Small Cap Round-Up: Pubs, Ports and Steel

Billington Holdings (LON:BILN) – A Very Attractive And Solid investment

Yesterday’s final results announcement from this structural steel and safety solutions provider reported a magnificent 346.2% leap in pre-tax profits at £5.8m (£1.3m), on the back of just a 4.7% rise in revenues to £86.6m (£82.7m) for the year to end December 2022.

The earnings per share for the period flew 382.7% higher at 39.1p (8.1p), while the dividend was raised a mega 416.7% to 15.5p (3.0p).

The group achieved that significant increase in profits, due to a number of larger contracts in robust market sectors being completed in the year, combined with improved factory efficiencies.

The £50m capitalised group ended the year with a very healthy £11.6m cash balance.

CEO Mark Smith stated that:

“2022 has been a challenging yet rewarding year for the Group. The onset of the Ukraine conflict presented significant challenges in terms of material availability and raw material price escalation, and I am pleased at how these issues were successfully navigated by our team. 

While being mindful of the uncertain economic outlook for the UK, we look forward to the remainder of 2023 with a strong orderbook and a pipeline of significant high-quality prospects.

We are confident in maintaining the momentum from 2022 and delivering another strong performance for our stakeholders, in line with current market expectations.”

Impressed by the group’s strong order book momentum, analyst David Buxton at finnCap has a price objective for the group’s shares at 541p.

He is looking for £115m sales this year, with adjusted pre-tax profits rising to £8.0m, worth 50.6p in earnings and covering a useful 20.0p dividend per share.

With its shares now at only 388p they look to be a very attractive and solid investment, with 500p being an easy price focus.

(Profile 02.04.19 @266p set a Target Price of 314.5p*)

The City Pub Group (LON:CPC) – 150p A Share Net Asset Value

Inflationary pressures in some areas are beginning to abate – was the note with yesterday’s results for the year to 25^th December 2022.

Revenues were 63% better at £57.8m (£35.4m) while adjusted pre-tax profits were 280% improved at £3.6m (£0.9m).

After a programme of acquisitions, disposals and new openings, the £94m group currently operates 43 trading pubs, while its refurbishments have continued on six establishments.

For the current year to end December analyst Anna Barnfather at Liberum Capital rates the shares as a Buy and is estimating £64.3m takings, £7.3m profits and earnings of 5.5p per share.

For 2024 she goes for £66.9m sales, £8.1m profits and 6.0p of earnings. Her price objective for the group’s shares is 115p.

The group’s shares responded to the good news with a 7.5% price rise to 85.5p. At that level I consider them to be an appealing purchase, backed by a net asset value of around 150p a share.

My price aim remains firmly in place and should be beaten in due course.

(Profile 04.07.22 @ 80.5p set a Target Price of 100p)

Global Ports Holding (LON:GPH) – Still Awaiting The Strategy Report

The world’s largest independent cruise port operator has released current monthly cruise call reservations and the implied cruise passenger volumes for fiscal year 2024.

It has reported that current cruise call reservations at its consolidated cruise ports for fiscal year 2024 are 4,632, implying passenger volumes in excess of 11.8m.

Passenger volumes at all ports, including equity accounted ports La Goulette, Lisbon, Singapore, Venice are expected to be close to 15m. 

Analyst Greg Johnson at Shore Capital has an implied value on the group’s shares at 400p. His estimates for the year to end March 2023 look for revenues of $117.7m ($40.3m) with the group’s adjusted pre-tax losses falling significantly to only $3.3m ($43.4m).

For the current year Johnson goes for $154.9m sales and a turn around to a useful $15.5m profit, worth 5.6c per share in earnings.

He believes that the current valuation fails to reflect the momentum building up in the global cruise sector.

In mid-January this year the company announced that, in light of the continued emergence of significant and exciting opportunities in its cruise business, that it was undertaking a strategic review of its current capital and financing structure.

The purpose of the strategic review was stated to explore ways to maximise value for all stakeholders and includes a range of potential corporate activity including strategic investments, joint ventures and new partnerships.

That will be interesting to see what transpires. The finals could be declared in July.

At the current 157p the group is capitalised at £98m and its shares are a good hold.

(Profile 11.11.22 @ 81.5p set a Target Price of 100p*)

M&C Saatchi (LON:SAA) – Liberum Target 260p

This advertising and marketing services group yesterday announced its audited results for the year ended 31 December 2022.

The company has delivered another year of record results with its highest ever net revenue, Headline operating profit, Headline profit before tax and Headline earnings.

Revenues of £271.1m were 8.7% ahead, while its pre-tax profit was 16.5% better at £31.8m (£27.3m), with earnings 31.9% better at 14.9p per share.

The cost of defending itself against a couple of bidders saw net cash fall to £30.0m (£34.4m).

The £207m group, which is continuing to win loads of new business, is guardedly optimistic about the current year despite the macroeconomic uncertainties.

Its shares, now at 169.5p, are well below the Liberum price objective of 260p, so they could be offering some sizeable upside.

(Profile 11.05.20 @ 64p set no Target Price)

Surface Transforms (LON:SCE) – Real Growth Potential

By the end of December this manufacturer of carbon fibre reinforced automotive brake discs had an order book standing at a massive £290m.

It has now declared that its operational technical issues have been overcome and production set to increase.

The first quarter of this current year was loss-making, but the company should now see big improvements over the balance of the trading period.

Analysts David Buxton and Michael Clifton at finnCap have a 120p price objective on the £84.5m group’s shares which are now 35.5p.

They are estimating that 2023 will see more than trebled revenues of £16.2m (£5.1m) helping to chop it adjusted pre-tax losses down from £5.9m to just £0.9m this year.

For 2024, with additional capacity well underway, the group could see £30.5m sales and £4.7m profits, worth 2.0p per share in earnings.

This group is still in its early development stages, but just consider those massive orders from top name motor manufacturers – that is the real driver for the years to come. The finnCap price objective is not so outlandish.

(Profile 19.09.19 @ 17p set a Target Price at 30p*)

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