Small-cap round-up: featuring STM, IDOX, Severfield 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 cap stocks…

The Covid-19 Market Recovery Portfolio + 40.96%

This portfolio of ten selections made on 24 March is now up 40.96% in just under three months.

In the same timeframe the FTSE100 is up 14.94%.

STM Group (LON:STM) – definitely undervalued

This cross-border financial services provider could well see its revenues improve slightly in this current year, rising £1m to £24.3m, while pre-tax profits will ease £1.2m to £2.7m. That would be worth 3.7p per share in earnings and easily covering a 1.7p per share dividend.

For next year, estimates suggest £26.8m of revenues, pre-tax profits of 4.5m, earnings of 6.2p and a slight increase in dividend to 1.8p per share.

The AGM on Wednesday of this week saw a report that recurring revenue and a strong balance sheet gives it confidence in pursuing its growth strategy.

I now look forward to the group’s first-half trading update to end-June when it is given in late July.

In the meantime, I rate these shares at 29p, as being undervalued and very capable of hitting my objective.

Profile 27.05.20 @ 33.7p set an end-2020 Target Price of 50p.

IDOX (LON:IDOX) – Peel Hunt looking for at least another 15% move higher

At the half-way stage this information management solutions group turned a pre-tax loss of £2.6m in 2019 to a £0.3m pre-tax profit.

The revenue for the six months to end-April 2020 was up 13% at £35.1m. The net debt at the year-end was down significantly from £26.4m to just £14.3m.

CEO David Meaden reported that the company was confident in the current outlook despite economic and Covid-19 hassles.

Peel Hunt, its broker, rates the shares as a ‘buy’, looking for 53p.

They close the week at around the 45p level, my objective looks easily achievable.

Profile 30.04.20 @ 38.5p set an end-2020 Target Price of 50p.

Circassia Group (LON:CIR) – let us wait to see

The company’s broker finnCap reckons that this pharma group’s 2019 results are largely irrelevant, especially as it had transferred its COPD assets back to AstraZeneca.

That leaves the company with its NIOX asthma diagnostic business as its generator of future profits.

The broker states that if it can return to its pre-Covid-19 levels then the group could justify a price range of between 25p to 60p in due course.

At the current 25.5p its shares could offer some upside from here. However, we will have to wait until the first-half figures and report in October to find out whether my objective term will need to be stretched to end-2021.

Profile 23.01.20 @ 25p set an end-2020 Target Price of 40p.

Severfield (LON:SFR) – holding steady before edging higher

This structural steel group issued its end-March 2020 finals on Wednesday. They showed revenues up from £274.9m to £327.4m, with pre-tax profits slightly better at £25.8m against £24.7m previously. Earnings per share were unchanged at 6.7p. Net cash was down from £25.2m to £16.4m.

Analysts at Progressive Research consider that these were strong results showing minimal impact from Covid-19. They look for the group to benefit from major opportunities in the second half of this current year.

The company should be holding its AGM in September, but, hopefully, before that it may well announce just how well it has been progressing in the meantime.

After peaking at 93p in late February this year, the shares fell to a 60p low in late March, they are now 72.25p and looking steady at that price but should be heading higher again soon.

I understand that brokers Peel Hunt have just upped their price target on the shares from 70p to 100p.

Profile 12.09.19 @ 62p set an end-2020 Target Price of 88p *.

Renold (LON:RNO) – trussed up and ready to be unlocked

Frankly, the performance of this industrial chain and power transmission group has been pathetic.

Obviously, various factors have impacted its progress, not least with Covid-19.

The finals to end-March 2020 showed revenue down £10.2m to £189.4m, while its pre-tax profit was more than halved from £10.4m to £4.9m.

The course of its shares over the last year has been downward since my profile. I am disappointed, but would I buy these shares at the current 12.5p? Probably not until I see some blue-sky proof from the company.

Profile 04.06.19 @ 30p set an end-2020 Target Price of 60p.

Epwin Group (LON:EPWN) – shares ready to build up again in price

The AGM update declared that this low maintenance building products group is seeing a return of demand, now that more of its manufacturing and distribution sites are operating again.

However, the virus has given it a big hit sideways and the group has, accordingly, withdrawn all sales and profit guidance for this year.

Perhaps we will get some overall indications when it announces its interims in September.

From its peak at 113.5p in mid-February this year, its shares have since been down to a 58p low, before subsequently recovering to the current 70.5p.

So, they have already beaten my profile objective of 100p. The question is will they reach that level again this year? September will give us a big clue.

Profile 22.08.19 @ 73.5p set an end-2020 Target Price of 100p *.

Surface Transforms (LON:SCE) – no braking yet

The results for this carbon fibre reinforced ceramic materials company to end-December 2019 will be announced next Monday.

It will give its interim to end-June pre-close Trading Update on 20 July and then hold its 2019 AGM four days later.

So, there will be a welter of news from this innovative group.

Investment in this company must be viewed as a long haul, but one which I am convinced will pay off in due course and at prices far higher than my aim.

The shares close the week at around the 23p level, after having hit 28p in late February this year.

Profile 19.09.19 @ 17p set an end-2020 Target Price of 30p.

And finally…

Springfield Properties (LON:SPR) – a wee bargain?

His name may not mean anything to market newcomers but those that know a thing or two will certainly recognise that of Angus Grossart.

The 83-year-old Scots businessman, Sir Angus McFarlane McLeod Grossart CBE, QC, is Chairman of Noble Grossart, the Edinburgh based merchant bank.

In his day he was a director of several top companies, with names such as Trinity Mirror, Scottish & Newcastle and NatWest amongst them.

Grossart last Friday acquired 1.06m shares in the Scottish housebuilding group, paying 94.5p a share for his 2.41% stake in the company. He acquired them from one of the trusts of the Chairman and largest shareholder Sandy Adam, who at the same time transferred 2.56m shares to members of his family. He retains a 41.9% stake in his group.

The shares, which fell to a 60p low in late March, close the week at around 96p, at which level they appear to me to be well undervalued and present a bargain.

Profile 05.3.19 @ 114p with no set Target Price.

(* denotes that Target Prices have previously been achieved.)