Small cap round-up: Pizzas, materials and information

The Fulham Shore (LON:FUL) – still time to tuck in

Just watch the dough!

It has been slow to react but it is beginning to look really quite tasty.

Last week’s Trading Update was very positive for this restaurant group, which owns 24 The Real Greek units and 59 Franco Manca eateries.

It is a fast-expanding operator and its corporate strategy is showing real impetus.

For the year to 27 March, it has now clearly stated that it will beat market expectations.

Sahill Shan, analyst at Singer Capital Markets, estimates a doubling in sales to £80.2m (£40.3m) and an adjusted pre-tax profit of £1.7m (£5.2m loss), generating earnings of 0.2p (0.6p loss) per share.

For the current year he sees £105.1m revenues, £3.6m profits and 0.4p earnings.

Going further ahead he predicts that the group’s expansion programme will push sales up to £120.8m in 2024, with profits almost doubled at £6.7m, worth 0.8p in earnings.

He rates the shares as a ‘buy’ looking for 24p in due course.

In the Update the group impressed that, despite the investment in new openings, it ended the year with £4.0m cash compared to the £3.6m net debt previously. And what is more it still had undrawn bank facilities of £15.9m.

The finals will be declared by the end of July, at which time it will, hopefully, be well underway with its summer season business at a very increased number of venues.

The group’s shares at 17.5p look cheap, my price aim remains firm.

(Profile 15.12.21 @ 16p set a Target Price of 20p)

Lords Group Trading (LON:LORD) – certainly one to build up with

This building materials distributor will be reporting its 2021 results on Tuesday 24 May.

We are already looking for some £365m (£288m) in sales revenue for the year, which could well see pre-tax adjusted profits come out at £11.2m (£8.4m), according to Kevin Cammack the sector analyst at Cenkos Securities.

That should see some 5.4p in earnings, amply covering a 1.6p dividend per share for the year.

For this year he sees £445m of sales and £16.0m of profits, for 7.7p per share of earnings and a 1.9p dividend.

The organic and acquired corporate growth shown by this group’s management is impressive and points to even further expansion.

The Cenkos ‘buy’ rating suggests that 132p is a ‘fair value’ for the equity.

I consider that the group’s shares, which touched 148p in early September last year, look attractive at the current 97.5p.

My price aim is an easy goal.

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

Journeo (LON:JNEO) – did you miss this one?

Wow – did you see the share price action of this transport information systems provider last Friday?

At 7am that day the company announced a major framework agreement with First Bus, worth £9m in revenues.

The extension new order will take the group up to some 13,000 vehicles connected and using the company’s services as a subscription platform.

The shares literally took off. In a somewhat tight market, they leapt from the overnight close of 106p straight up to top out at 154p. A massive 192,999 shares were traded on the day, leaving them to close on Friday night at 137.5p after some profit-taking.

Some dealing sanity became evident on Monday with the shares closing at 121.5p on just 35,613 shares traded.

Don’t get me wrong, I do think that the shares of this company are worth a lot more, but in due course, not just jumping 50% on an order extension, but instead on steadily gained business and additional corporate profitability.

The shares closed last night at 115p and look much better priced for investors in such growth.

(Profile 07.04.21 @ 95.5p set a Target Price of 120p*)

Microlise Group (LON:SAAS) – frankly I am very disappointed and I apologise

This transport management software for fleet operators yesterday announced the results for the 18 months to end December.

When broken down they showed that revenues for 2021 were £60.3m against £57.0m, with adjusted pre-tax profits standing still at £4.6m, but with earnings per share collapsing from 8.9p to 2.3p.

Despite strong order books as it progressed into this year, I was disappointed at these results and now regret having profiled the company in January when its shares were trading at around the 200p level.

They subsequently hit 220p, before falling away to 131p at the start of February. By the end of that month, they were back up to 190p.

They subsequently endured an appalling March falling back to 120p at their lowest.

Last night, after the results, they closed at just 140p.

My timing was atrocious, for which I apologise.

I really got this one wrong – would I buy them today?

No, I would not because I believe that it will continue to suffer from component shortages impacting its business.

Furthermore, if it decides to go out on the acquisition trail to jack up its earnings, I see it having to really dilute its equity at lower prices to help funding, despite it having some £12m net cash and £20m of undrawn facilities at the year end.

However, I do have to report that analyst Kevin Ashton at brokers Singer Capital Markets rates the shares as a ‘buy’. He estimates that £65m of revenues are possible this year, taking profits up to £4.9m and pushing earnings up 50% to 3.6p per share. His price objective is 280p.

I am probably getting it wrong again and not looking at this right – sorry!

(Profile 12.01.22 @ 200p set a Target Price of 240p)

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