Small-cap round-up featuring: Luceco, STM, Solid State, Devro and others

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Small-cap round-up featuring: Luceco, STM, Solid State, Devro and others

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…

Luceco (LON:LUCE) – Doing much better than expected

I have to say that I have been very pleased with the price performance of this lighting and portable power products maker since I profiled the company two months ago.

Now trading at around the 154p level they have put up a good two-thirds appreciation in the subsequent timeframe.

Brokers Peel Hunt were going for 135p, while Liberum Capital stated that the shares were a ‘buy’ looking for 200p.

The first six months trading performance was materially ahead of market expectations. Second lockdown permitting, that could continue.

(Profile 15.06.19 @ 96.1p set a Target Price of 125p*.)

STM (LON:STM) – A p/e of 8.9 this year and 5.3 next year

This cross-border financial services provider stated in its trading update for the six months to end-June that it had not been impaired by Covid-19 in its ability to service its customers or in seeking new business.

Strong operational control on its finances and its costs has helped to protect margins and profit expectations.

Brokers finnCap are looking for a £1m revenue increase to £24.3m for the year to end-December and a fall in pre-tax profits from £3.9m to £2.7m. That should ease back earnings from 5.6p to just 3.7p per share.

However, they are forecasting £26.8m of sales next year will see a big recovery to £4.5m pre-tax profits, worth a massive 6.2p per share in earnings. Their price objective is 53p.

Ahead of its results on 8 September its shares at 33p look extremely attractive, trading on just 8.9 times current year and on a mere 5.3 times prospective earnings.

(Profile 27.05.20 @ 33.7p set a Target Price of 50p.)

Solid State (LON:SOLI) – A good recovery in trading

Although its first four months to end-July showed revenues down 4%, they came in better than expected.

However, the computer and power products maker reported that order intake was running at some 7% lower. The order book at end-July at £38.3m was only 4% lower than the end-March figure.

In due course its shares, now at 610p, should reflect a recovery in trading for this well managed, cash efficient group.

(Profile 15.08.20 @ 404p set a Target Price of 546p*.)

Devro (LON:DVO) – More skin to stuff?

At the end of last month, along with its interim results to end-June, the maker of collagen products for the food industry was sounding cautiously optimistic.

Rutger Helbing, CEO, stated that, “Whilst trading conditions remain uncertain due to Covid-19, the Board expects, based on underlying growth momentum and supported by cost savings actions, and FX at current rates, to make progress during 2020.”

The group has also been making several improvements in its operations.

Its shares burst through my price objective on Wednesday morning, but are ending the week at around the 178.9p level.

They do feel as though they have a lot further to climb yet.

(Profile 28.04.20 @ 149p set a Target Price of 180p*.)

M&A Saatchi (LON:SAA) – Getting ready for Vin’s next move

Well, now we know – the group actually made a small profit in the first six months of this year and those results should be announced sometime next month.

We also know that the 2019 results will be reported before the end of this month.

There has been a lot more interest in the advertising group’s shares over the last couple of weeks, touching my profile price again before easing back to the current 61p.

I am a big fan of the company’s large shareholder Vin Murria. She is shrewd and is an extremely agile corporate player.

Accordingly, I am more fascinated to see what she plans to do with her 15% plus stake in the group, while the company’s actual operating performance is of much lesser interest to me.

(Profile 11.05.20 @ 64p set no Target Price.)

Epwin Group (LON:EPWN) – Treading water?

The pre-close trading update for this building products group for the six months to end-June announced in the middle of last week was not as bad as some were expecting.

With so many of its customers in the various construction markets that it helps to supply being shut, the company was expected to be a great deal lower in sales.

However, the pre-lockdown months were a strong period for the company. It took until May for some of its own operations to re-open. June was good and July even better. The improvement has continued into this month.

The group’s finances look strong.

The interims will be announced on 10 September, with revenue estimates around £93m against £140m last year – it could have been a lot worse.

CEO Jon Bednall stated that, “we are optimistic for trading prospects in the second half and expect to make further strategic progress with our site consolidation and rationalisation programme, whilst continuing to manage the challenges that the pandemic presents. Looking further ahead, the medium and long-term drivers for the RMI market remain positive.”

There is no profit guidance from the company, so until we see better signs of the hoped-for corporate recovery, I would suggest that its shares, now at 70p, will tread water for some while ranging in the 65p to 80p price band.

(Profile 22.08.19 @ 73.5p set a Target Price of 100p*.)

discoverIE (LON:DSCV) – Already highly rated but going higher still

This electronic designer, manufacturer and distributor of innovative electronic components will hold its AGM next Wednesday (19).

This group is very well positioned to give a good performance for the year to end-March 2021, with pre-tax profits expected to ease just £2.2m to £30.8m on sales £8.1m better at £474.5m.

Next year £484m revenue could push profits up to £34.2m, worth 28.4p in earnings.

This stock is already highly rated trading on almost 20 times historic earnings. But even so, the market sees the shares going a lot higher than the current 603p.

Perhaps next week’s statement will help push the shares along.

Brokers Peel Hunt rate the shares as a ‘buy’ having upped their objective from 580p to 700p.

(Profile 08.08.19 @ 438p set a Target Price of 550p*.)

And finally…

Braemar Shipping Services (LON:BMS) – AGM next Wednesday (19)

I know that I have stated this many times before, but I really do consider that this group’s shares are undervalued.

Brokers estimates for the current year to end-February 2021 suggest that despite lower revenue of £116.5m (£120.9m) for this period, the group could report pre-tax profits some 58% better at £7.71m. That would be worth 18p per share in earnings.

Furthermore, £123m turnover for the 2022 trading year could well see profits up to £9m, giving 21p in earnings.

The shares, which saw a recent peak at 242p in October last year, have been down to 92p at their lowest in mid-May this year.

They close the week at only 133.5p, which puts them out on a mere 7.4 times current year and only 6.3 times prospective earnings.

Its peer Clarkson (LON:CKN) is on 24.5 times current year earnings.

To me that just screams out that Braemar at this price presents a massive opportunity to buy cheaply into such a significant discount.

(Profile 05.12.19 @ 185p set a Target Price of 250p.)

(Profile 20.05.20 @ 99p set a Target Price of 150p.)

(*denotes that Target Prices have been achieved.)


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