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…
Eddie Stobart Logistics (LON:ESL)
This £270m transport company started the week off well. It announced that it has received a preliminary expression of interest in buying the business from its third largest shareholder, DBAY Advisors, which owns just over 10% of the ESL equity.
Of course, we all know that its major shareholder is the troubled Woodford fund management group with around 23% of the equity, so DBAY has probably considered it likely that Woodford would jump at a sensible offer for its holding.
The company had earlier suspended trading in its shares at 71p, pending the announcement of its interim results and the restating of its accounts.
| Master Investor Magazine
Never miss an issue of Master Investor Magazine – sign-up now for free! |
However, I understand that DBAY, that was formerly known as Laxey Partners, must come up with a firm offer or just walk away so the game is now on.
The question is – will the shares ever get up to anywhere near my 130p target price? Unfortunately, I feel that the shares could well be heading even lower.
Capital Drilling (LON:CAPD)
Oh, I do like the recent share price movement for this drilling rigs company.
The interims to end-June announced in late August were impressive, showing good drill rig utilisation rates, big new contracts and strong profit performance.
Its net assets per share even improved from 52p to 58p, not that I consider that an important rating to look at when considering investing in this company.
This is an excellent example of making good money ‘selling the shovels to miners.’
The shares are firming up gently. From my profile price at 48p less than two months ago, they are now at 61p and looking extremely capable of hitting my 76p target price, and soon.
Futura Medical (LON:FUM)
Just what does the market expect?
It carries on costing money to research and develop new drugs and their delivery systems before any product ever gets onto the market.
So, when I saw the reaction to this week’s interim statement from this erectile dysfunction treatment developer, showing losses more than doubled to £5.3m, I was not at all surprised at dealers selling the shares off in reaction. The shares were sold down from 43p to as low as 29p at one stage.
However, this company appears to be going in totally the right direction, in fact it states that it is totally ‘on track with its phase three study’ – that is very important and more funds will be required to be thrown into the progress of further development stages.
Just look at my comments from last weekend’s round-up referring to the size and potential growth of the market in which Futura is now a contender.
Further studies will be undertaken in the next year, in the meantime we do understand that the company has been in early-stage discussions with potential out-licensing partners.
At just 29p, the shares look to be quite an exciting speculation. My mid-March profile on the company featured the shares at just 15p, so their performance to date has been very pleasing.
Broker Liberum has put out a 60p target price on the shares.
Tricorn (LON:TCN)
I must admit that I have a certain nervous anticipation of just what this £6m valued tube manipulation specialist will be announcing on 9 October.
Around that date is when the Malvern-based company will be giving its shareholders its first-half trading update.
As I see it, currently the company’s shares at just 17.5p are very good value and capable of close to doubling when its virtues become more visible to investors.
The Simply Biz Group (LON:SBIZ)
Well last Tuesday’s interim results from this compliance and business services group were pleasing.
They showed that in the six months to end-June group revenue was up 20% at £29.1m, while pre-tax profits came in at £2.66m against a loss of £1.15m previously. Earnings were better at 5.52p per share.
It appears that both trading and earnings in the second half have already been in line with expectations.
The company’s shares are, hopefully, forming a new base trading level at around the 195p current price, before a move higher, with 245p being an early target on further items of good news.
They are still below my early April 208.5p profile price and some way off my two targets of 250p, then 300p. Keep this stock on your buy list, as I am convinced that it will be a big climber in due course.
Volution Group (LON:FAN)
This global supplier of ventilation products for the residential and construction markets is due to announce its results for the year to end-July, on Wednesday 9 October.
Broker estimates suggest that the five recent acquisitions will help to push sales up to around £236m and profits to £40m, with earnings of 16p and a dividend of 4.80p.
| Master Investor Magazine
Never miss an issue of Master Investor Magazine – sign-up now for free! |
Current-year revenue is projected at £248m with £43m of profits, which will see earnings of 17p and a dividend three times covered at 5.10p per share.
The shares, currently 180p, are still more than capable of hitting my end-2020 target price of 250p.
Joules Group (LON:JOUL)
Now celebrating its thirty years in business this iconic clothing, footwear and accessories group will be holding its AGM in Market Harborough, Leicestershire in just over a fortnight’s time, on Wednesday 25 September.
I really like this company and we are currently witnessing its ability to grow globally, while also expanding its product ranges taking in eyewear, homewares and through licence deals.
Joules is now very much an international brand. It is not only available online but also in over 125 of its stores in the UK and Ireland, as well as in the States, France, Germany and other European countries.
Furthermore, it is still building up its wholesale business, now with well over 2,000 global stockists.
The group’s report & accounts for the year to 26 May 2019 has just been sent to its shareholders and it makes very good reading.
I look forward to the chairman’s statement at the AGM, with hopefully, a bullish trading update.
The company was profiled in mid-March, when the shares were 282p, since when they have eased back to as low as 240p just two months ago. However, I remain committed to the shares, now 263p, and stick solidly to my 387p target price.
HML Holdings (LON:HMHL)
Very gradually this property management, insurance and services group is adding to its management portfolio, by both organic and acquired growth.
Earlier this week the company acquired the business of Thornes Chartered Surveyors, which was set up 123 years ago, in a £470,000 deal. The Luton-based property management and lettings company makes a perfect fit for HML.
The HML shares, which touched 37p at their best in July this year, had eased back to my 32p February profile price, before improving to 35p on the news.
The current 33.5p is still some way off my 50p target price; however, the shares continue to look inexpensive to me.
Harworth Group (LON:HWG)
My ‘beds and sheds’ property regenerator showed a very good performance in its interim results for the half year to end June, announced last Tuesday.
The group’s net assets came out with a 10% jump in value, to 141.3p per share, while the group also increased its dividend by 10%.
The shares, now 125.5p, are down just 4.5p on my end July profile price of 130p.
However, I really like the way this company does its business and I continue to rate its shares highly, with no change to my 170p target price.
Petards Group (LON:PEG)
This advanced security and surveillance systems group needs to see its shares start to climb back up to their previous 2019 highs again.
So, the recent two items of news, a big electronic countermeasures contract with an MOD supplier, together with a major product announcement of a military grade 360 spherical video system for armoured vehicle personnel, should help to turn the price.
| Master Investor Magazine
Never miss an issue of Master Investor Magazine – sign-up now for free! |
Now at just 20p, the shares have been up to 29p since my mid-April profile at 22p, before collapsing back to the current level.
At this rate of progress, it might need quite a bit more on the good news front to get the shares up to my 40p target price – but I am still hoping.
And finally… I hope they are both wrong… and I hope they are right
Last Tuesday Standard Life reduced their holing in the shares of the Costain Group (LON:COST). Their stake has been chopped by some 3m shares to 5,219,000, representing 4.38% of the civil engineering group.
My recent profile on the company shows how bullish I am about its quality and its prospects – so I really hope that Standard Life has made the wrong decision in offloading so much stock.
Then on the same day Cannaccord Genuity announced that they had clipped just over 1.31% of the stake in my favourite holiday operators On The Beach Group (LON:OTB), and they now control 4.99% of the company’s equity.
Again, I am very bullish about this company and I sincerely hope that they have got it wrong by selling too early.
However, I do welcome the news that Norges Bank has increased its stake in my favourite ‘chaff’ maker, the Chemring Group (LON:CHM) by buying another 1.2m shares taking their holding up to 3.27% of the company.
Last Tuesday’s trading update was bullish, stating that it is currently meeting current-year expectations, and that it has good momentum taking it up to the 31 October year end and then strongly into the 2020 year.
So, in this case I am sure that Norges Bank has got it right!