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…
Coral Products (LON:CRU) – growing dealing volumes as a vanguard of organic and acquired growth to come
I have a very strong hunch that this little group of companies really is going to be a ‘cracking’ performer over the next few years.
The £12.5m Manchester-based packaging products maker is totally undervalued right now.
It currently has £4m cash in the bank, with another £1m possible by the end of April 2022.
It has a property in Haydock let on a ten-year lease to a $700m US group, due to pay £340,000 per annum in rental. The unmortgaged property is valued in the group’s books at just £2.5m, but is about to be revalued, which I would guess would be close to £4.5m/£5m.
On the trading front this year it could see £11.7m in sales, and profits of £1.09m, worth 1.27p per share in earnings.
Analyst Jason Streets, at the company’s recently appointed NOMAD and Corporate Broker WH Ireland, estimates that next year’s sales could touch £12.3m and the group could make £1.3m pre-tax, worth almost 1.4p in earnings. He estimates the net asset value at 17p per share.
Last week the group repaid its Coronavirus Business Interruption Loan.
The company’s Executive Chairman, Joe Grimmond, said: “Following the repayment of the CBIL, we are enabling a return to normal business activity, with three profitable, cash generative businesses, a strong balance sheet and a healthy cash balance. This will support organic growth whilst allowing for us to seek acquisitions to augment our existing activities.”
Subsequent to my mid-week profile there was a substantial dealing volume in the shares, with buyers of the stock apparently more than able to match the selling down of over 1m shares by the Swedish private equity firm Peter Gyllenhammar AB, leaving that company with 2.35m shares (2.79%) in the near 85m share equity.
I repeat that this stock is cheap, it is just at the start of a big period of growth using its strong balance sheet and ungeared assets to help pay for any further acquisitions in the plastic packaging sector.
The shares closed at just 15p on Friday night – I really do think that they could double from this price as its new strategy gathers pace.
(Profile 28.04.21 @ 14p set a Target Price of 18p)
Flowtech Fluidpower (LON:FLO) – big profits recovery this year and double next year
It would appear that Roger McDowell, the non-executive Chairman of this supplier of technical fluid power products group, has really shown the way the market should be treating the company’s shares.
His purchase of 750,000 shares just two weeks ago @ 100p each, giving him a 1.22% stake in the company, has certainly spurred interest in the stock.
On Friday alone there were some four times the average daily volume in the shares, at 411,825 dealt against 114,659 average. That is impressive.
Zeus Capital, the group’s broker, is confident that it will stage a big profits recovery in this current year, from £0.3m pre-tax to over £4.7m.
Then next year they go for £110m of sales, and almost doubled profits of £8.7m, worth 11.4p in earnings per share.
I reckon that we should get a confident AGM statement on Thursday 3 June.
By that time, I consider that my price objective could have been well beaten.
This feels like a real winner to me and that there is a lot of upside in the shares, now 117.5p.
(Profile 23.04.21 @ 105p set a Target Price of 130p)
PCI-PAL (LON:PCIP) – fundraising is excellent news
I am so glad that James Barham, CEO, and William Good, CFO, realised that the high share price reigning for this loss-making cloud provider of payments solutions group, provided an excellent means to raise fresh funding and tuck some added reserves into the tank.
Early in March the company announced its interims to end-December, showing a 56% revenue increase, a 73% gross margin and, wait for it, an 86% ARR – yeah!
At the end of last week, it raised £5.5m gross through a placing and a subscription for shares @ 95p each, representing an additional 9.7% in equity terms.
Fabulous timing and funding for the group, which I do hope that they will use propitiously as they move several steps ahead in their corporate growth.
The company will be holding an Investor Presentation through Investor Meet on Tuesday of next week (11 May).
The group’s shares closed strongly on Friday night, up 7% on the day, 7.5p better at 112p. Its broker has increased its price objective from 90p to 125p on the back of current year estimates.
I imagine that the price will waiver around for a short while, as the new shares get digested. However, give it time and I do see them rising a great deal higher yet.
(Profile 11.02.21 @ 76p set a Target Price of 95p*)
Brickability Group (LON:BRCK) – building up again
The pre-close trading update issued two weeks ago by this construction materials group, has helped its shares to move gently better.
They closed the week at 94.5p, a peak for the last twelve months, some 10% up since the news.
This is feeling very solid to me, especially as we know that there is a strong and growing demand for building materials right now.
The shares are for holding.
(Profile 16.04.20 @ 39p set a Target Price of 55p*)
Time Finance (LON:TIME) – running fast
Certainly not waiting for any man – it appears that the latest corporate update from this specialist finance provider has wound up the company’s shares.
CFO James Roberts informed shareholders that the group now has sizeable funding facilities with significant headroom in place across all its lending divisions.
As it returns to normality the group should be able to achieve some steady organic growth.
The shares hit my aim on Friday night, ending the week some 3.5% better at 30.5p.
(Profile 23.12.20 @ 21.5p set a Target Price of 30p*)
UP Global Sourcing (LON:UPSG) – up, up, and away
On Friday morning this value-focused consumer goods brands owner, manager, designer and developer, declared a strong performance in its interim results to end-January.
Revenues were up 11.4% at £75.4m, with the impressive jump being seen in its online platforms which showed a 53.6% improvement.
Underlying pre-tax profits were 24.4% better at £7.7m.
Chief Executive Simon Showman sounded confident as to the group’s prospects going forward, which no doubt helped the shares rise 4.5% to 163.5p after the statement.
That is now more than double my profile price of nine months ago – and they can easily rise still further yet, so hold tight.
(Profile 13.07.20 @ 74.8p set a Target Price of 100p*)
The shares of Futura Medical (LON:FUM) are certainly rising now. They closed 15.4p better on Friday at 60.4p, a 34% rise on the day that it was announced that the EU have perked up to and certified the group’s treatment. (P 14.03.21 @ 15p, no TP)
Disposal news from Maintel (LON:MAI) helped push up the shares 16p to 340p, a near 5% gain. It has sold off its Managed Print Services Business Unit for £4.5m cash. I continue to have a good feel for this group as its transformation to a cloud-first managed services provider. (P 03.06.20 @ 173p TP 250p*)
I am still bearish about this £55m valued group, just a feeling in my water, with Trackwise Designs (LON:TWD) shares 15p up at 240p at the end of last week. The printed circuit technology group is paying £2.8m for a new 77,000 sq.ft. site in Gloucestershire, at the same time as beefing up its management team. Impressed by a new seven-year contract from a Swedish Medical Device company, its brokers, finnCap, are looking for sales to increase from £6.2m to £14.2m this year and then £22.1m next year, with a £0.4m profit (£0.3m loss) then £1.8m respectively. (P 10.04.19 @ 92.5p TP 150p*)
Is something blowing in the wind, I wonder? The specialist filtration and environmental technology groupPorvair (LON:PRV) is still reacting well to the recent AGM update. The group’s shares are edging ever closer to my price objective – showing an 8% rise of 40p on Friday closing at 592p. (P 05.10.20 @ 510p TP 600p)
Specialist currency and derivatives management group Record (LON:REC) is seeing its shares looking quite firm of late. The Q4 trading update two weeks ago was very positive, showing assets under management equivalent (AUME) up 37% at $80.1bn – a ‘record’ figure. An increase of 6p to 93p, a 7% gain on Friday, sees these shares now more than doubled my price objective of last August. (P 20.08.20 @ 35p TP 44p*)