Small Cap Round Up: featuring Equals Group, Xpediator, TClarke and more…

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Small Cap Round Up: featuring Equals Group, Xpediator, TClarke and more…
Master Investor Magazine

Master Investor Magazine Issue 59

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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…

Equals Group (LON:EQLS) – for buying not dumping

I note from an article by Richard Evans, in last Wednesday’s Questor column in the Daily Telegraph, that Richard Bernstein fund manager of the Crystal Amber investment trust considers that Equals is on the turn.

The stricter hand of the company’s new finance director is visible, with a prudent pull back in market expectations for the 2019 trading results.

Bernstein states that “it needs to grind out results, reset profit expectations and rebuild trust. There is a new culture and the new finance director should be more cautious. It is profitable and generates cash and should be able to succeed as an independent business but would probably be better off being bought.”

If you strip out the group’s £16m net cash, Equals trades on a price earnings ratio of just 8.5.

The shares eased back during the last week to bottom out at 43p before closing the week stronger at 49p.

Profile 14.02.19 @ 89p set an end-2020 Target Price of 100p.

Xpediator (LON:XPD) – motoring back up again

Another one of my profile stocks that has over the last year been weathering a storm or two is this Braintree-based freight management business.

I spoke at length earlier this week with CEO Stephen Blyth, the company’s boss.

I have no doubt that he is pulling his company around and that he will succeed in pushing it forward again.

The company’s results for 2019 will be announced in late April, but what we do know is that turnover was up 19% to £212m and that the adjusted pre-tax profit will be just a bit above £5m, while net cash doubled to £6.9m by the year end.

After falling away to 28p recently, the shares are starting to firm up again, currently trading at just 35.6p and back on the climb upwards

Profile 28.05.19 @ 50p set an end-2020 Target Price of 90p.

TClarke (LON:CTO) – great stock, great value

Boy what a company this is! It is a real building specialist supplying services for infrastructure, residential and accommodation, facilities management and framework, mechanical and electrical contracting, and technologies.

The recent trading update for 2019 suggests sales up at £335m, with underlying operating profit before tax and interest of £10.2m. That should push earnings up to 17.5p per share, with, I guess, a 4.3p dividend per share.

It maintains a strong cash balance at around £12.4m and is looking at a £400m plus order book.

I love the value this company’s shares offer investors, now at 128.5p.

Profile 10.12.19 @ 120p set an end 2020 Target Price of 165p.

Manolete Partners (LON:MANO) – setting a new target price of 500p

In profiling this litigation funding company, at this time last year, I was extremely confident about its business model and its prospects.

Within three months the shares more than doubled from the profile price of 230p – in fact they hit over 620p.

I was chatting with boss and founder Stephen Cooklin last Tuesday and I remain convinced that his business model is strong, that the company is handling a record number of cases and is doing even better this year.

For the year to end-March, estimates suggest that revenues could increase by 33% to £18.4m, with pre-tax profits increasing 72% to £10.2m, worth 19p per share in earnings and backing a 4p per share dividend.

For the coming year, predictions are for £25m of revenue, £13m of profits, 24p of earnings and a 5p dividend per share.

Even further out £30m of sales, £15m profits, 28p earnings and a similar 5p dividend per share.

This is what growth is about and this is why the shares, now 369p, deserve a much stronger rating.

I now set a new target price for end-2020 of 500p and I am confident that the shares will be up there again before the year is out.

Profile 12.02.19 @ 230p set an end-2020 Target Price of 300p.

Profile 26.02.19 @ 330p.

Angling Direct (LON:ANG) – another one hooked

Almost on cue, this fishing tackle retail group responded to my little mention of last weekend.

I stated that it was growing at a pace, opening and refurbishing shops across the country.

Well, this week it has announced the opening of its 35th store, a 4,500 sq. ft unit at the Cockhedge Shopping Park in Warrington, Greater Cheshire.

I am hoping to see a bullish trading update being announced within the next few weeks. The shares at 68.5p offer good upside potential and my target price is firm.

Profile 29.10.19 @ 58p set an end-2020 Target Price of 100p.

And finally…

Audioboom Group (LON:BOOM) – pump it in and then get out?

Am I being cynical?

Last week it was announced that Candy Ventures, one of property tycoon Nick Candy’s vehicles, had, together with this podcast company’s chairman Michael Tobin, lent the company $4m.

Was that loan because the loss-making company has yet to prove itself strong enough to raise more equity funding?

Was that loan a ‘bail out’ to keep it afloat? So last weekend’s news that New York advisers Raine have been called in to examine options for potentially the sale or a merger for the company was probably a reaction from its financiers – ‘yes we will put some more in but let us see whether we can get rid of it now’. Yes, probably too cynical of me.

Anyway, that news jacked the shares up 10% to 242p.

Its advance was helped by Candy taking out a solid 100,000 shares @ 245p, thereby taking his Candy Ventures stake up to 26.29%, some 3.68m shares.

That helped to stoke the shares again, with them touching 275p at one stage before closing the week at around the 266p level.

At this rate, more news like this could push the shares higher again, the year high was 290p and it was 117p at its lowest.

Profile 09.07.19 @ 210p.

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