Small-cap round-up: featuring N Brown, Totally, Augean and more…

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…

N Brown Group (LON:BWNG) – at 5.8 times current year and just 4.4 times prospective earnings, these shares are amazingly undervalued

This Manchester-based digital retailer of clothing and footwear for the plus size and over 50s markets includes in its brands JD Williams, Ambrose Wilson, Simply Be, Home Essentials and Jacamo. 

Who hasn’t noticed their adverts littering our daily press?

Next week it will show just how well it has been doing during the Covid-19 lockdown for its first half of the current trading year, the six months to 29 August.

Analyst estimates for the current year to end-February 2021, suggest that although the group may well have suffered a sales fallback from £858m last year to just £724m for this current year, it could well have only seen a slight easing in pre-tax profits from £35.7m last time to an impressive £33.9m in this period, worth 9.4p in earnings per share.

For the next year, the benefits of the overall group restructuring begin to show, with estimates of sales up to £767m and pre-tax profits leaping to £45.7m, worth 12.3p per share in earnings.

The group’s shares rose to 66p earlier this week before the market fall brought them down to just 55p now.

The interim results, which are due to be announced on Thursday 5 November, could provide some fireworks on their own.

These shares, now on just 5.8 times current-year earnings and only on a mere 4.4 times prospective, look amazingly undervalued.

(Profile 06.07.20 @ 36.15p set a Target Price of 50p*)

Totally (LON:TLY) – interims due next week?

Valued at just £32m this Derby-based ‘out of hospital’ healthcare services group should be announcing its interim results next week – it was on the 6 November last year.

This debt-free group, which boasts £10.2m cash in the bank, has obviously seen its business hit by the Covid-19 virus.

However, I am looking for a positive but guarded statement from Chairman Bob Holt with the interims. He is one of the rare breed of company bosses that always ‘under promises and over delivers’ and has successfully pursued that policy.

I like the range of services that this group offers to NHS Trusts and other health providers across the country. Its services, especially in virus-free times, are well-respected and certainly well-needed.

There is no guidance currently for revenues and profitability. However, at just 17.5p its shares have great medium-term attractions.

(Profile 12.03.20 @ 12p set a Target Price of 18p*)

Augean (LON:AUG) – bullish estimates despite Covid-19

Edison Research have come out positively about this specialist waste management business.

Noting the company’s resilient waste lines, its analysts state that Augean faces a shift in challenges in the second half of the current year, as North Sea decommissioning activity declines and waste flows return towards more normal levels following first-half shutdowns.

Edison concludes, “Encouragingly, cash flow remains strong and we anticipate a positive net cash balance at the year end.”

Its estimates for this year are £93.5m (£107.1m) in revenues and £19.8m (£19.2m) in pre-tax profits, giving earnings of 15.4p (21.0p) per share.

For next year their analyst goes for £100m of sales, £21.7m of profits and earnings of 17p per share.

Those estimates totally underline my enthusiasm for this group’s shares, which after hitting 205p on Monday of this week, have since fallen back with the unsettled market to the current 186p. 

I remain convinced that my price objective will be achieved, hopefully this year.

(Profile 31.10.19 @ 158.5p set a Target Price of 200p*)

(Profile 10.06.20 @ 185p set a Target Price of 235p)

Medica Group (LON:MGP) – setting a new Target Price of 138p

Although its share price is telling you something else and brokers Peel Hunt remain bearish, this market leading teleradiology services group is still attracting professional investors.

On Thursday of last week, Aberforth Partners declared that they had almost doubled their previous 5.87% holding up to 10.72%.

Then on Monday of this week those clever boys at Gresham House Strategic Equity Capital declared that they are still adding to their holding in the group – it was just 7.23% earlier this month, but it increased to 10.32% in the last week.

Medica contracts with the largest pool of consultant radiologists in the UK performing remote access teleradiology across its customer base of more than 100 NHS Trusts, private hospital groups and diagnostic imaging companies in the UK. 

This enables the company to offer a fast, responsive service both during the day and importantly supporting urgent out-of-hours reporting.

This enables the company to offer a fast, responsive service both during the day and importantly supporting urgent out-of-hours reporting.

The group is experiencing continued improvement in its second-half revenues as its clients deal with a backlog of elective procedures.

I really do consider that Aberforth and Gresham House are on to a winner with Medica Group, whose shares at 106p are back down to their late March price level.

My early January price objective was made pre-Covid-19 and the incredible pressures that the pandemic created.

Accordingly, I now set a brand-new Target Price for Medica shares of 138p within months.

(Profile 07.01.20 @155p set a Target Price of 215p)

Bloomsbury Publishing (LON:BMY) – making a very good read

It just goes to show that the market does not always get it right and so often overlooks the obvious.

Was it not obvious that if shoppers could not go out to the shops during the ‘lockdown’ then they were instead going to use their online ordering abilities? 

Suddenly digital retailing exploded. That not only went for groceries and fashion but also for buying books.

Boss Nigel Newton reported that his £185m book publishing business made a record breaking first half performance to end-August this year.

Year-on-year profits growth was up 60% to £4m and far exceeded its own management expectations.

The first half saw cash grow to a super £44.1m (£20.1m) net due to the good trading.

The group’s shares, which were down to 191p just three weeks ago, shot up in price on the ‘surprise’ interims from 210p on Monday night to 257p on the results announcement. They now rest at around the 250p level.

Analyst Malcolm Morgan at brokers Peel Hunt rates the shares as a ‘buy’ and looks for 265p.

(Profile 28.02.19 @ 231p set a Target Price of 257p*)

(Profile 27.03.19 @ 238p set a Target Price of 270p*)

And finally…

In the next week I suggest that readers look out for a number of corporate results including those from:

UP Global Sourcing (LON:UPGS) – Finals due Tuesday, now 98p. (Profile 13.07.20 @ 74.8p set a Target Price of 100p*)

Morgan Sindall (LON:MGNS) – Trading Update due out on Wednesday, now 1094p. (Profile 14.05.20 @ 1300p set a Target Price of 1600p*)

Wilmington Group (LON:WIL) – its AGM is next Wednesday, now 128p. (Profile 22.06.20 @ 143p set a Target Price of 175p)

DWF Group (LON:DWF) – a Trading Update due on Thursday, now 79p. (Profile 01.06.20 @ 67p set a Target Price of 100p)

Superdry (LON:SDRY) – its Trading Update is due next Thursday, now 166p. (Profile 21.11.19 @ 454p set a Target Price of 600p)

Wincanton (LON:WIN) – its interims are due next Thursday, now 210p. (Profile 07.05.19 @ 247p set a Target Price of 350p)

(*denotes that Target Prices have been achieved since profile.)