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…
Corero Network Security (LON:CNS) – almost trebled in six months
By the end of Q3 this distributed defence of denial service for the defence sector was sitting on a record intake of orders, with some $6m of business booked in Q3 alone.
Lionel Chmilewsky, Corero’s CEO, stated: “I am extremely pleased with our Q3 performance, as not only have we set a new record for order intake in the quarter, but we have secured a number of new customers and seen our largest deal value to date. The wins we have seen are fully aligned with our strategy, which is to expand our international presence, to penetrate global and tier one accounts, and to strengthen our relationships and traction with key business partners.”
Well that was enough to push the shares up to 12.3p at one stage, before easing back to the current 11.25p.
This stock has been a little winner for readers, almost trebling in just six months. Obviously, the shares are a firm hold.
(Profile 14.04.20 @ 4.2p set a Target Price of 6.5p*)
Halfords (LON:HFD) – absolutely biking it
Last Thursday’s trading update was very bullish, predicting pre-tax profits to be in excess of £55m.
It appears that the group has done very well due to the continued momentum in its cycling and motoring products, as well as the other services that it offers.
The retailer and services operator states confidently that “We are well placed to address any headwinds we may face and capitalise on the tailwinds as they arise. Our balance sheet and liquidity position remain strong.”
The group will be announcing its interim results on Wednesday 18 November.
The shares, which pumped up to 246.5p on the news, are now trading steadily around 243.25p and do not need to be chased until more is known around the interims.
(Profile 02.07.20 @ 156.5p set a Target Price of 180p*)
Premier Foods (LON:PFD) – Hovis sell off to raise some £50m
Italy’s Newlat Food group has made a £100m bid for the Hovis brand, which is 51% owned by the Gores Group and 49% by Premier, the branded foods group.
That is just what was expected in terms of the potential disposal of its interest in the unique bakery company.
And it is, no doubt, somewhat reassuring to Premier as it has just paid off another £40m of its outstanding £130m group debt. It has an ongoing policy of deleveraging its business and thereby saving significant yearly interest costs.
The food group’s interims to 26 September will be declared on Tuesday 10 November.
The shares touched 101.5p a few days ago and rest currently at 97p.
(Profile 29.06.20 @ 67.5p set a Target Price of 101p*)
Robinson (LON:RBN) – news on the property front?
We are a few months away from this Chesterfield-based plastic and paperboard packaging manufacturer announcing just how well it will have done in the year to end-December.
At the halfway we were told that sales were just 5% up at £17.9m, while pre-tax profits had more than trebled to £1.1m, with net debt falling to just £5.6m.
Chairman Alan Raleigh told shareholders that, “Despite the uncertain economic environment, we expect to report mid to high single digit revenue growth in the full year, whilst continuing to drive further efficiencies across all aspects of our operations in order to compete and win in the market.”
So just why are the group’s shares looking so much better? They have risen from 120p at the start of the month to 137.5p last night on the back of a small dealing volume.
Could we soon be getting some news on the progress of their surplus property disposals?
(Profile 02.04.20 @ 55.5p set a Target Price of 80p*)
MPAC Group (LON:MPAC) – interest building up?
Just a month ago the shares of this global packaging solutions group were trading at 270p, after having been down to 180p in late March.
Last night they showed a continuing interest building up in the company, closing at 340p.
The group’s early September $15m acquisition of the US based Switchback Group, which is like a mirror copy of MPAC, was said to be immediately earnings enhancing and giving the group an even better build-up of its own US operations.
On the back of the Switchback deal Equity Development forecast £83.6m in revenues and a £5.8m EBIT for 2020, putting out a 380p a share valuation.
(Profile 19.12.19 @ 182p set a Target Price of 235p*)
Connect Group (LON:CNCT) – trading better than expectations
It appears that the trading at this group’s Smith News business has been much stronger than management expectations.
Accordingly, the post-close trading update for Q4 to 29 August, announced at the start of this month was really quite bullish, with the company suggesting the top end of previous results guidance.
Chief Executive Jonathan Bunting told shareholders that “Despite the uniquely challenging times Smiths News continues to deliver against all the priorities we set earlier this year. Service and cost control have been first rate, driving a strong result and giving us positive momentum into the first quarter of the current year.”
The finals are due to be published early next month.
The shares went up to 23.9p on the update but are now back to just 21.5p. That must be an attractive level for the Guernsey-based Worsley Investors to buy more to add to their increasing equity stake in the group.
My price objective remains very firm.
(Profile 24.07.20 @ 20.25p set a Target Price of 27p)
And finally… ‘On The Move’
Trackwise Designs (LON:TWD) – the higher it climbs the greater the ‘short’
Well it seems as though the market is telling me that I am looking the wrong way with this company.
The improved harness technology and specialist printed circuits board products business is now valued at a thumping £46m, with its shares climbing even higher to 206p at one stage yesterday.
The recent interims were obviously incredibly impressive, showing £2.4m of sales and a near £1m after tax loss. Net cash was £1.6m.
Just what optimism has created such an absurd valuation astounds me.
You only have to take a look at the number of times brokers have been steered by the company, for their subsequent estimates to be rescinded.
No doubt investors can be persuaded that the Trackwise Designs horizon is totally blue, but I like to profile value investments and this company is a very long way from ever being such a portfolio candidate.
I repeat that I have been grateful to see my previously misjudged profile recommendation breaking through my price objective.
They closed last night at 196p.
(Profile 10.04.19 @ 92.5p set a Target Price of 150p*)