It is the second largest producer of Iodine in North America.

As specialists in the exploration and production of iodine and manufacturers of specialty chemical products, Iofina could suddenly become a market ‘wonder stock’. We have seen ‘spoof companies’ hit the roof before – and Iofina is certainly not a ‘spoof’ with a record iodine production expected to be reported by the group for 2020. 

Iodine prices have strengthened of late and the group has refinanced and reduced its debt – boss Dr Tom Becker recently stated that the group was in the strongest position it has ever been, both operationally and financially.

The group’s shares were trading at around 30p a year ago and that was before Covid-19. They fell to a low of 10.4p before gradually rising back up to 15p a few weeks ago.

Now at 13p the shares could well be ready for another run upwards shortly. It announced a trading update in mid-December last year.

(Profile 29.07.20 @ 13.5p set a Target Price of 18p)

Tekmar Group (LON:TGP) – first-half report due at start of December

This stock has been a total disappointment almost since the day that I profiled the company in late January this year.

Within days the shares had collapsed 30% on unexpected corporate news. At the beginning of this month they had fallen even further to just 35p. 

The group is a leading provider of technology and services for the global offshore energy markets.

BlackRock, the Wilmington, US based investment empire, reduced its holding in the group from 12.20% to below 5% at the start of November.

However, I have noted that those shrewd boys at Schroders have been picking up more and more Tekmar stock at these lower levels.

At the last reported count, they had built up a 17.83% stake in the group, and it looks as though the company’s shares are still on their shopping list.

The group has endured some big hassles this year, with delays to big contracts, a change of CEO and a major review taking place.

I am now prepared for a positive ‘recovery hoped for’ statement coming out on Tuesday 1 December when the company declares its half-year results to end-September.

Now at 46p, the shares could well attract the short-term gamblers.

(Profile 28.01.20 @ 168p set a Target Price of 205p)

MP Evans (LON:MPE) – palm oil group’s shares are advancing well

The producer of sustainable Indonesian palm oil will present to its investors and analysts on Tuesday 1 December.

It will be an update of its strategy to deliver growth and profitability integrated with its sustainable development, by way of highlighting its pilot traceability programme for its independent smallholders.

That will take it a few stages further on to its goal of 100% production of certified sustainable palm oil.

The group’s shares were some 756p almost a year ago and fell away to 370p in late March.

Since then, as I have highlighted previously, the group has been using chunks of its cash to buy in more of its own equity.

In the half year to end-June, the group reported a massive turn around, with sales leaping from $46.25m to $75.89m, and pre-tax profits coming in at $4.42m against a $0.56m loss previously.

Following the mid-September H1 news, the shares have moved up from 560p to the current 632.5p – just 10% higher would then break my price objective.

Hold very tight for good news.

(Profile 07.04.20 @ 540p set a Target Price of 700p)

IDOX (LON:IDOX) – a very encouraging trading update

Last Tuesday this specialist information management software and solutions company announced its trading update for its year to end-October.

Revenues were up 4% at £68m, while adjusted pre-tax profits were an impressive 35% ahead at £10.4m.

And what did I like best about this update? The fact that its recurring revenue was 5% better at £37.4m for the year, some 55% ARR.

I like this group and its prospects for increasing its business and its profitability.

The shares at 49.85p are looking quite firm, and they are going higher, of that I have little doubt.

(Profile 30.04.20 @ 38.5p set a Target Price of 50p*)

DX. (Group) (LON:DX.) – insiders buying ahead of AGM next week

Ahead of its AGM next week, I was very pleased to note that Russell Black, one of the logistics group’s directors has been buying more shares.

The purchase at 18.72p a share took his holding up to 2.59m shares. 

I have a lot of time for Russell, having followed him closely with his market leading Nightfreight delivery group in the late 1990s.

His purchase follows another director, Paul Goodson, having added another 400,000 of the group’s shares at 19.2p, taking his holding up to 3.30m shares.

Other insiders have also been adding to their holdings over the last couple of months.

As I have stated before, I believe that the shares of DX, now 20p, are headed a lot higher. 

Let us hope for a good AGM statement next Thursday.

(Profile 20.02.20 @ 12.5p set a Target Price of 15p*)

Halfords Group (LON:HFD) – cracking interim results, but not unexpected

Wednesday’s interims obviously pleased the market.

And why shouldn’t they?

The 26 weeks to 2 October showed a 9.6% jump in revenues to £638.9m and an underlying pre-tax profit up 116.2% at £56m. Earnings leapt 88.5% to 23p per share.

The group’s shares responded with a move up to 278p at one stage, before easing back to close that night at 250p.

They close the week at around 248p, a level that does not need to be chased too hard in pursuit of greater gains.

(Profile 02.07.20 @ 156.5p set a Target Price of 180p*)

Sureserve Group (LON:SUR) – share stake hurdles overcome, brakes off now

The change around in some larger share positions has possibly helped to take off the brakes on this compliances and energy services provider.

Down to just 46p at the start of this month, the shares have been edging higher this week, putting on 12.5% this week alone, closing at 54p.

Do not underestimate this group – basic services and cash generative, a classic combination.

I still see them touching 70p within the next few months.

(Profile 14.01.20 @ 36p set a Target Price of 50p*)

Randall & Quilter Investment Holdings (LON:RQIH) – higher share price and a special dividend

Yesterday the General Meeting of this non-life global specialty insurance group, which specialises in run-offs, passed the payment of an extra 3.8p per share in a return of capital to its shareholders.

That payment gets made to its investors next Friday.

The group’s shares hit 187p yesterday, passing my price objective set just two months ago.

(Profile 07.09.20 @ 156p set a Target Price of 185p*)

(* denotes that Target Prices have been achieved subsequent to profile publication)