Small cap round-up: featuring Futura Medical, Rank Group, Surface Transforms, Hostelworld and others

13 mins. to read
Small cap round-up: featuring Futura Medical, Rank Group, Surface Transforms, Hostelworld and others

Futura Medical (LON:FUM)

In the last ten years there has been little to get excited about in the world of erectile dysfunction treatments.

However, it would appear that the team at Futura Medical will be rising to the occasion next Thursday, Friday, Saturday and Sunday. That is when they will present data on their DermaSys drug delivery technology and their lead product MED2005, a fast-acting, topical, nitroglycerin gel.

The event will be over in Nashville, Tennessee in the US, at the 20th Annual Fall Scientific Meeting of the Sexual Medication Society of North America. The company will also be hosting its third Scientific Advisory Meeting with high profile US Key Opinion Leaders in the field of erectile dysfunction (ED).

Their product “has the potential to be a highly differentiated therapy, especially for mild to moderate ED. Shown to be safe and fast-acting (5-10 minutes) with a favourable side effect profile – a key differentiator to other ED products on the market, which has seen very little innovation over the past ten years.

Way back in mid-March I profiled this company, with its shares at just 15p. Today they are trading at around the 30.5p level, after having touched 47.5p in July this year. Obviously still a speculation, the shares look to be on the rise again.

Rank Group (LON:RNK)

The first quarter results from this gaming group see the company predicting a 10% improvement in like-for-like net gaming revenues.

It appears that its international venues saw a 4% rise, its digital operations rose strongly by 16%, while its net gaming revenues rose 9% – its bingo halls were flat though.

The group, which recently completed its £115m acquisition of Stride Gaming, has been undergoing something of a transformational year. And the benefits will become apparent over the next year or so.

Both Peel Hunt and Shore Capital rate the group’s shares as a Buy, with the former going for 240p.

I featured the company in the middle of June at 157p, they are now 218p and are just about to break above my 200p/220p target price range. The shares look to be a very strong hold.

Norcros (LON:NXR)

On Thursday this bathroom and kitchen products supplier gave out a Trading Update for the 27 weeks to 7 October.

Despite challenging conditions in its markets, it showed a resilient performance in the first half year, with revenue up 11.4% at £181.2m. The South African subsidiary had a very good first half.

Underlying operating profit will be in line with expectations and further progress is seen for the year to end March 2020. Net debt at the halfway stage was around £42m, which is down £11.5m.

The shares are now 221p, compared to my end August profile price of 214p. My target price is 321p. Peel Hunt are rating the shares as a Buy, looking for 240p, I think that is too pessimistic.

Hostelworld (LON:HSW)

Well this global hostel-focussed online booking platform company has seen some interesting changes in its international shareholders ranks in the last week or so.

Long-term holder the Los Angeles based Capital Group has sold down its entire 9.95% stake in the company.

However, it would appear that it was easily placed off to some existing holders. The Diverse Income Trust increased their holding to 3.16%, the Miton UK Multi Cap Income Fund now has 12.75% of the online company.

Edinburgh based Baillie Gifford sold down from 5.40% to under 5%, while LHC Capital, from Sydney, Australia, more than doubled their holding to 7.55% of Hostelworld’s equity.

The company, which in the first half year put in place a number of operational and strategic improvements, is expecting to see a return in its volume growth next year. It is currently assessing organic and inorganic opportunities to boost that growth.

Since I profiled the company at the end of August its shares have fallen significantly from 152p to the current 112p, even so, perhaps bravely, I am sticking to my 200p target price by the end of next year.

Avon Rubber (LON:AVON)

Watch out for the final results for the year to end September being announced by this innovative technology group on Wednesday 13 November.

I expect them to show a set of strong results for the last year, which has been a highly transformational period for the respiratory systems and milking point specialist.

Its Avon Protection division is the recognised global leader in advanced CBRN respiratory protection systems for the world’s Military, Law Enforcement and Fire markets.

Whilst its milkrite | InterPuls side is also a global leader, in the provision of complete milking point solutions to dairy farmers across the world, which has the aim of improving every farm it touches.

Ahead of these results its shares look very attractive at 1690p against my early month 1700p profile price.

Driver Group (LON:DRV)

This professional services consultancy group provides multi-disciplinary advice to the construction and engineering industries. Those services, such as expert witness, claims and dispute resolution, are offered to its clients across the globe.

In fact, it is that global coverage that has given it a certain resilience that has seen the European and UK interests taking the strain of weaker performances in the Asia Pacific and Middle East regions.

The group had a slow start to the trading year, with strengthening in the second half year showing through. There is a good inflow now of client business and it has a strong pipeline of leads to process.

We now expect the full year to show underlying pre-tax profits of some £3m.

After a vigorous programme of share buybacks over the summer it will still show a period-end net cash balance of about £5m.

Way back in April I profiled this company with its shares at 59p. They are currently 55.5p, at which level they have very good attractions. I maintain my 89p target price by the end of next year.

Surface Transforms (LON:SCE)

Following the purchase of 100,000 shares @ 26p each by the Finance Director of this high-tech ceramic brake maker, earlier this month, I am even more convinced that this is a ‘winner in the making’.

Do not forget that on Wednesday 30 October the company will be holding a Capital Markets Day at its offices in Liverpool, the same day as its AGM.

It will provide investors, the media, brokers analysts and others with a tour of the site, presentations and give them the ability to chat with Directors, senior management and staff.

Now you do not offer such an invitation to visit if you have nothing to show or to talk about.

So, let us take this as a strong hint that something is up and that its shares may have some very strong upside potential.

Now at 24p, against my mid-September profile price of 17p, I am not at all worried about my 30p target price being beaten within weeks.

A speculative target price might now be 50p but let us wait and see what the reaction is at the end of this month.

Cake Box (LON:CBOX)

Monday 25 November will be the day that this specialist retailer of fresh cream cakes will announce its interim results for the six months to the end of September.

A combination of operational growth in its existing estate and from the opening of nine new stores in the period, now up to 122 in total, is expected to see revenues up 6% to £8.8m.

The new store programme is continuing at quite a pace, while improvements to the overall Cake Box proposition will see other development getting underway.

The company is confident for the full year and beyond. But first of all let us see the interim results and statement.

The shares, now at 162p, are down 10% on my end July profile price of 180p, even so my target price of 240p by the end of next year remains firm.

Trackwise Designs (LON:TWD)

After a set of extremely disappointing interim figures a month ago, from this printed circuit technology company, I was interested to note that the Miton UK Microcap Trust have just taken their holding up 0.84% to 5.09% of the company’s equity.

The shares, which I profiled at 92p way back in April, had subsequently risen to 154p at one stage. But that was before the recent statement from the company which knocked the shares way back to the current 62.5p level.

We now know that the company will not be reporting anticipated results for the full year, but it seems that the company’s CEO is confident of it being at the beginning of a long-term, profitable growth trajectory.

I remain bearish of the shares and am happy that I suggested baling out a few weeks ago at around the 80p level.

discoverIE (LON:DSCV)

Much as predicted, this innovative electronic components group is on the acquisition trail again.

On Thursday morning it announced the £70m acquisition of Sens-Tech together with a £33m Placing of 8,034,840 new shares at 415p each. That was a 3.9% discount to the closing price on Wednesday night.

The high margin Sens-Tech is a UK-based designer, manufacturer and supplier of specialist sensing and data acquisitions modules for x-ray and optical detection applications. It supplies customers in the transport security, medical, food processing and industrial markets.

This is possibly one of the group’s largest acquisitions to date. The £58m cash down and £12m on profit achievement deal looks to fit in perfectly with the group’s expansion plans. It will create further opportunities for organic growth. The Placing funds will be boosted by existing debt facilities to complete the purchase.

This deal gives investors a useful opportunity to get in some cheaper stock. Even six of the company’s directors bought more shares in the Placing.

I profiled the company in early August at 438p, with a target price of 550p by the end of next year. I remain fixed with that target.

On Friday morning I noted that brokers Peel Hunt have just increased their target from 500p to 530p.

Carr’s Group (LON:CARR)

This agricultural and engineering group, which supplies customers in over 50 countries across the world, will be announcing its annual results on Monday 11 November.

The results are expected to be in line with expectations. As the group continues to invest in its businesses, both organically and through strategic acquisitions, and as it expands its international footprint, it looks well positioned for sustained growth.

I profiled the company in early July at 153p, they are now just 11p off their year’s low at 140p. However, I am still happy with my end of 2020 target price of 200p.

Loungers (LON:LGRS)

Wednesday 4 December is the date when this café/bar/restaurants operator will announce its half-year results.

Now with a total of 157 venues across England and Wales, for its Lounge and Cosy Club brands, and another three sites to be open before the end of this month, this group’s estate is fast growing and ever-widening geographically.

In the current financial year the group will have opened 25 new sites and there are still many others in the pipeline.

For the 24 weeks to 6 October the company reported that its revenue was up 5.4% on a like-for-like basis, but overall some 22% better at £79.8m.

Its value-for-money proposition is giving it some resilience in its trading and it expects to outperform others in their marketplace.

In early September I profiled the company, with its shares at 199.5p. They are now 205p and still offer significant prospects, with my 275p target price holding very steady.

Bloomsbury Publishing (LON:BMY)

The interim results are due from my favourite publishing business. The figures for the six months to end August will be announced on Tuesday 29 October.

Those numbers will not be significant because it is always the second half year that has the strongest performance.

Book sales leading up to the important Christmas market will show through for the full-term to end February 2020.

However, I have noticed that there has been some ‘nosey buying’ this week, with the shares moving up to end the week around the 247.5p price level. And I do not think that it was just because BlackRock has nudged up its holding in the publisher to 5.25%.

I have known this group for decades, having been pumping the shares since they went public in the early 1990’s. I remember taking them from 17p in 1997 up to 370p or thereabouts in mid-June 2005. Over the next six years they eased back to as low as 90p, before starting their inevitable rise again to their current near 13-year High.

This is no ‘flash stock’ instead it is a very solid business, managed extremely well and very professionally. I have faith in their ability to continue to deliver and I am forever checking the company’s entries in the Bestseller Lists.

Without any doubt in doing so, I maintain my end February profile 280p/300p target price range for the shares. That compares with my end February profile price of 231p.

Costain Group (LON:COST)

A little-noticed statement from this smart infrastructure solutions company on Wednesday of this week concerned a big contract with Southern Water.

Together with its joint venture partner MWH Treatment, the company has been selected by the south-eastern water giant to extend its contract for their consultancy, design, digital, construction and commissioning expertise in developing and delivering a range of solutions to maintain and improve Southern Water’s water supply and wastewater treatment.

This contract is worth £325m to the joint venture in an equal share over a five-year period starting in April next year.

My profile on the company early last month featured the shares at 151p, they are now 171.5p, and they look good for my end 2020 target price of 250p, especially with such good contract news flowing around.

I note that Liberum Capital is looking for 350p.

Frontier Developments (LON:FDEV)

I like the share price move over the last week since this Cambridge-based video games developer and publisher announced that it had released its GRID racing game.

The company will be holding its AGM in Cambridge on Wednesday 30 October and I would expect a bullish Trading Update for that meeting. Perhaps that is behind the latest price move.

Now up 68p over the last week, the shares stand at 1068p making my early October profile piece at 1000p look fairly well-timed. Let us hope that good news is forthcoming, certainly good enough to maintain its current projection up to and passed my 1500p target price by the end of next year.

And finally …..

Eddie Stobart Logistics (LON:ESL)

And the saga rumbles on like a very long-distance lorry driver going from Land’s End to John O’Groats.

DBay Advisors, the potential bidder, now has until the end of this month, the 28th, to firm up on whether it will make an offer or not. The two companies are currently in talks.

Andrew Tinkler had previously stated that he could have been interested in making an offer but by Wednesday night he had dropped out.
It was interesting to see that the Woodford empire has sold down its 22.89% holding, now under 5%, in the company. A knockdown price, no doubt, has given someone a useful springboard.

Then late on Thursday it was declared that Link Fund Solutions, a major player in the demise of the Woodford Empire, has now a 19.9% stake in Eddie Stobart.

And late to show its hand Wincanton, Britain’s largest third-party logistics company, on Friday morning stated that it has been doing due diligence on the victim’s books.

Now a combination of these two companies makes very good sense, but will it come up against any Governmental restrictions?

This pot boiler continues.

The shares remain suspended at 71p.

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