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…
Inland Homes (LON:INL)
One of the best performers this week in my list has been Inland Homes, the specialist housebuilder and developer of brownfield sites.
On Monday morning it announced that it had received planning consent for its flagship site at Wilton Park in Beaconsfield, Buckinghamshire.
This site, which is described by Savills estate agents as the best residential opportunity in southern England, has an estimated gross development value of £350m.
| Master Investor Magazine
Never miss an issue of Master Investor Magazine – sign-up now for free! |
The consent given so far for the 100-acre site covers 350 new homes together with commercial and community space. Another part of the site could see the company go for a further 250 homes and some 200,000 sq. ft. of commercial space.
On the former Tesco site at Cheshunt, where the company has just agreed to buy out its 50% partner for £29.9m, the deal should be completed next Monday.
Together Wilton Park and Cheshunt could total over 1,650 consented plots for the company’s land bank, which is now growing at quite a pace.
Its sites are held on discount to market values by way of options that only get exercised when planning permissions are granted. By this method the company now has 31 options on sites totalling 480 acres, which could see some 2,650 plots, taking in 2,300 house and 350 flats.
The company’s shares moved up from 71p to a high of 79p during the week, on the back of some sizeable turnover in its stock.
I remember going to see the company last December for its AGM, when its shares were looking unfriended at just 47p – at that level I napped them for 2019, with a view that they could rise to 110p in due course – they are halfway along that course right now.
The shares have a lot further to climb yet, so hold very tight.
Hotel Chocolat Group (LON:HOTC)
The year to end-June saw sales up 14% at £132.5m and pre-tax profits up 11% at £14.1m, with earnings coming in at 9.5p per share and a dividend of 1.8p for the year.
The leading British chocolatier and multi-channel retailer had a cracking year and is still growing apace, both in the UK and internationally.
Against a tricky trading environment and a somewhat halting economy, the company, which now has 130 shops, is building up its customer loyalty. It has a strong pipeline of opportunities ahead of it and current-year trading is up to expectations.
Brokers Peel Hunt increased their target price from 375p to 410p, while Liberum Capital advanced their target price from 410p to 440p.
My end-March profile at 340p suggested a 402p target price. They are currently trading at around 376p – with my target being maintained.
Xpediator (LON:XPD)
The freight management and logistics company announced its interims on Thursday, and they were disappointing but not devastating.
Revenues were up 30% at £102.4m, but the impact of a challenging UK logistics market, coupled with higher than expected losses at its e-commerce business, helped drive down operating profits from £2.8m to just £2.4m.
I would look now for around £5m for the full year.
The shares touched 22p on the news but have since been trading at around the 24p level, which I would have thought could well be a good averaging purchase point.
| Master Investor Magazine
Never miss an issue of Master Investor Magazine – sign-up now for free! |
They are less than half of my end May profile price, then 50p – but I have not given up hope.
When Brexit has been finally delivered, one way or the other, I foresee the shares making up lost time and getting back up to trade around the profile price again.
S&U (LON:SUS)
I really like this motor finance and property bridging company. It is not in a rush to make mega profits but instead it wants to carry on its unbroken profit record by making the right moves, without gambling for the big bucks.
When I spoke to the company’s bosses earlier this week, they clearly explained that at its Advantage motor finance company, they have been tightening up their credit criteria whilst being prepared to pay a higher cost to get the right business.
The cost of each sale has gone up from £727 to £823 a time, with the average motor loan on a five-year-old car being £6,353 against £6,136 previously. That 3.5% increase in the 51-month loan more than covers its increased costs.
The number of live accounts that it has is up from 59,109 to 62,032, which is impressive when you consider just how poorly the motor trading sector has been performing of late.
Although the Aspen Bridging property lending side has not done as much business as was anticipated, the average sum lent has increased from £375,000, for loans over 6 to 14 months, to around £550,000 for an average 12 months.
The Aspen loan book had increased to £24.7m by the end of July, but it has not been plain sailing with a number of late payments and one actual loss being incurred.
It is still very early in Aspen’s corporate history and I am sure that the company will get it right in due course.
Overall, the first half to end-July showed a 7% revenue increase to £47.7m, upon which it made a 3% gain in pre-tax profits to £17.1m. Earnings per share were up 3% to 116.5p, while the interim dividend was up 6% at 34p per share.
Anthony Coombs, the group’s chairman stated that, “These results clearly demonstrate the resilience and dynamism of our business, and our ability to perform irrespective of the unprecedented uncertainty surrounding the British economy and consumer markets.”
“These strong and well-established foundations give me every confidence for a resumption of usual rates of growth, whatever the outcome of the current maelstrom in Westminster.”
The shares, at 2,110p, are performing well since my end August 2010p profile, where I set a target price of £25 by the end of next year.
Peel Hunt rate the shares as an ‘add’ with 2,300p in their sights, whilst Shore Capital rate them as a ‘buy’ with a similar price aim.
This is a quality stock worth sticking with.
Surface Transforms (LON:SCE)
This cracking little loss-making company is going to really get it together within the next couple of years. Gamblers will then kick themselves if they had not jumped aboard at around the current levels.
On Thursday, it announced that it had been selected as a tier one supplier to a major high-performance automotive company of a carbon ceramic disc brake.
The company, it appears, is getting very excited about this relationship, which has now been turned into an order worth £400,000, which will be delivered before the end of this trading year to 31 December.
The shares went 2p better on the news to 25p. Mark my words, my 30p target price could be in sight very soon.
Miton Group (LON:MGR)
This week’s interim results were much as expected.
Despite it still being underway with a merger plan with Premier Asset Management, brokers Peel Hunt are saying ‘add’ to existing holdings.
| Master Investor Magazine
Never miss an issue of Master Investor Magazine – sign-up now for free! |
They say that the fund management businesses together should see a major re-rating as their joint values and savings begin to become visible. It will emerge as a significant asset management group in the process.
The shares at 54p look very appealing.
Billington Holdings (LON:BILN)
A cracking set of interims from this leading structural steel and construction safety solutions specialist.
To the end of June, it saw revenue up 19.7% at £47.15m and pre-tax profits up 38.1% at £2.68m. Earnings per share came out at 17.80p, a 39.1% advance.
Even cash was 32.4% better at £10.01m.
It appears that all of the group’s companies had performed well in the period.
Order books are continuing to grow, with several large contracts having been won recently.
Mark Smith, the company’s chief executive, stated that the outlook for the company remained positive, particularly with its spread of projects giving it some insulation against an overall uncertain market.
He stated that he was looking forward to the remainder of the year and beyond with cautious optimism.
Well that is certainly good enough for me!
I profiled the company in early April at 266p, with a target price of 314.5p. Well that target was well and truly beaten – by early June they touched 363p. They closed the week at around the 328.5p level.
I am now upgrading my target price to 400p by the end of next year.
On The Beach Group (LON:OTB)
This travel company will take a hit from the failure of Thomas Cook. Even so, three brokers are saying that the shares are a ‘buy’ – with Berenberg going for 480p, Liberum Capital for 520p and Peel Hunt aiming higher at 550p.
The company will take an exceptional charge for the costs of helping its clients make alternative arrangements, as well as taking a hit on cancelled bookings. However, it should be able to recover the cancelled flight costs by way of a chargeback claim.
The immediate effect of the Thomas Cook melee was to see the shares of the other players in the market picking up as they benefit from the ability to pick up extra clients in due course.
On The Beach shares closed at around the 378p level, which is some way below my end March 448p profile price.
Even so, I still rate the company and its offer and consider that they will soon recover in price – but I am now downsizing my 630p target price to 500p by the end of next year – fingers crossed no more hits.
Synnovia (LON:SYN)
The offer documents have now been posted to shareholders from BPF1.
But I wouldn’t wait until after the 125p a share cash offer closes in mid-October; instead, I’d sell the stock now and take 123p in the market.
| Master Investor Magazine
Never miss an issue of Master Investor Magazine – sign-up now for free! |
Then I’d reinvest the proceeds immediately back into the market – there are scores of undervalued stocks from which you can choose.
My profile piece in early March was at 102p – so a 20% turn in six months seems a good enough gain to take.
Stobart Group (LON:STOB)
On Wednesday, this aviation, energy and civil engineering group, issued a trading update to the end of August.
I was fearing that it was going to be bad – but thankfully it was quite the opposite.
Trading is in line with expectations and is making strong progress in the two core divisions of Energy and Aviation.
It would appear that the group’s prospects are looking good and we will get fuller details when the interims are announced in the middle of November.
I profiled the company way back in mid-June, with the shares at 106p and with a target price of 175p.
They are currently holding steady at 126p – I maintain my target.
And finally…
On The Market (LON:OTM)
I am not at all perturbed by the profit warning that the property portal issued on Thursday.
The company declared that the conversion rate of pulling its estate agent users away from casual business on to longer term contracts has not been up to expectations.
It also stated that transaction volumes were lower than usual in the property market. That is understandable whilst Brexit is still causing such unsettled conditions across the whole economy.
As an example, Savills estate agency has seen UK transactions down 9.6% over the last three months, as compared to this time last year.
What this company has done over the last few years is to have created a definite competitor to the Rightmove and Zoopla portals, now scoring itself with a 30% market share.
It is still early days in the development of the company, which has maintained a very strong financial control and still boasts cash at around the £8.5m level.
On the shock news the company’s shares dropped to 77.5p before closing the day just 10% lower at 87.5p.
My profile of last week was at 96.5p, with a target price of 175p, so it was quite a quick drop in price.
However, I rate them as inexpensive taking a firm two-year view that my target price will be close to the mark.