Small-cap round-up: featuring Petra Diamonds, Iofina, Rosslyn Data and more

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Small-cap round-up: featuring Petra Diamonds, Iofina, Rosslyn Data 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…

Petra Diamonds (LON:PDL) – Blue gems anyone?

This stock has been my 2020 howler.

I profiled the company at 9p in late January and saw the shares rise over 30% within days, capping out at 12p, which was my price objective.

However, less than two months later they collapsed to 1p in the virus crash.

Diamond buyers suddenly became sparse and so too did the workers at its closed mines.

The pressures of handling the group’s massive borrowings were monumental.

Subsequently the shares recovered 75% from their 1p low, before a bit of leaky news burst into the market earlier this week sufficient to accelerate them up to 2.35p.

The bit of sparkling news was that the company had recovered five high quality blue diamonds at its world-famous Cullinan mine in South Africa.

Does your better half deserve a reward? The stones range in size from 9.61 carats to 25.75 carats.

Petra Diamonds

This is a significant find, the previous similar one being in September last year. That was a magnificent 20.08 carat blue diamond that was subsequently sold for $14.9m to an anonymous buyer in November 2019. The price was close to $740,000 a carat.

The Cullinan is the world’s most important source of these exceptionally rare blue diamonds. It is considered to be very unusual to recover five high quality stones around the same time, all in the space of one week’s production.

No values were given by the company in its announcement, which came out ninety minutes after the price started to rise.

Unfortunately, these finds, whilst still very positive, will have little impact upon the group’s refinancing hassles.

Hopefully, we will learn more come Tuesday 17 November when the group will be announcing its final results to end-June. Its AGM is planned for a month after that date.

The shares, which are now back to rest at about 1.9p, could well edge higher over the intervening weeks to mid-November.

(Profile 21.01.20 @ 9p set a Target Price of 12p*)

Iofina (LON:IOF) – Debt refinancing closed?

Is it possible that when this iodine specialist group announces its interims to end-June, possibly this coming week, that we might also see a conclusion to its refinancing issues?

The group’s shares dipped to 12.5p earlier this week, before picking up to close the week at around the 14p mark.

A month ago, the group informed its shareholders that it had been making progress in its discussions with a new US-based lender to replace its existing $15.45m loan.

Get that out of the way and then the group can concentrate upon its growth potential.

The company’s brokers are looking for $33m revenue for 2020, and a quadrupling of pre-tax profits to $4.4m, worth 2.3c in earnings per share. Next year $37m of turnover and $6.1m pre-tax would generate 3.2c per share in earnings.

Corporate broker finnCap is forecasting 32p for the shares. However, for now I am happy with my price objective.

(Profile 29.07.20 @ 13.5p set a Target Price of 18p.)

Rosslyn Data Technologies (LON:RDT) – Ready to capitalise upon its 84% recurring revenue

We cannot be more than a few days away from this £19m cloud-based big data analytics platform provider announcing its results for the year to end-April.

It very sensibly raised £7.3m new money in early May, through a placing of 146m new shares @ 5p each.

That funding was transacted at a 22% premium to its market price and significantly jacked up its equity, representing some 70% of its pre-raise capital. The issue was oversubscribed.

Research house Equity Development currently has projections for the group’s turnover to rise 7.5% this year to end-April 2021 to £7.63m, upon which it sees an adjusted pre-tax loss of £1.3m.

The next year to end-April 2022 £8.73m of revenues could help losses to reduce to £0.9m.

For the 2023 year a £9.98m revenue would slash those losses to a mere £48,000.

This loss-making company really is on the cusp of breaking into profit. Remember it has a very healthy 84% annual recurring revenue, so the current-year update could indicate positivity.

Also don’t forget that the group has over £13m in tax losses available to use as it expands.

Its shares are currently trading at around the 5.6p level. However, I do feel confident that my price objective will be achieved.

(Profile 12.08.20 @ 5.75p set a Target Price of 7.5p.)

Augean Group (LON:AUG) – Hoping for positive interims

Next Monday (21st) sees this leading specialist waste management group declare its half-year results to end-June.

They should be encouraging and hopefully with its final year prospects spelled out clearly enough to help push its shares, now 179p, over the 200p barrier almost penetrated in early August.

Having been 225p in January, the shares, in my opinion, should be trading at around that figure right now.

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

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

N Brown Group (LON:BWNG) – Transformation will bring fresh followers

Early next month this Manchester-based retail group, which employs over 2,000 people, will be publishing its half-year figures. The company did very well during the ‘lockdown’, seeing its online sales explode.

Remember that Schroders have been increasing their shareholdings in the company over the last few months and come the second week of October we will, possibly, see their faith in the shares being rewarded. Their stake was almost doubled to 10.075% in August.

The Top 10 UK clothing and footwear digital retailer specialises in the underserved customer groups, like large and old. It also has a useful financial services side that helps customers to spread the cost of their purchases.

The group’s shares have been a better market over the last few days, closing the week at 55p. As the company progresses upon its transformational path from traditional to digital retailing, I expect investors to become more aware of its progress.

In this current year to end-February 2021, we could see £715m of sales help to kick in £33.5m pre-tax profits, producing 9p in earnings per share. That puts the shares out now on just 6.1 times earnings, which in my view is very cheap. These shares have a lot further to climb.

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

And finally… ‘On the move’

Braemar Shipping Services (LON:BMS) – Despite recent upward move still looking inexpensive

We are about a month away from this marine services group announcing its interim results for the six months to end August.

The shares, now at 143p, have been moving up in the last week or so from the 133p level earlier this month. I continue to rate these shares as undervalued.

They are very capable of getting back up to the 175p level last seen in late February this year.

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


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