Small cap round up: featuring Solid State, Loungers, Codemasters and more

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Small cap round up: featuring Solid State, Loungers, Codemasters and more
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Master Investor Magazine Issue 57

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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…

Solid State (LON:SOLI) – very solid growth

The 43% increase in first-half revenue to £33.6m helped pre-tax profits leap 61% to £2.67m. with for the six months to end-September earnings were up 64% at 27.8p per share, while the dividend increased just 25%.

There are very good prospects for this manufacturer of computing, power and communication products as it increases both its organic and its acquired growth.

The shares close the week looking very good at 553p – my profile 15.08.19 @ 404p set an end-2020 target price @ 546p – already scored in just four months. The shares are heading even higher, it appears.

Norcros (LON:NXR) – looking to outperform its competition

In this second half of the current financial year I am looking for this building products company to benefit from the balance of its various parts.

It had a good double-digit advance in its first half but since then some of the group’s markets have gone softer. However, the other sides are going well and thus make up the difference.

Analyst Toby Thorington at Edison Research is bullish and reckons that the group is targeting above-market growth. He states that he believes the company is aiming to outperform its markets rather than wait for an upturn to occur.

Brokers Jefferies International rate the shares as a ‘buy’ while raising its sights from 258p to 337p. While Deutsche Bank initiate their coverage of the group with a ‘buy’ up to 340p.

The shares ended the week at 292.5p – my profile 30.05.19 @ 286p set an end-2020 target @ 350p.

Bloomsbury Publishing (LON:BMY) – far flung expansion

In early October the shares of my favourite publishing house were trading at just 232p. Having peaked two months later at 283p, they have since eased back, ending the week at 267p.

Earlier in the week the company announced an important international move in signing a joint venture agreement with a Chinese state-owned publisher. The new Beijing based JV will sign up new authors as well as licensing titles from Bloomsbury and other global houses.

My profile 28.02.19 @ 231p set a target price of 257p – now they appear to have 300p written all over them.

Ramsdens (LON:RFX) – far too early to redeem

For the half-year to end-September the pawn broker reported pre-tax profits were up 23% at £6.2m on the back of a 30% rise in revenue to £32.5m. Earnings were up 22% at 15.9p, while the dividend was just 13% better at 2.4p per share.

The diversified financial services provider and retailer has already had a good start to the second half so the company is confident of meeting expectations.

Closing up 6p on the week at 217p, the shares look inexpensive and capable of a much higher price. My profile 07.11.19 @ 204p set an end-2020 target price of 250p.

The Vitec Group (LON:VTC) – strong 2020

Despite last week’s slightly disappointing trading update analyst Tom Fraine at brokers Shore Capital still reckons the shares of this camera imaging equipment specialist are a ‘buy’.

Due to its dominant position in the photographic and videographic equipment markets he states that the company could gain from its economies of scale, its product research and development facilities, lower production cost and its distribution network.

Master Investor Magazine

Master Investor Magazine Issue 57

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The group is looking for a strong year for 2020 due to anticipated demand emanating from the Olympics and the US Presidential Elections.

The shares at 1,075p are still way below my prices but I remain very hopeful – my profile 02.07.19 @ 1,150p set a target price of 1,600p.

Joules Group (LON:JOUL) – against the tide

The pre-close trading update from this premium British lifestyle brand for the first-half to end-October impressively declares that the group, despite the appalling retail environment, is still growing. It robustly showed a 1.3% advance of the previous year’s first half.

Helped by strong e-commerce support its brand awareness remained very high with its customers even though it was retailing in difficult markets.

However, the group is confident as it runs up to the important Christmas trading period.

The interim results will be announced on 21 January.

My profile 19.03.19 @ 282p set an end 2020 target price of 387p.

To date the group’s shares, currently 219p, have been a poor performer but I remain hopeful that they will recover enough to regain my entry price and then go better after that.

Codemasters (LON:CDM) – playing very well

Last week’s acquisition of the rival video games developer Slightly Mad Studios has gone down well with investors.

The group’s shares were down to 206.5p in the middle of last week. They close this week at 236p after touching 246p last Tuesday.

That was a very positive response to a very sensible and strategic acquisition and £20m institutional investor placing to help fund the first stage of the deal.

Analyst Katie Cousins at Shore Capital rates the shares as a ‘buy’ as the group takes benefit from both operational and financial opportunities that will ensue.

I really do like the style of this group and, as it pulls off similar deals to this one, I remain convinced that its shares are going a great deal higher.

My profile 25.06.19 @ 225p set an early stage target price of 278p and 350p before the end of next year.

Loungers (LON:LGRS) – cheers!

This group now operates 161 café/bar/restaurants across England and Wales. Its two distinctive brand names are Lounge, which has 133 sites, and Cosy Club, with 28 sites.

The 24 weeks to 6 October showed a 22% increase in revenue to £79.8m and an adjusted pre-tax profit of £2.6m, which compares very well with the corresponding period’s loss of £4.3m.

The group is set upon opening 25 new sites in total for the current year – with 10 expected in this second half taking that total up to 171.

Optimistic or not – who knows – however, the management expect to achieve their aim of having 500 sites – 400 Lounges and 100 Cosy Clubs across the UK over the next few years.

My Profile 03.09.19 @ 205p set a target price for end-2020 of 275p.

Closing the week at 210p, up from 188p in the middle of last week, shows that the market also appears as bullish as myself.

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