Small cap round-up: featuring Cohort, Avon Rubber, Hotel Chocolat and others

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Small cap round-up: featuring Cohort, Avon Rubber, Hotel Chocolat and others
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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…

Frontier Developments (LON:FDEV)

Ahead of its Capital Markets Day in Cambridge next Wednesday, this leading video games developer and publisher has successfully released its Planet Zoo sim. It has already taken the number one spot across the globe on Steam.

The initial response has been massive for its new simulation game, where players build up their own zoos and landscapes and then let their authentic living animals run wild.

The company is still in talks with potential development partners for other games, which will widen its scope further for its Frontier Publishing business.

The company’s shares have been a firm counter all week, rising from a 1,068p low to the current 1,239p – a useful 16% gain over the week.

My early October profile featured the company at 1,000p, with a target price of 1500p by the end of next year. My confidence continues.

Cohort (LON:CHRT)

This independent technology group acquired Chess Technologies a year ago. Chess offers systems and technologies for detecting and tracking, classifying and disrupting naval, land and air threats.

Last weekend there was a report in The Times featuring Chess. It detailed that Gatwick Airport uses a military tracker to beat the drone menace:

“Radio, radar frequency and optical detection systems have been installed at Gatwick to thwart malicious drone attacks.”

You may remember that last December more than 1,000 flights were grounded after the illegal operation of unmanned aerial vehicles had been sighted over the airport.

The Chess anti-UAV system comprises of some ten networked sensors around the site and a control centre inside the airport. Electro-optical trackers, featuring long-range colour camera and high-sensitivity thermal imagers, capture visual data, while radar and radio frequency sensors are also used.

It works when the drone enters the radar detection zone, the electro-optical camera locks onto and then tracks the drone’s movements. The data then fed back helps to calculate the location of the drone operator, so that he or she can be apprehended.

We should see the interim results from Cohort announced in early December.

Over the last month the company’s shares have risen from 515p to touch 559p on Monday morning, before easing back to the current 550p.

My early August profile featured the company at 446p, with a 607p target price to be attained by the end of next year. Looking well set on target!

Avon Rubber (LON:AVON)

On Wednesday of next week this innovative technology group will be announcing its final results for the year to end-September.

The company, which produces respiratory protection systems for the chemical, biological, radiological and nuclear sectors, also has another main activity – making milking point solutions for the global dairy sector.

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The finals for the last year should be good and the statement optimistic for the current year.

The company’s shares have been a very active market this week, having risen from 1,694p about three weeks ago to touch 1,898p at one time this week.

The shares ended the week at around the 1,826p level, almost mid-way between my early October profile price of 1,700p, and my 2,000p target price. They could easily be up to 2,250p before the end of next year.

Morgan Sindall Group (LON:MGNS)

On Wednesday morning this construction and regeneration group announced a trading update for the year to end-October. It was very positive, declaring that the group’s cash position remained very strong at around the £109m figure.

The full-year figures should reflect the good progress made across the group’s operations, which could well be better than even the company had been expecting.

Brokers Peel Hunt rate the group’s shares as being undervalued, with an increase in the price that they are looking for, up from 1,600p to 1,700p. Even Liberum Capital rate the shares as a ‘buy’ looking for 1,530p.

I profiled the company way back in May at 1,300p, with a 1,600p target price. They ended the week at around 1346p – a disappointing performance to date, but I do anticipate better pricing in due course.

Watkin Jones Group (LON:WJG)

We will not be seeing the final results from this student accommodation developer until mid-January next year.

However, the trading update issued this week stated that the business had been strong throughout the year to end-September. Revenues and earnings for that year will be very much in line with current market expectations.

I profiled the company in mid-May this year at 225p, with a target price of 300p.

Subsequently the shares have been an almost a total non-performer – they are now 233p. Peel Hunt have just raised their target from 265p to 280p for the shares.

I remain very hopeful that my target price can be achieved by the end of next year.

Hotel Chocolat (LON:HOTC)

This really is turning out to be a ‘hot chocolate’ ahead of its AGM statement on 21 November. This week, the shares have been quite an active counter, chasing up from 448p at the start of the week to 460p on Tuesday, before drifting back to the current 445p.

On Thursday I understand that Angus Thirlwell and Peter Harris, the two founding directors, responded to market demand by selling down a total of just 2.4m shares at 420p each – even so, after each pocketing £5m, that still left them with a 63.2% stake in the business.

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My late March profile was at 340p, with a target price of 402p – well that has been truly beaten and I see even higher pricing to come.

Accrol Group (LON:ACRL)

I have noted some recent strength in the share price of this toilet roll and kitchen towel maker. Over the last week they have crept up from 28p to 31.5p, and while that may not seem a lot, a 12.5% gain in a week is worthy of note. And it compares very well with my mid-March profile price at 22p.

Billington Holdings (LON:BILN)

I was beginning to get excited when the shares of the structural steelwork group moved up to touch 316p on Tuesday, then fell back to 306p before whizzing back up to 316p again.

But I was certainly disappointed to see them fall back down again to a lowly 300p before ending at 308p by the end of the week.

Spurred on by the September interim results announcement and statement, I reckon that the full year will show through very strongly indeed. Which in turn makes the shares at the current price even more attractive.

My early April 266p profile price was accompanied by a 314.5p target price – so that was beaten a couple of times this week. However, I see them rising to 350p, even 375p within the next year, especially if the current trading pattern continues.

Helical (LON:HLCL)

This property development and investment company has been a much better market of late. Its shares touched 412p on Wednesday, up from a 391p low on the week. That was a year’s high – in fact it was its highest since late January 2016.

The company will be announcing its interim figures in just under a fortnight’s time on 21 November.

The shares eased back to 405p, before bouncing back up again to 417p by the end of the week. That is still above my mid-June 389p profile price and well below my 489p/500p takeover target price range.

Bloomsbury Publishing (LON:BMY)

This publishing group’s shares, which were knocked last week after the reaction to its interim results felled the price down to 245p at one stage, actually enjoyed a bit of a revival this week.

They touched an all-time high of 268p on Wednesday, before drifting back to 255p – but still well up on the week.

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My end-February profile price was 231p, with a target price of 257p, then I saw them going up to touch the 280p/300p price range. I still see 300p well before the end of next year.

Zotefoams (LON:ZTF)

Following last Wednesday’s trading update the shares of this technologically advanced foam maker turned around quite significantly.

From 305p at this time last week they have put on a very impressive reaction to the company’s statement. Closing the week up 29%, at around the 394p level.

Unfortunately, this company has proved to be one of my worst selections this year.

I profiled the company at the end of June with the shares then at 600p and giving a target price of 750p – well, that did not take long to be totally rubbished and the subsequent price performance has been pathetic.

But believe it or not, I still remain optimistic that they can at least recover to my profile price.


Are investors beginning to realise the true value of this fast-growing finance and banking group?

The late October trading update might well have helped the recent positive sentiment. It is continuing to increase its prime sector lending, boosted by now being able to source much cheaper funds through now having its own banking licence.

Its big acquisition of this time last year, the Azule funding business for the broadcast and media industry, has done some mega lending over this year – up from £55m to £77m.

Its property bridging finance business has, in its first nine months, gone from zero to £14m funded.

In short, it appears that the group’s lending portfolio is up at £338m for the year to end September, with overall trading being in line with expectations.

We will find out come Wednesday 4 December when the company announces its final results.

Perhaps that is a good reason for why the shares have risen from 27p a month ago to trade around the current 36.5p.

I profiled the company way back in mid-March this year at 33.5p, with a target price of 50p by the end of next year. Looking very promising.

And finally…

Topps Tiles (LON:TPT)

I do hope that this week’s announcement from the UK’s largest tile specialist is not a bad sign ahead of its finals being announced on Tuesday 26 November.

The group’s chief executive, Matt Williams, will be resigning from the company three days after the figures are released. The new CEO is going to be Rob Parker, the current finance director.

Matt Williams will, however, stay as adviser to the company until the end of May next year, so perhaps the figures will not too bad.

The shares ended the week 2.5p below my early May 75p profile price. I maintain my 100p target price by the end of next year.

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