Small cap round up: featuring Eddie Stobart Logistics, Renold and Equals

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Small cap round up: featuring Eddie Stobart Logistics, Renold and Equals

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 – shock suspension and CEO kicked out

Well, Friday morning’s shock news from the transport and logistics group was an announcement that its chief executive, Alex Laffey, has been kicked out and immediately replaced.

The shares of Eddie Stobart Logistics (LON:ESL) were suspended at 71p whilst an investigation of accounting procedures delves into just how profits have been derived – whether forward accounted or not, and also checking the recoverability of certain outstanding accounts. I do understand that as much as £2m has been overstated in last year’s adjusted operating profit.

This is horrendous news for the company’s shareholders, who are also going to be hit with the results being impacted. The interims will be reported in early September – could the suspension of dealings last until after they are announced and assessed?

Read the original write-up HERE.

Capital Drilling (LON:CAPD)

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This drilling company, focussed upon the African markets, showed another strong performance in the first half of the current year.

It reported an improved fleet utilisation at 52% against 46% previously, on an average number of drill rigs at 91, down just three rigs from previous results.

The company is still spending on its capex, up from $5.4m to $6.4m, and that is against a much greater cash generation in the first half at $10.5m, up from $7.2m.

Revenue was steady at $54.8m ($54.5m); however, the net profit after tax was almost doubled at $5.1m against $2.8m.

Earnings improved 87% to 3.7c per share, with the interim dividend up to 1.5c per share.

That was a very decent set of results, especially considering the increased spending as it wins new contracts to come into action in this second half, in Burkino Faso, Mali and Cote d’Ivoire.

This really is a cracking little company with masses of upside potential and tightly controlled financially.

Its shares are trading at around the 58p level, well up on my late July 48p feature price. I strongly maintain my 76p target price. 

Read the original write-up HERE.

The Gym Group (LON:GYM)

The first half year for this low-cost and fast-expanding gym clubs group saw it performing well and up to expectations. The results to the end of June will be reported next Thursday 29 August and I look forward to seeing the statement with the figures.

The shares at 246p are up on my mid-April profile price of 220p, just another 54p to go to hit my target price of 300p.

Read the original write-up HERE.

Rank Group (LON:RNK)

Thursday’s announcement of the annual figures to end June from this gambling and gaming group was very heartening despite its 26% profits fall.

It had a bit of a shake up in the first half and its subsequent transformation is proving positive.

Revenue was much the same at around £695.1m but profits reacted to a rise in operating costs coming in at £34.6m.

It appears that the second half cost savings were some £10.7m and that should continue in the current financial year to end June 2020, with another £9.3m expected to be cut off expenditure.

The £115m acquisition of Stride Gaming in May should be completed by October, with some strong synergistic and revenue opportunities to kick in and helping the rapid transformation of the group.

The market certainly took heed of what has happened and is in store for the group, with an initial marking down of the shares being replaced with a 10% rise to 170p on the day.

My mid-June profile price was 157p with a 200p to 220p target price trading range. I remain positive on this happening.

Read the original write-up HERE.

Equals Group (LON:EQLS)

On Tuesday this group announced that it had completed its placing of 12,727,000 new shares at 110p each to help fund its organic and acquisitive growth. The shares held pretty steady at just below that price for the rest of the week.

The same day Schroders announced that they now hold a 5.33% stake in the expanded group, which used to be called FairFX.

Then on Wednesday Pembar Ltd, registered in Tortola in the British Virgin Islands, declared that it held 26,715, 813 shares in the company, a 15.01% equity stake.

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The Equals group provides money movement services to both personal and business customers through four channels: currency cards, physical currency, international payments and also bank accounts.

It offers retail and business bank accounts with all the functionality expected from a bank, namely faster payments, BACs, direct debits, international payments and a debit card.

The Equals platform facilitates payments either direct to bank accounts or at 35m merchants and over 1m ATMs globally via mobile apps, the internet, SMS, wire transfer and through MasterCard/VISA debit cards.

FairFX was the second company that I profiled on Master Investor, way back in mid-February this year. Then its shares were trading at 89p, they have since been up to 132p.

Now trading at the 109p level, I rate this company more highly than I did on my February profile, with brokers pre-tax profit estimates at £8.25m for 2019, £12.7m for next year and up to £15m for 2021.

My target price by the end of next year is now set at 165p.

Read the original write-up HERE.

HML Holdings (LON:HMLH)

This property management group’s report & accounts have just been published. Its AGM is to be held in Croydon on Tuesday 17 September.

The shares, which peaked at 36.5p in May, were profiled by me in mid-February at 32p, with a 50p target price.

The end-March 2019 results showed a profits advance from £1.46m to £1.69m, with earnings coming out at 4.6p and a dividend of 0.47p per share.

This current year estimates are suggesting that a revenue rise from £28m to £30.5m could help to push pre-tax profits up to around the £2.5m level. That would put the shares at 33.5p out on a mere 7 times current year earnings – that is cheap, so my target price remains unchanged.

Read the original write-up HERE.

Stobart Group (LON:STOB)

The aviation, energy and civil engineering group, this week announced a new partnership with Wizz Air, which is the largest low-cost airline in central and eastern Europe.

Using Airbus A320 aircraft, the airline will operate 14 weekly flights on three new routes from London Southend Airport to Bucharest and Sibiu, both in Romania, and to Vilnius in Lithuania.

The new routes, which will start in October and November, will see an additional 250,000 passengers in the first year of the five-year agreement.

Wizz Air has joined Ryanair, easyJet, Loganair, Air Malta, and Flybe (Connect Airways) in operating from Southend Airport. Customers now have more than 40 domestic and European destinations from which to choose.

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That aim of having 5m passengers pass through the airport within five years is beginning to seem a very easy target.

Having been knocked by the shock suspension of Eddie Stobart Logistics, in which they are a big holder, the shares at 108p are still some way off my 175p target price but gradually they will hopefully get there.

Read the original write-up HERE.

Renold (LON:RNO)

This chain-making group has been suffering a bit of late, with questions over its accounting still lingering on.

It was, therefore, worthy of note that Rights & Issues Investment Trust has added 1.1m shares to its holding in the company, taking it up to 13.09% of the equity.

I profiled the company at 30p in early June, they are now a dismal 21.5p. So I welcome the news that Rights & Issues has whipped out some cheap stock.

Let us hope that recovery is on the way because I would still like to see them hit my target price of 60p, despite it now being so very far away.

Read the original write-up HERE.

Trackwise Designs (LON:TWD)

I noted on Friday morning that the Miton Group had reduced its holding in this specialist products company which uses printed circuit technology.

It has taken its stake down from 13.31% down to 12.77%, some 1.88m shares in total. It is perhaps understandable that the investment group has taken some of its profit on the holding at the higher levels.

The shares have been up to 154p since my early April profile, when the price was 92.5p – I set a 150p to 200p target price trading range for this currently loss-making but highly innovative company. Now at 134p the shares reflected the Miton reduction with a 4.5p price fall.

Read the original write-up HERE.

And finally…

You know that I enjoy seeing directors buying more shares in the companies on whose board they sit. It is my way of sussing ‘insiders’ dealings’.

So, I was pleased to note that Ian Wood, a non-executive at Carr’s Group (LON:CARR), the specialist engineering and agricultural feeds business, has doubled his holding in the company to 20,000 following his purchase of 10,000 shares at 130.9p.

Also, of note this week was Chris Holmes, the company’s non-executive Chairman, buying 10,000 shares at 136p each, he now holds 749,000 shares.

The group will be announcing its results for the year to end August on Monday 11 November – so there is plenty of ‘allowed’ time for ‘insiders’ to deal in their own stock.

In early July I profiled the company at 153p, with a target price of 200p. While I may be disappointed with the price performance to date (they closed at 132p), my view is strengthened by these ‘insiders’ making some opportunistic buying of the shares.

Read the original write-up HERE.

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