Small Cap Round-Up: Loungers, Norcros and Alumasc
Loungers (LON:LGRS) – Interims due at the end of next month
This operator of all-day café/bar/restaurants across the UK recently declared a Trading Update for the 24 weeks to 2 October.
They showed a good advance, certainly outperforming the market. Sales growth in the period was up 17%, using a like-for-like comparator with the similar pre-Covid period.
Despite opening 11 new sites since the start of its financial year the group had actually reduced its non-property net debt.
It is now up to an impressive 206 sites carrying its Lounge and Cosy Club brands and it has another 19 sites to open during this current trading year. That would achieve its 30 new sites a year strategy.
Analyst Anna Barnfather at Liberum Capital has a Buy out on the group’s shares. She is estimating that to end April 2023 the group will lift its takings to £276m and generate profits of £11.6m, worth 8.6p per share in earnings.
Her price objective is a very bullish 400p for the group’s shares.
The hospitability sector is feeling the squeeze from the cost-of-living crisis but Loungers is still ahead of the pack and the shares are undervalued, says Peel Hunt analyst Douglas Jack.
He has retained his ‘buy’ recommendation on the stock with a price objective of 375p.
‘To manage margins and take [market] share, Loungers has changed its food distributor, making deliveries more efficient, as part of the transition to introducing a hybrid distribution model,’ said Jack.
‘The combination of like-for-like sales growth, successful new openings, increasing efficiency and scale economies should support forecasts after the next update. We believe the shares are materially undervalued.’
Having been as high as 300p this year and as low as 180p, the shares closed last Friday night at 202p.
Could they ready for another run upwards, obviously both Liberum and Peel Hunt think so.
(Profile 03.09.19 @ 205p set a Target Price of 275p*)
Alumasc Group (LON:ALU) – AGM Update due this Thursday
This coming Thursday will see the premium sustainable building products group holding its AGM up in Yorkshire.
The benefits are expected to show through in this current year following the disposal of the loss-making Levolux business.
Analyst David Buxton at the group’s NOMAD finnCap is estimating that the current year to end June 2023 will see a small rise in sales to £91.0 (£89.4m) and a small easing back in profits to £11.3m (£12.7m) worth 24.2p (28.2p) in earnings per share.
However, he has a small increase in dividend per share at 10.3p (10.0p), which leads the thought that there is management confidence going into the next year.
Already Buxton is going for £96.0m sales, £12.0m profits, 25.7p earnings and a 10.8p dividend per share.
The finnCap price objective is 315p, compared to the current 141p.
I would expect the AGM Trading Update to be positive, despite ongoing economic pressures.
In July last year the group’s shares were trading at 272p each since when they have bottomed out at 130p. Alumasc is a very attractive stock at these levels.
(Profile 13.02.20 @ 116p set a Target Price of 145p*)
(Profile 08.06.20 @ 80p set a Target Price of 110p*)
Norcros (LON:NXR) – Looking inexpensive ahead of interims
The interim results for this bathroom and kitchen products supplier are due to be announced on Wednesday 9 November.
They are expected to show sales for the 26 weeks to 2 October were some £220m (£200.9m) reflecting a robust first-half trading performance, with gently weaker UK sales being boosted by stronger figures from its South African operation.
Despite macroeconomic uncertainties the group’s management has confidence in the current year – which hopefully will be reflected in the accompanying Outlook statement with the interims.
Analyst Peter Ashworth at Shore Capital rates the undervalued company as a Buy
‘The shares currently stand on a full-year 2023 price/earnings ratio of 4.5x based upon our forecasts of earnings per share of 39.1p and a full-year dividend of 10.5p, offering a yield of 5.8%. This rating significantly undervalues the group.”
With a one-year High of 349p and a recent Low of 165p, the shares closed appealingly at just 176p on Friday night.
(Profile 20.08.19 @ 214p set a Target Price of 321p*)
(Asterisks * denote that Target Prices have been achieved since Profile publication)
I would be interested to read an article on MANX as a small cap Ist there any chance that this could happen?
Alumasc may have it’s day in the sun when the building sector improves, but currently I (unlike the brokers who forecast it doubling,) do not think it has bottomed yet. Lots of building suppliers struggling… Imo
The buisness which alumasc was a solar energy shading offering. It made a profit in the year before. Management said focus and expand this buisness. As a result it went to a big loss. The management sold it to a rival for £1. Plus some contractual deal where they might get up to £1million back, better cross your fingers and more.
They have a defined benefit pension plan which they have to continue to support.
The had virtually no debt in the previous financial year. Now they have significant debt. A lot of this came from buying in inventory so that they had stock in place for major customers.
Finally when all is said and done, they made a large loss on the balance sheet for the financial year 21-22.
For more detail read the full RNs with the full year results.