Small Cap Round-up – Piering in to the future

The Brighton Pier Group (LON:PIER) – after falling 37% on profit-taking, there is now a strong bounce-back in progress

Less than two months ago the shares of this diversified entertainment business were up to 116.7p, on the back of investor reaction to the group’s ‘very strong first half performance’ reported in late March.

At that time the company clearly stated that, due to those first half-year trading results combined with the then current strong trading, the profits for the year to end-June were now expected to be ahead of market expectations.

The group’s four divisions – the Brighton Palace Pier, the Paradise Island Adventure Golf centres, the bars side and the Lightwater Valley theme park – were all viewed as good revenue and profit earners in the current year to the end of this month.

Cenkos Securities, broker to the company, has current year estimates out for revenues to have risen from £13.5m in 2021 to £38.1m this year, with adjusted pre-tax profits increasing from £1.5m to £6.0m, generating earnings of 12.6p per share for the year against 5.7p previously.

Considering that the average price-to-earnings ratio for its sector peers is some 15 times, that makes this group’s shares at just 90p look severely undervalued.

At a 15 times current year earnings figure that would put the shares out at 189p and would be just to match the median.

The market has not yet been given any indication whether the group will be announcing a Pre-Close Trading Update – but let us hope that it will do just that within the next few weeks.

After that mid-April peak of 116.7p the shares succumbed to profit-taking and subsequently fell away to just 73p by 26 May, since when there have been ‘nosey’ buyers taking stock out of the market, with them closing last Wednesday night at 91.5p.

I consider that they are now ready to lift back up above the 100p barrier and edge closer to that 116p level again, possibly ahead of any news from the company on the continuance of its first half strength.

(Profile 30.06.21 @ 61p set a Target Price of 75p*)

Accrol Group Holdings (LON:ACRL) – a ‘recovery’ gamble

Less than a month ago the UK’s leading independent tissue converter declared its Trading Update for its year to end April 2022.

There were no surprises in the statement but merely confirmed that despite improved sales the group had been victim to rapid cost inflation during that year.

Accordingly, analysts at Liberum Capital and at Zeus Capital confirmed that they expected revenues for the 2022 year of £159m but a significant collapse in profits from £9.1m in 2021 to just £1.1m or thereabouts for the last year.

For the current year estimates suggest about £208.5m sales and around £7.1m adjusted pre-tax profits, worth some 1.7p in earnings per share.

Looking ahead to next year sales of £220m could push profits up to between £10m – £12m, worth 2.5p per share in earnings.

This group’s shares have been up to 70p in the last eighteen months and have been as low as 18.5p, they are now trading at around the 26.8p level, after some market chatter of an overseas private equity player expressing deep interest in the group’s activities and its future prospects.

Obviously still very much a ‘recovery’ gamble, however a move upwards could well be on the cards ahead of the final results being announced in September.

(Profile 12.03.19 @ 22p set no Target Price)

Lords Group Trading (LON:LORD) – looking for a confident AGM Update on 29 June

This group is a leading distributor of building materials, plumbing, heating and DIY goods.

Principally it sells to local tradesmen, small to medium-sized plumbing and heating merchants, construction companies as well as retailing directly to the general public.

Floated on AIM less than a year ago, the group has recently declared its 2021 results to end-December.

They saw sales of £363.3m (£287.6m), profits of £12.4m (£11.7m), with earnings of 5.5p (3.5p) per share.

For the current and coming year estimates suggest £438m then £490m sales, £16m then £18.7m profits, earnings of 7.7p then 8.6p for the two years, 2023 and 2024.

On the face of it the shares at 89p might look expensive, but I still consider that they have very good upside.

That may well be boosted by a confident Trading Update at the time of the group’s AGM on Wednesday 29 June.

I maintain my price objective and concur with Cenkos Securities who rate the shares as a ‘buy’ – it has a ‘fair value’ of around 128p on the group’s shares.

(Profile 21.03.22 @ 90p set a Target Price of 115p)

(Asterisks * denote that Target Prices have been achieved since Profile publication)