Small-cap round-up: featuring RBG Holdings, Brickability, discoverIE 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 caps.

RBG Holdings (LON:RBGP) – beginning to implement its growth strategy

Yesterday morning Nicola Foulston, CEO, announced a more than satisfactory set of results for the year to end-December. Against the backdrop of Covid-19, the legal services group increased revenues to £25.6m (£23.7m) and generated adjusted pre-tax profits of £7.7m (£7.6m). It ended the year with £3.5m cash in the bank (£1.9m).

The group’s growth strategy saw a mega-boost yesterday with the news that it is taking over Memery Crystal, another leading legal services group, in a £30m deal, satisfied part cash, part shares.

This looks to me to be a cracking acquisition as Foulston builds up her group, while it also offers significant cross-selling opportunities.

Current year estimates by analyst James Bayliss at house broker N+1 Singer suggest £30.3m of revenues and £8.2m of adjusted pre-tax profits, then on to 2022 he goes for £32.5m and £9.5m respectively.

Andrew Simms at Arden Partners is bullish about the company and rates the shares as a ‘buy’ looking for 145p.

They closed last night up 7.5% on the day at 129p. A firm hold.

(Profile 05.02.21 @ 80p set a Target Price of 100p*)

Brickability Group (LON:BRCK) – brick by brick it is building up

This construction materials group issued its pre-close trading update yesterday for the year to end-March.

Revenues are seen at £180m (£187.1m) and pre-tax profits at £15m (£15.7m), earnings being estimated at 5.3p (5.5p) per share.

For the current year Kevin Cammack at the company’s broker Cenkos Securities reckons that £212m sales and £17.8m of profits, giving 6.2p of earnings, is possible. The house rates the shares as a ‘buy’.

They closed up 4% on the day at around 90p. Hold tight.

(Profile 16.04.20 @ 39p set a Target Price of 55p*)

discoverIE Group (LON:DSCV) – broker ups price target to 833p

The full-year trading update from this customised electronic products designer, maker and supplier, showed that it continued to strengthen by its close, with expectations needing to be lifted by the market.

Guy Hewett at house broker finnCap is looking for £452.4m of sales (£466.4m) and pre-tax profits of £34.2m (£37.1m), giving earnings of 24.9p per share against 30.2p previously.

However, he sees a bounce this year and next in going for £477.4m then £493.3m in sales, £33.6m then £35.8m in profits, with earnings per share of 27.6p then 29.4p respectively.

The brokers have upped their price objective from 712p to 833p.

The shares closed last night at 798p, up 7% on the day.

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

Hargreaves Services (LON:HSP) – now looking in much better shape

The shares of this support services group closed almost 7% better last night at 331.5p, after issuing a trading update reflecting improved results from its German joint venture, as well as boosted cash to close the year in the black.

This unexpected update was a positive surprise. The year ends on 31^st May, so it proves the market standard that says that good news always comes faster than bad.

2020 was not an easy year for the group and it has done some necessary reshuffling on the corporate front.

Analyst James Tetley at house broker N+1 Singer forecasts that the current year to end-May will see £191m sales (£222.2m) but adjusted pre-tax profits could come in at £9.9m (£4.9m), jacking earnings up to 27.5p against 19.5p per share previously. He also sees a massive uplift in the dividend from 4.5p to 20p per share.

Reflecting the sell-off of various parts of the business he goes for sales next year of £175m, with £11.9m profits, 32.4p of earnings and a 20.5p dividend per share.

Those estimates support the upward share price move – I think they will go even higher yet.

(Profile 29.12.20 @ 263p set a Target Price of 325p*)

Some quick asides… BMS, DX. BWNG and TLY

I gather that there has been some ‘nosey’ buying of Braemar Shipping Services (LON:BMS) shares in the last week or so, helping to push the price up from 207p to a recent high of 230p. The group should announce its finals in early June. The shares, which peaked at 258p early last month, are now 226.5p. The house broker finnCap has a 281p price objective. (05.12.19 @ 185p TP 250p*) (20.05.20 @ 99p TP 150p*)

Now really looking to motor ahead could be a good description of DX (Group) (LON:DX.). Yesterday the parcels and freight delivery group noted that it had boosted its delivery fleet by another 300 vehicles, taking it up to over 900. Now you don’t order that many if you don’t have the business – which I am convinced that it will do in the near term. The group’s shares at 31.75p, up 5% yesterday, could soon break above their 38p peak that was scored in late January this year. (20.02.20 @ 12.5p TP 15p*)

With its trading update for the year to end-February due shortly, could now be the right time to top up holdings in clothing and footwear digital retail group N Brown Group (LON:BWNG). In mid-January it reported that it was suffering from some supply shipment delays of two to three weeks. Will the now cash-strong group rule a line under the 2020 figures and look positively towards the current year trading? 

Methinks that it possibly could do so, which would help the shares, now 65.5p, get back over the 81.6p recorded in late January. A fair gamble? (06.07.20 @ 36.15p TP 50p*)

Last week’s trading update from healthcare services provider Totally (LON:TLY) has been very well received, understandably. Chairman Bob Holt never overplays his hand, he always overdelivers against expectations. He could well be showing another good set of figures for the group’s year to end-March. The update inferred as much but without giving any guidance on numbers, apart from stating that the previous £4m EBITDA figure for the end-March 2020 year will be ‘substantially ahead’ of expectations. Now boasting some £92.5m of contracts, the group goes forward into the current year against a backdrop of significant NHS waiting lists – which should be very good news for the company. The shares, which touched 43.5p on the news, have since eased back to 40.5p at which level I would not be a seller. (12.03.20 @ 12p TP 18p*)

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

Profile company results, meetings and updates expected within the next two weeks: