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…
The 24.03.20 CV19 Market Recovery Portfolio + 30.57%
This portfolio of 10 stocks continues to show well over just three weeks.
RA International Group – the orders keep coming
Friday morning’s announcement from this leading provider of services to remote and challenging locations around the world was very encouraging.
They showed revenue up 26% from $54.8m to $69.1m, with pre-tax profits for the year to end December 2019 showing well up from $9.83m to $13.26m.
Earnings came out at 7.4 cents (6.3p), while a 25% increase in the dividend has been recommended to 1.25p (sterling).
Already in Q1 this year it has shown $17.9m of revenue, while its order book at the end of March was an excellent $138.8m. It has since then won a $15.6m order to add to that book figure.
The company’s balance sheet is looking strong enough to counter any disruption due to the Covid-19 impact. However, it has had some contract delays due to the virus, which will reduce current year results.
Soraya Narfeldt, CEO, declared “we believe that as a provider of critical services, when COVID-19 is contained or possibly sooner, we will return to work as normal, executing against our order book and continuing to bid for new projects. Given our wealth of experience in planning for and operating through crisis situations we are uniquely placed to assist our clients in managing the impact of the ongoing pandemic.”
That is good enough for me – I remain convinced that this group’s shares are wrongly priced and destined to climb higher than the current 37.4p.
Profile 26.03.20 @ 37p set an end-2020 Target Price of 50p.
Costain Group (LON:COST) – light at the end of the tunnel?
Just a few weeks ago it looked as though this infrastructure solutions group was on its way out.
Its shares were down to 33p, well down on the 206p peaked in February.
On 11 March the group announced a £100m capital raising had been fully underwritten by HSBC, Investec and Liberum on a standby basis.
This time last week its shares were looking a little better at 41.5p.
By Tuesday of this week they had moved convincingly better, closing at 55p.
But the news on Wednesday morning was the reason for such sudden strength.
It announced that its joint venture company Skanska Costain Strabag had been granted notice to proceed with its full detailed design and construction phase for HS2!
Well, that saw the shares almost double to close at 91p. On Thursday they succumbed to a spot of profit-taking, closing at 83p.
A very healthy performance over the week.
On Friday morning, Highways England handed Costain a £210m design and build contract to upgrade part of the A30 that runs to the north of Truro in Cornwall.
Let us hope that the good news keeps on rolling in because the shares, ending the week at around the 83p level, certainly need some stoking to get them back up to their end-February High.
Profile 05.09.19 @ 151p set an end-2020 Target Price of 250p.
Carrs Group (LON:CARR) – little bug impact
This engineering equipment and agricultural feeds group could well see a 7.5% drop in sales for the year to end August 2020 at £370m, while pre-tax profits could ease £3.7m to £15.2m.
That would see earnings coming out at around 11.7p per share.
Those estimates were provided by Edison Research following the group announcing its resilient Interims and Covid-19 Update on Wednesday.
Both of the group’s divisions appear to be not too bothered by the virus, while net debt looks manageable at just 22% gearing.
Its shares were just 95p a week ago, bounced up to 108p by early Thursday morning and then closed that night at a much stronger 129p.
They close the week at around 130p having put on a quite confident performance over the last few days.
Profile 11.07.19 @ 153p set an end-2020 Target Price of 200p.
Surface Transforms (LON:SCE) – cash buys safety for brakes
The recent placing to raise £1.4m, together with an open offer to shareholders for another £0.3m, should give this manufacturer of carbon reinforced ceramic materials a bit of a buffer against the impact of Covid-19.
There are a lot of orders, hopefully, in the pipeline, giving investors some prospect of seeing returns in the next few years.
The company’s brokers, finnCap, reckon that if the group’s Knowsley factory reaches capacity, producing some 100,000 discs per annum, it could be pumping up revenue at £50m, producing a gross of £30m and EBIT of £25m.
That is some years off, but it still shows the tremendous possibilities that SCE could offer investors.
The funding was at 13p a share, a 16% discount to the pre-funding price of 15.5p.
They close the week at around the funding price, which could well offer some good gambling upside potential.
Profile 19.09.19 @ 17p set an end-2020 Target Price of 30p.
And finally… Look who is buying!
M P Evans (LON:MPE) – the buy orders are still out there
Way back in October 2018 this palm oil group took the view that its share price substantially undervalued its assets, relevant to the performance of the business to date and its prospects.
The group’s robust balance sheet provided the opportunity to take advantage of the then prevailing market conditions to repurchase shares at advantageous levels that would be earnings enhancing.
The decision was to spend £1m of its cash on hand in such a share buyback programme. However, that was extended by a further £2m in December 2018.
By end-June 2019 the group had purchased a total of 213,939 of its own shares at an average price of 686p, at a cost of £1.47m – leaving £1.53m left in the £3m budget.
Well that buyback programme is continuing apace. They have not stopped buying more shares and then cancelling them. Within the last couple of weeks alone the group has acquired 22,085 shares @ an average 570.26p per share.
There are many market observers and ‘experts’ who decry the share buyback exercise taken up by many companies.
Some, admittedly, are initiated by boards with ulterior motives – especially those where the top executives are on handsome share option schemes based upon just earnings per share.
But on looking at this palm oil group I assess that its reasons are balanced out by the knowledge that big revenues and profits will be evident within the next couple of years or so and they have already spent good lines of capital upon their crops and processing.
They already pay out an uncovered dividend, which is a massive pointer of good times to come.
My profile was headlined ‘ready for a big leap forward’. That is so true. Remember that its own brokers are very bullish, looking for the shares to hit 1000p each. They close the week at 575p, very appealing.
- Just as I finish writing this article, I note that the company yesterday bought another 5,483 shares @ 585p each.
Profile 07.04.20 @ 540p set an end-2020 Target Price of 700p.
Tremor International (LON:TRMR) – flush with cash
As part of its strategy to deliver shareholder value, at the end of March this global leader in video advertising technologies commenced a share buyback programme.
It is massively flush – boasting some $76.9m net cash. So, to seek and win authority to spend just $10m of that on buybacks seems extremely sensible.
However, these shares will not be cancelled but under Israeli Companies Law will be considered as dormant shares and will be held in ‘treasury’.
In just 7 days of buying the Israel based group has spent £379,513 on buying in 274,755 shares at an average of 138.13p per share.
I think that these purchases make a lot of sense, especially in these markets and considering how much cash it has in its coffers – a good use of money.
The shares close the week at around 145p. They were just over 222p two months ago and are destined, in my view, to be well over that price before the year is out.
Profile 16.01.20 @ 156p set an end-2020 Target Price of 235p.