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…
Robinson (LON:RBN) – more than doubled in just over two months
The food, household, drink, confectionery, cosmetic and toiletry sectors are supplied by this packaging group.
It has been hit by Covid-19, but it has managed to actually keep its manufacturing operations running safely during the period.
The epidemic has created some challenges and opportunities; however, net sales in the first half year are up.
Chairman Alan Raleigh at last Tuesday’s Chesterfield AGM informed shareholders that, “Whilst the outlook for the year remains uncertain, we are confident the business can prosper, and we continue to explore and develop the opportunities that will emerge.”
However, I was disappointed to see that progress in selling the group’s surplus properties was due to the inability for site inspections etc, which has delayed disposal timescales by some six months.
Even so, the group is enjoying greater clarity of its earnings, certainly enough to actually reinstate its final dividend for last year, while declaring an interim dividend for the current year of 3.5p per share, which is the equivalent of that paid for the whole 2018 year.
Brokers finnCap are estimating that the year to end-December 2020 will see an increase in sales to £37.2m and pre-tax profits similar to last year of £2.3m. That will put earnings out at 11.2p per share, double covering a 5.5p per share dividend.
They are estimating a 130p share price, compared to the current 106.5p, which has doubled since I profiled the company just two months ago.
Still more to go for and looking undervalued.
Profile 02.04.20 @ 55.5p set an end-2020 Target Price of 80p*.
DX (Group) (LON:DX.) – brokers have set a 30p objective price
In a 39-page ‘rebuilding profitability’ research note, brokers Liberum Capital have become very bullish of the prospects for this delivery group – they are forecasting a price rise to 30p, compared to the current 14.75p.
As I have previously mentioned, the directors have been recent buyers – it always pays to follow closely the dealings of the insiders.
Yesterday’s trading volume was just over 2m shares and that was more than five times the daily average.
This group, which is a leading provider of delivery solutions, including parcel freight, secure, courier and logistic services, is classed as an essential provider.
We should be getting a pre-close Trading Statement later this month, its year end was 27 June.
Chairman Ronald Series has stated that, “We remain well-positioned to deliver further recovery in volumes and will continue to control costs carefully.”
Although they have been down to as low as 6.3p since I profiled the company five months ago, this week the shares have hit my target price. And they are obviously still on their way up – especially if you take on board the bullishness of Liberum Capital.
Profile 20.02.20 @ 12.5p set an end-2020 Target Price of 15p*.
Augean (LON:AUG) – some pre-corporate news ‘nosey buying’?
I was disappointed not to have seen this leading UK specialist in waste management giving a clear statement at its mid-June AGM.
However, after touching 195p a few weeks ago, the group’s shares have since been down to 178p by the end of June.
But I did notice that they have crept better over the last few days, currently 185p.
Could that rise be a reaction to interest before a first-half update on trading to end June, to be announced shortly?
Some 631,000 shares were traded yesterday, three times the daily average volume.
Is it ‘nosey buying’?
Methinks yes, it certainly is – this company is so undervalued, and it is at times like the Covid-19 crisis that you suddenly realise how much waste there is everywhere.
Admittedly these guys are the ‘difficult waste’ specialists but even so it still has to be shifted and coped with somehow.
The HMRC landfill tax dispute does look as though it may well see the group getting a clearance and a return of payment soon.
This is a classic defensive business and its shares, trading on just 10 times earnings, are cheaply rated, very easily capable of at least a 25% gain short-term.
Profile 31.10.19 @ 158.5p set an end-2020 Target Price of 200p *.
Profile 10.06.20 @ 185p set a Target Price of 235p.
Solid State (LON:SOLI) – great results and hopefully more to come
The results for the year to end-March 2020 from this manufacturer of computing, power and communications products were impressive.
They showed a 19.7% increase in sales to £67.4m, while adjusted pre-tax profits were 34.3% higher. Earnings were 29% better at 46.3p per share, while the 12.5p dividend was unchanged.
We will have to wait for some current-year trading update news, perhaps at the September AGM. In the meantime, profits guidance has been suspended.
Even so, the shares have reacted well to this week’s results and yesterday were back up at 546p again – spot on my price objective set ten months ago, but they did hit 685p a share way back in January this year.
I think that they are heading back up there again, so hold very tight.
Profile 15.08.19 @ 404p set an end-2020 Target Price of 546p*.
Premier Foods (LON:PFD) – broker ups target from 80p to 100p
I gather that Jefferies International have upped their price objective from 80p to 100p a share, quite a significant upwards re-rating.
They are not late to the party – there is still plenty of time to jump aboard the shares of this foods group as they progress higher.
I was late in profiling the company, but I am glad that I did so earlier this week.
On Monday I detailed my thinking on the company, suggesting that at the then 67.5p a share they were heading at least 50% higher.
We shall just have to wait and see. They close the week at 73.9p.
Profile 29.06.20 @ 67.5p set a Target Price of 101p.
Avon Rubber (LON:AVON) – selling off the milkrite side for £180m
Wow – I didn’t expect that news but my goodness it does make a lot of sense.
Now that the group’s management has received an offer at close to its own valuation of its milkrite/InterPuls milking point business Avon has accepted an offer of £180m on a cash and debt free basis.
That will leave Avon Rubber (please change the name) solely focused upon its protection business, where it is an international sector leader.
Jefferies International reckon that the group’s shares are worth 3530p each, against the current 3405p, which is now twice my October 2019 1700p profile price.
A name-change to represent its true business and, perhaps even a share split (when did you last see one of those?) will help to push the group’s value considerably higher.
Profile 03.10.19 @1700p set an end-2020 Target Price of 2250p *.
(* denotes that my Target Prices have been attained.)