Small cap round up featuring: Sureserve, Inland Homes, Medica and more…

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Small cap round up featuring: Sureserve, Inland Homes, Medica and more…
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Master Investor Magazine 58

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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…

Sureserve Group (LON:SUR) – very quick price rise on good results

An 11.1% rise in revenue to £212m for the year to end-September 2019 helped to boost adjusted pre-tax profits by 25.7% to £8.3m, with earnings leaping 31.2% to 4.2p per share.

Those were impressive results and I understand that the current year has started strongly.

Brokers Shore Capital estimate that revenue will increase by £12.6m this year, with profits up nearly 15% to £9.5m, jacking earnings up nearly 17% to 4.9p per share.

The shares have had a very good quick run, peaking at 47p last Tuesday, and close the week at around the 44.5p level, just over 9 times current year earnings.

Looking really quite cheap but allow for some profit-taking.

Profile 14.01.20 @ 36p set an end-2020 Target Price of 50p.

Inland Homes (LON:INL) – partnership housing offers massive potential

Friday morning’s news about its partnership development contract with Octavia Housing, the leading affordable housing provider, shows that this excellent property group is expanding very well.

Its partnership subsidiary is very fast growing. At the end of September last year, it had 892 private and 921 partnership homes under construction.

These partnership deals help to boost the group’s revenue, while also kicking in very useful monthly cash flow which gives a balance to its own open market housebuilding.

The final results for the 15 months to end September 2019 could well be announced in the next week.

Readers will already know just how keen I am on this ‘brownfield’ development group and I continue to rate its management extremely highly. As I do also its shares, which close the week at around 91p after peaking at 94p.

Profile 13.08.19 @ 68p set an end-2020 Target Price of 110p.

Profile 24.10.19 @ 77p set an end-2020 Target Price of 110p.

CMC Markets (LON:CMCX) – excellent Q3 update news

At least three brokers came out with ‘buy’ advice after this global online financial trading company announced its third-quarter update on Thursday.

The company is now looking to beat expectations for the year after it reported a stronger client retention in those three months.

RBC Capital Markets rate the shares as ‘outperform’, upgrading their 145p prediction to 170p. Shore Capital go for 160p and Peel Hunt for 150p.

I think that they are all too conservative in their price aspirations. This group is getting things right and its target of more global partnerships has strong potential.

The shares close the week at 165p, up 15p from their week’s low of 150p.

Profile 17.10.19 @ 120p set an end-2020 Target Price at 180p.

Epwin Group (LON:EPWN) – confident for current year

Despite weakening market conditions, the low maintenance building products group is apparently fighting fit and its full year to end-2019 will be as expected.

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Master Investor Magazine 58

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Even better though was the CEO’s declaration that the group can expect to make further progress this year and it is confident of its longer-term drivers.

The shares close the week stronger at 103.5p – finals due 2 April.

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

Medica Group (LON:MGP) – pulse racing reports?

I wonder whether Peel Hunt and myself are looking at the same company?

It seems that their analyst rates the shares of this UK market leader in the provision of teleradiology services as a ‘hold’ looking for just 126p a share.

Last Thursday’s pre-close trading update for the 2019 year stated that revenue was up 19% year-on-year at £46.5m, while the number of contracted radiologists increased 20.2% to 435 at the year end.

I really do like the feel of this unique company and very much look forward to the final results announcement on 23 March.

In my view the shares at 156p appear destined to go a great deal higher.

Profile 07.01.20 @ 155p set an end-2020 Target Price of 215p.

Strix Group (LON:KETL) – confident about prospects

This global leader in kettle safety controls announced a very positive pre-close trading update on Thursday.

In globally volatile markets last year it believes that it made a very solid performance.

It is looking to deliver full-year profits in line with market expectations when it announces its finals on 18 March.

Not only is the group hoping to launch twelve new products in this current year, but it is still seeking strategic acquisitions.

Its new manufacturing facility in China is on target and is due to be completed in a year’s time.

The group is confident about its current-year prospects.

And I am confident about its shares, which close the week at 194p.

Profile 31.12.19 @ 196p set an end-2020 Target Price of 250p.

Hotel Chocolat (LON:HOTC) – we have had a very good turn

The shares of this iconic retailer and chocolatier look frothy after the latest update news.

An 11% rise in sales for the 13 weeks to 29 December was impressive and driven by its in-home ‘Velvetiser’ ‘barista-grade’ hot chocolate machines selling very well.

It opened 14 new locations in the last six months, nine in the UK, two in the US and three in Japan.

The group is expanding globally and that is going to cost both working capital and drag margins somewhat.

Also, it appears that there are certain inefficiencies in the supply chain that are being attended to, so that will cost.

So, is it time to establish profits, perhaps looking to come back in again at cheaper levels?

Readers who followed the profile comment will have already had the chance to take some substantial profits earlier this month as the shares hit 527p, giving an over 50% hike since last March.

Brokers Peel Hunt retain their ‘buy’ rating aiming at 400p a share, while Liberum Capital suggest that the shares, now 394p, are a ‘hold’, looking for 440p.

And finally ….

Tremor International (LON:TRMR) – many apologies for my simple error

In my profile on this company after its acquisition of Unruly from News UK in a shares-only deal I quoted a research note on the company from broker finnCap, making their assumptions on future profits.

Stupidly I did not check my copy and missed that I had denoted its profits and earnings in sterling, when in fact it should have been in US dollars.

However, I still feel that the shares, now at 190p, after hitting 216p, really are too cheaply rated, even at 20% higher in financial ratio terms.

Profile 16.01.20 @ 156p set an end-2020 Target Price of 235p.

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Comments (2)

  • Brian McHenry says:

    Mark, in reference to your Profile of Tremor International (LON:TRMR) – and your subsequent apology for mixing up your £’s and $’s in that sketch, it appears that in correcting that error you have now screwed up with the £ to $ exchange ratio! Quote…However, I still feel that the shares, now at 190p, after hitting 216p, really are too However, I still feel that the shares, now at 190p, after hitting 216p, really are too cheaply rated, even at 20% higher in financial ratio terms.
    The GBP to US dollar ratio is currently 1.307 which makes the financial ratio C. 30% not 20%. Ouch, once again. Sorry, but not very impressive for your other reports, is it?
    Re your…. in reference to Profile of Tremor International (LON:TRMR) many apologies for my simple error. In my profile on this company after its acquisition of Unruly from News UK in a shares-only deal I quoted a research note on the company from broker finnCap, making their assumptions on future profits.
    Stupidly I did not check my copy and missed that I had denoted its profits and earnings in sterling, when in fact it should have been in US dollars.
    However, I still feel that the shares, now at 190p, after hitting 216p, really are too cheaply rated, even at 20% higher in financial ratio terms.

  • Brian McHenry says:

    Mark, these posts (see below)have appeared today on the Tremor Int thread of the ADVFM Bulletin Board. You might wish to address the content therein.

    26/1/2020
    17:59
    It could be that the “profile” was commissioned by Tremor, but then having commissioned it, the article was “independent”. I really can’t tell from reviewing the site, although I would have expected them to acknowledge somewhere that the profile had been commissioned if that was the case. The comment stt made, that wheeze highlights, in post 2432 that he thinks the article was “deliberately published before the detailed TU to entice PIs in before they publish bad news” strikes me as a very serious allegation. Incidentally, the author did (eventually) acknowledge his mistake on $ vs £, although retained his “too cheap” conclusion: “Tremor International (LON:TRMR) – many apologies for my simple error” …”However, I still feel that the shares, now at 190p, after hitting 216p, really are too cheaply rated, even at 20% higher in financial ratio terms.” https://masterinvestor.co.uk/equities/small-cap-round-up-featuring-sureserve-inland-homes-medica-and-more/ I hope he isn’t mixing up Euros and $ now with his “20% higher” comment.

    26/1/2020
    14:29
    gowlane, “What awful rubbish that tipsheet posted, trying to make it appear that revenues were growing.” Absolutely… Whoever from Tremor PR dept paid for it should be sacked…. It seems like nobody bothered to check the facts.. …What is your assessment of Finncap and how objective, independent and reliable are they? Some shrewd judges on here have serious doubts and of course Finncap are the house broker and paid by Tremor. But let us give them a chance and see how their report dated 2 April 2019, has stood the test of time, before relying too much on, or even dissing their latest report. Well on 2 April 2019 they were forecasting 2019 revenues of $495m, net cash of $113m, and bottom line reported earnings of $9.8m. Now on 06 January 2020 they are forecasting 2019 revenues of $325m (down 34%), net cash of $75m (down 34%), and bottom line reported earnings of $1.1m (down 89% – and they will be lucky to make that). Ouch! Ouch! Ouch! Significantly there is an ominous item in the latest forecast balance sheet of ‘other liabilities’ of $78.6m – that was not there in the April report – at least it was a mere $30m just up $10m from a year before hand, but now up $58m! Again some very shrewd judges on here believe that this may represent advance payments of some kind thus distorting the net cash position. We await clarification in the audited financials. Any other views or possible explanations are welcome! But you have the information so make your own mind up.

    https://uk.advfn.com/stock-market/london/tremor-TRMR/share-chat

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