Small Cap Round Up: featuring The Gym Group, Billington and Manolete
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…
As fit as a fiddle and pumped up to rise
You would expect the results from The Gym Group (LON:GYM) to be healthy – and that is just what they are.
The fast-growing nationwide operator of 24/7 health clubs, now with some 166 across the country, announced its interim figures for the six months to end June.
They showed a 26.9% increase in revenue to £73.99m, with the half-year adjusted pre-tax profits coming in at £7.11m, a whopping 53.3% improvement. Earnings rose 42.9% to 4p per share, while the interim dividend was hiked 28.6% higher at 0.45p.
Now with a membership of 796,000 compared to 720,000 at the same time last year, it is impressive to see such good numbers, with average revenue per member up to £15.47 per month – just think of all that cash generation.
This really is a classic business model. It opened eight new clubs in the first half-year, with a possible 7-12 to be opened in H2. It has excellent roll-out potential and I foresee its growth in numbers and profits continuing at quite a pace.
Subsequent to these results I understand that Liberum has a 330p target, while Peel Hunt is going for 350p.
In mid-April this year I profiled the company at 220p a share, with a target price of 300p. Now the shares are trading at 246p after the results. I am pleased with their performance to date and retain my target price.
Ready to ramp-up production
The Georgia based exploration and production company Block Energy (LON:BLOE) is beginning to get its act together.
As part of its £12m programme, it is now ready to start to rapidly scale up its oil and gas production across its flagship West Rustavi field, in which it now owns a 100% interest. Its well 38Z is adjacent to its well 16aZ, where it resumed production in July.
Its shares have been a pathetic performer to date, more than halving in price from my 13p profile piece at the beginning of June. But at just 6.2p they could be a good gamble. My target price is still 25p.
Target almost hit but with a lot more to come
My favourite structural steel and construction safety solutions specialist Billington Holdings (LON:BILN) is due to announce its interim results to end-June in just over three weeks – on Monday 23 September.
First-half and current-year expectations have remained solid, as was stated by the company way back in June when it announced yet more good contract wins – some £30m in the first half – to add to the £41m announced last November.
This is a cracking company, it is trading well and because it always seems to deliver well on large scale and complex projects, I believe that it will continue to progress.
I featured the company in early April at 266p, with a 314.5p target price. Now at 302p my target looks very close to scoring. Hold very tight and we could see greater upside in the share price.
Coming unstuck? I do not think so!
The way that the shares of Topps Tiles (LON:TPT) have performed since my early May profile, with the shares then at 75p compared to just 66p now, does not look too clever.
Perhaps the Woodford Investment Management group dipping below the 5.09% stake in early July was the forerunner of them dumping more of their holdings.
However, to counter that I was pleased to note the Prudential now holds 9,880,631 shares in the company, some 5.06% of the equity.
Brokers Liberum rate the shares of this UK-only leading tiles retailer as inexpensive, putting them out on less than 10 times estimated earnings and on a handsome 4.8% yield.
The third quarter trading update in July stated that the company had performed well, with like-for-like sales up 3.8% despite it being against a softer trading period for the previous year. The company is confident it can continue to deliver good trading results.
So, let us hope that shows through in the next set of results. It should be announcing a trading update for the year to end-September in early October.
Right now, the shares look attractive at these lower levels, with my target price of 100p being maintained.
Georgie Porgie sticking his thumbs in deeper
It was very interesting to note amongst the Burford Group/Muddy Waters melee that the Soros Funds Group has increased its stake in the Manolete Partners (LON:MANO) litigation funding group. In total it now holds 5,086,518 shares.
Having touched 620p at one stage, the shares are now trading at around the 408p level, which shows that Soros has been topping up its holding with some cheaper stock.
I profiled the company twice, in mid-February at 230p, and then at 330p two weeks later.
Its AGM is being held in the City on Friday 20 September, which should be an interesting occasion to hear how they react to Burford’s problem and just how they have protected themselves against any comparisons by Muddy Waters lookalikes.
Short covering or not?
Well now, the Crystal Amber Fund has started to add to its holdings in STV Group (LON:STVG) again. It has announced that it has increased its stake from 7.77% to 8.41%.
The broadcast group will be announcing its interim results next Tuesday – so it will be interesting to see whether this increase is part of an ongoing exercise or just simply a piece of bear covering.
Now at 363p, against my end April article price of 370p, the shares are still looking undervalued – pending next Tuesday’s results statement I am considering whether to put on a 450p target price by the end of next year.
Bigblu Broadband
Shares in Bigblu Broadband (LON:BBB) have not performed well to date. I featured the company way back in mid-April at 122p, now they are just 112.5p, and my target price of 175p looks far off. But I am not giving up hope.
Obviously with such a young but fast-developing group, which is now a leading provider of alternative super-fast broadband solutions, it will take some time for the group’s progress to really kick up a gear or two and then show the market a clean pair of heels.
The company’s customer base increased by 5% to 119,000 in the half-year to end May, despite an 18% annualised churn rate.
We will soon see an increase of the company’s Quickline fixed wireless networks showing through in the UK, especially after the recent successful £12m equity and debt-funding package was secured.
Strong demand is expected for the company’s various solutions as it adopts new products with faster broadband speeds and unlimited download limits.
The company is anticipating being able to drive down the cost of customer acquisitions and churn during the second half of the current financial year. It has improved its infrastructure and is developing some strong partnerships.
I maintain my target price and the shares at 112.5p are a good speculation on future performance.
And finally…
All chained up and speculative
Well it is now confirmed that there was a deliberate error made in the accounts of Renold Group (LON:RNO) and now the figures for 2018 and the last year have been restated.
It may take some time for the shares of this industrial chains maker to recover, but I am confident they will. But for a while they remain somewhat speculative until the market fully accepts what went on and lets the company continue to move forward.
The shares are now 22.5p against my early June article price of 30p. I still maintain my 60p target price.
Comments (0)