Small Cap round up featuring Cohort, Kape Technologies and Strix

Don’t get spooked out

Market shake-ups, like that which occurred on Monday of this week, should be used as buying opportunities, so do not get spooked out of your holdings, unless they were already weak situations.

The overall mood – despite staff shortages, gas price increases, stock supply hassles, higher shipping costs and the like – is still bullish.

Companies are gradually bouncing back from Covid-19 pressures and sales and profits generally are on the rise.

Remember – ‘Good stocks recover, cats and dogs die.’

Cohort (LON:CHRT) – strong order book and still going for growth this year, with bid possibilities

Monday’s AGM Update from this defence and related markets technology group declared that the group’s long-term order book was now up to £242.4m.

Of that figure some £100m is for the current year, which already underpins 64% of market expectations for the year to end April 2022.

Like so many other businesses across industry generally, there are supply chain and staff hassles, however the company expects the current year to show a trading advance while also leaving itself with zero net debt.

I still reckon that the group is on the shopping list of a potential bidder or two.

It really does have such a good spread of businesses that are essential to several of the sectors in which it operates.

Its various subsidiary companies cover: surveillance, tracking, fire-control systems for the defence and security markets; communications systems for naval and military customers; sonar and underwater communication systems for the naval markets; electronic warfare specialist data technology, digital services and training support for defence and security markets; electronic and surveillance technology for the UK MOD and government agencies; and technology-based products, research and training services for the defence and transport markets.

The group would fit into any of the private equity vehicles that are popping up in the UK, the US and in Europe.

Current year estimates to end April 2022 suggest that the group could have revenues of £156m and make around £18m pre-tax profits, worth 34.5p in earnings and able to pay just over 12p per share in dividends.

Then going into the next year, the order book helps to kick in an extra £12m of estimated sales at £168m, producing profits of nearly £20m, pushing earnings up to 37.5p and paying a 13.5p dividend per share.

At just 550p the group’s shares, which were up to 722p some 21 months ago, today offer both growth and possible bid upside.

(Profile 06.08.19 @ 446p set a Target Price of 607p*)

Kape Technologies (LON:KAPE) – a really cracking performance

Yesterday’s announcement of its interim results to end June helped to push the shares of this digital security and privacy software business even higher.

After last week’s news of its massive £635m bid and fund raising for the ExpressVPN virtual private network operator, investors are showing even more interest in the group’s potential.

Revenues were 61.9% higher at $95.5m in the first half, of which nearly $60m are recurring revenues (I love it). Operating profit was up almost 300% at $13.6m, helping to boost earnings 70% to 9c a share.

Estimates for the end December year suggest $200m ($122.2m) of sales, $64m ($30.8m) of profits, with earnings of 24c per share.

Next year already looks very exciting with almost $620m of sales, $160m profits, with 41c of earnings being predicted.

In less than nine months we have done very well with this group’s shares, rising over 240% in the period.

However, I consider that they have a great deal higher to climb and are a strong hold at 415p.

(Profile 21.12.20 @ 172p set a Target Price of 215p*)

Strix Group (LON:KETL) – getting a great deal hotter

Now with its new factory in Guangzhou, China, in operation this group is beginning to boil up a head of steam.

It is the global leader in the design, manufacture and supply of kettle safety controls and other complementary water temperature management components, and its new factory will create not only much-needed additional manufacturing capacity but also major efficiencies and cost savings in its operations.

Fund manager Gervais Williams is very keen on the group, noting that it has recorded an annualised return of 34.2% since it went public in August 2017. He is convinced that there is more to come.

A month ago, the shares were up to 390p at one stage, but they have since slipped back to the current 349p. With the interims due to have been announced today I am, as I write, very hopeful of a good set of figures, together with confirmation that the full year is still on a growth tack.

(Profile 31.12.19 @ 196p set a Target Price of 250p*)

M&C Saatchi (LON:SAA) – getting the story out there

Yesterday’s interims to end June reported sales up 14.7% at £171.2m and a headline pre-tax profit of £10.5m, up a massive 420% on last year’s £2.0m. Net cash was also a lot better at £31.8m (22.4m).

The 2021 full year pre-tax profits will now be substantially ahead of market expectations.

The globally operating advertising and marketing services group is now estimated to see current year revenues of £234m (£225m), while pre-tax profits could double to £16.0m (£8.3m), with earnings coming in at 5p (1.3p) per share.

Going forward analyst Harry Read, at the group’s brokers Liberum Capital, goes for some £241m of sales, profits of £19.4m and earnings of 6.5p per share for 2022.

He is extremely bullish about the group’s prospects and its share price he rates at 240p, compared to the current 158p, which, no doubt, is why he gives a ‘buy’ for the shares.

Hold very tight.

(Profile 11.05.20 @ 64p with no Target Price being set)

Stagecoach Group (LON:SGC) – a new bid-war counter, ‘all your fares please’

This company has already seen its shares up to 111p, well above my price objective of 100p, before falling backwards in reaction to its Covid-19 lockdown pressures, to trade in the 65p to 70p range.

Yesterday the UK bus and rail operator declared that it is in merger talks with its competitor National Express, which is why the group’s shares rose 25% on the day to around the 84.5p level.

Whether such a merger will be allowed to happen is up to the ‘authorities’ and, of course, it could now be wide open to a counter approach.

The UK bid scene is picking up noticeably and I would not rule out any overseas interests getting ready to show their hand in a bidding contest.

Hold very tight in anticipation of further action to come, however you must be prepared for a waiting time of a few months while this all occurs.

(Profile 07.12.20 @ 73.5p set a Target Price of 100p*)

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