Small-Cap Round-Up featuring STM Group, RA International, Inland Homes, Studio Retail, Surface Transforms and One Media

5 mins. to read
Small-Cap Round-Up featuring STM Group, RA International, Inland Homes, Studio Retail, Surface Transforms and One Media

STM Group (LON:STM) – looking for an early 47% price increase

This cross-border financial services provider two weeks ago announced the £2.9m acquisition of two inter-related businesses in the UK and international pensions sector.

The group, which has operations in the UK, Gibraltar, Malta, Jersey and Spain, specialises in the administration of client assets in relation to retirement, estate and succession planning and wealth structuring.

I am looking forward to some bullish comments from the company on Tuesday 8 September when it declares its interims to end June.
Brokers finnCap are estimating that although sales will rise just £1m to £24.3m for the full year, its pre-tax profits will ease by £1.2m to £2.7m, worth 3.7p in earnings but amply covering a 1.7p dividend per share.

Next year is expected to see a £4.4m increase in revenues to £28.8m, with pre-tax profits rising nearly 78% to £4.8m, worth an impressive 6.6p per share in earnings.

At the current 34p these shares are looking undervalued, trading on 9 times earnings and a handsome 5% yield.
I feel very confident about my share price objective.

(Profile 27.05.20 @ 33.7p set a Target Price of 50p)

RA International (LON:RAI) – order books up and still buying its own shares

Less than two weeks ago this provider of services to remote locations in Africa and the Middle East announced a $60m contract with a global engineering and construction group for a project in Southern Africa. That took its order book up to an impressive $188m.

Then at the end of last week the company declared that it had been appointed as the preferred contractor to Danakali and its partners on a $20m plus contract in Eritrea, in East Africa.

The company is still buying in its own shares, the last purchase was of 800,000 shares at 56.1p each, taking its treasury holding up to 2.62m, representing some 1.53% of its own equity.

The shares closed last night at 57.25p.

(Profile 26.03.20 @ 37p set a Target Price of 50p*)

Inland Homes (LON:INL) – here we go again

The ambition of bosses Stephen Wickes and Nish Malde, apparently, knows no bounds. Just one week ago the duo announced that their property development group is getting involved in what could be one of the largest ‘brownfield’ sites in London.

In August next year the participants in this £600m mixed-use development project could be taking vacant possession from the MOD of the 36.7 acre Cavalry Barracks in Hounslow to the west of London.

Planning permissions will be sought early next year for a 1,000-home development on the site.

The property developing duo have a strong history of working on such schemes, in fact it is the fifth MOD transaction by them at Inland.
This is a ‘big boy’ of a development and one that could well yield to Inland Homes a significant profit – so watch this space.

I remain a massive fan of Wickes and Malde, both of whom I have known and followed for two decades. The group’s shares at 53p could well be ready to start climbing back up to the 95p high level of earlier this year.

(Profile 13.08.19 @ 68p set a Target Price of 110p)

(Profile 24.10.19 @ 77p set a Target Price of 110p)

Studio Retail (LON:STU) – almost a half century, now on the cusp?

On Monday the online value retail and education group announced its finals to end March.

Group revenue was up 2.2% at £515m, while its adjusted pre-tax profit was up 8.6% at £31.2m.

However, those figures were pre-Covid19 and also while still awaiting clearance from the Competition and Markets Authority over the group’s £50m sale of its education business.

Just looking at its Studio online retail business makes that disposal decision look very sensible.

The pandemic lockdown was great business for its online activity. Its “trading performance in the first 20 weeks of the new financial year has been exceptional, with product sales up 42% on prior year and financial services revenue, which inherently lags behind product sales growth, up 6.4%. The business passed the milestone of having over 2m active customers in June, which positions the business ideally as it heads into its traditional peak trading period up to Christmas.”

Phil Maudsley, the CEO, stated that “whilst it is too early to restore detailed guidance for FY21, we continue to believe that Studio’s recent performance provides the basis for sustainable medium-term profit growth.

Studio is becoming a leading digital value retailer with a broad product offer of clothing and footwear, alongside home and electrical products, plus the more seasonal ranges, many of which can be personalised for free.  Over 90% of its sales are generated online.
Having followed this group, on and off, for nearly fifty years from its greetings cards origins, I now have a sneaking feeling that it is beginning to come right.

Getting the Findel education sale cleared and completed will enable it to concentrate upon the true area of sales and future profitability, which is the Studio side.

The group’s shares at 223p are now a lot higher than the 140p hit at the end of March.

(Profile 04.07.19 @ 253p set a Target Price of 375p)

Surface Transforms (LON:SCE) – brakes off?

This little group manufactures carbon fibre reinforced ceramic materials, such as advanced brake discs for high performance cars.
In the next month the company will be announcing its interim results to end June. At the end of last month its Trading Update indicated that revenues were up 55% to £902,000.

Brokers Zeus Capital are estimating a turnover of £1.6m for this year, jumping up to £4m next year and £5.7m for 2022.
In that same period Zeus suggest that this year’s loss of £2.2m will be bettered to just a £1m loss next year and then bounce to a small £109,000 profit for 2022.

Zeus, which is the group’s NOMAD, states that its analysis of its earnings sensitivity indicates significant upside potential. Looking further out, carbon ceramic discs are particularly well suited to electric vehicles. The broker is putting out a 40p valuation on the shares, which are currently 27p.

(Profile 19.09.19 @ 17p set a Target Price of 30p)

And finally ……

One Media IP (LON:OMIP) – good names aboard

After the mid-month £6m fund-raising by this digital music rights group, I note that Canaccord Genuity have increased their stake to 28.69m shares (18.21%).

Also spending more to build up its holding in the group was Gresham House Asset Management, almost doubling its stake to 10.32m shares (6.62%).

The group’s shares are currently trading at 7.05p each, the merest fraction above the oversubscribed 7p Placing price.

(Profile 21.02.19 @ 5.75p set a Target Price of 10p)

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