Small Cap Round-Up: Trading Updates Getting Market Stirred

Windward (LON:WNWD) – Excellent Update Gets Shares Soaring 

The maritime awareness group has announced a Full Year 2023 Trading Update showing strong trading and guiding that its results, due at end March, will be comfortably ahead of market forecasts. 

The group’s shares roared away by some 20.9% to 107p, up 18.50p on the overnight price. 

Hold very tight. 

(Profile 03.04.23 @ 37.5p set a Target Price of 47p*) 

Mears Group (LON:MER) – Shares Up 10.7% At One Stage 

A week ago I congratulated David Miles, who retired as CEO of this housing and social care sector service provider at the end of last year. 

I noted that its shares were on the move, then at 310p. 

The group has now issued a Trading Update for its 2023 financial year, guiding that its results will be ‘modestly ahead of market expectations’ – that was certainly enough to spirit its share price. 

At the best they touched 346.50p in reaction to the news, before easing back to 340.5p, up 27.50p on the overnight price. 

Another position to Hold on tightly.  

(Profile 21.06.23 @ 285p set a Target Price of 320p*) 

Volution Group (LON:FAN) – Getting The Wind 

I was interested to note that Grandeur Peak Global Advisors, has put together a 3.001% stake in my favourite ventilation products group. 

The Salt Lake City-based investment group, which is chaired and was co-founded by Church Leader Robert Gardiner out in Utah in the States, has a strategy of identifying global opportunities by investing in small companies. 

It crossed the notification threshold last Thursday, taking its holding up to 5,935,000 shares in FAN. 

Last July I commented that the internationally operating air quality solutions group’s shares, then 361.20p, were ready to climb back up to the 450p peak that they reached two months previously. 

In the middle of last month, the company, whose Vent-Axia is just one of 22 brands sold across the UK, Europe and Australasia, issued an AGM Trading Update for the first four months of the current year. 

The company stated that – 

Whilst new build market conditions remain challenging, our refurbishment activities continue to benefit from strong regulatory drivers and consumer focus on eliminating the damaging health impacts of mould and condensation in buildings. 

Our strong start to the financial year, together with the tailwind from the three acquisitions completed in the calendar year, gives the Board confidence in delivering earnings ahead of the current range of market expectations for the financial year. 

Analysts Charlie Campbell and Edward Prust at Liberum Capital consider that the group’s shares are a Buy, looking for 470p a share in due course. 

Their estimates for the year to end July predict sales rising to £352m (£328m) and pre-tax profits improving to £68.5m (£65.1m), lifting earnings to 26.5p (25.8p) treble covering a dividend of 8.3p (8.0p) per share. 

For the coming year they see £367m revenues, £73.4m profits, 28.2p earnings and 8.5p dividend. 

The brokers consider that the market, which de-rated the £856m valued group’s shares based upon cyclical concerns, is now starting to understand Volution’s major differentiators. 

My view is that I think that the investment boys from Salt Lake City have made a great choice.  

Hold very tight to the shares, which hit 456p towards the end of May last year, last night closed at only 417.60p. 

(Profile 23.05.19 @ 174p set a Target Price of 250p*) 

Frasers Group (LON:FRAS) – Diverse Growth Is The Strategy 

Mike Ashley’s retail empire has been busy, as always. 

Yesterday it announced that it had increased its stake in Asos (LON:ASC) and now controls 29.55m shares, some 22.27% of the online retail group’s equity. 

The shares of the internet-based fashion shop company, which ended the 2023 year at 450p, last night closed at 386p, after having dipped to 370p during the day. 

There have been mutterings within the whole sector that business has not been as hoped for over the Christmas period. 

The recent news from JD Sports has seen its shares being slammed down from 175p to 113p, which sympathetically knocked sentiment in Ashley’s own company, falling back from 940.50p in mid-December to a recent low of 828p, before some cheap buyers came into the market over the last couple of days, to take them back up to 854p at one stage. 

My feeling is that one should not underestimate the ability of Ashley and his CEO son-in-law Michael Murray – they have their own strategies in play in building up a diverse business for multi-year growth. 

I believe that will soon be reflected in a glowing share price as it recovers over the next few weeks. 

They closed last night at 844p, a worthy punt at that level. 

(Profile 28.07.23 @ 798p set a Target Price of 1000p) 

And finally….. 

Nightcap (LON:NGHT) – Certainly Needed By The Group’s Investors 

The shares of this late-night bar operator certainly need a 2024 ‘pick-me-up’ to get interest geeing up some more. 

Despite a 10% uplift in price yesterday, they still look fairly ‘flat and lacking sparkle’ – totally in contrast to the fabulous cocktails and drinks that their 46 venues offer. 

Declaring a record Christmas trading period, the group’s CEO Sarah Willingham reported that in spite of train strikes, inflation and other cost of living rises it was moving ahead. 

“2023 has been a volatile year, particularly in terms of the macro-economic impact on the hospitality sector.  

The cost of living crisis, inflation and rail strikes have significantly impacted our business and therefore it is very welcome news that the majority of rail workers have reached an agreement to end the rail strikes.  

It is also positive news that inflation is getting under control, which is expected to result in interest rate cuts in 2024. 

These are elements that should start to positively impact disposable income for our target customers during 2024. 

During the second half of 2023 we have transformed our management team whilst focussing on the integration of acquisitions and improving our systems.  

We expect to see the benefits of this integration and the synergies during the coming year. 

We are a much larger business with the team and foundations in place for the next stage of growth.  

We have set ourselves up to maximise our long-term potential.  

I am so proud of what we have achieved and am very excited about the future of Nightcap.” 

We will have to wait until mid-March for the group to declare its Interim Results for the period to end December last. 

In my opinion, if a big financial turnaround does not get underway this year the group is wide open to either a Private Equity Group or a Trade Buyer popping up with a ‘take-out’ bid. 

The shares, at last night’s closing price of just 5.65p, value the whole group at a miniscule £12.31m – a cracking penny punt. 

(Profile 14.11.22 @ 9.5p set a Target Price of 12p*) 

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