Start of the week small-cap comment on SNWS, IOG, FSTA, RBGP and AQX

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Start of the week small-cap comment on SNWS, IOG, FSTA, RBGP and AQX

Smith’s News (LON:SNWS) – these shares really are ready to deliver

It is possible that within the next week or so we should be getting sight of the Post Close Trading Update from this wholesale newspaper distribution group.

Already its shares are undervalued so I would hope for quite a smart uplift on good news about the business in the last year.

Smiths News is the UK’s largest newspaper and magazine wholesaler. It has an approximate 55% market share. On behalf of the major national and regional publishers it distributes newspapers and magazines.

Analyst Andy Murphy at Edison Investment Research estimates that the year to 28 August this year could have seen the group’s revenues at £1.08bn, with £27.9m of pre-tax profit, worth 8.7p in earnings and able to cover a 1.6p per share dividend per share.

That should see the group’s shares, now just 39.4p, on a miniscule 4.52 times price earnings ratio.

When the market fully realises this undervalue, I consider that they could rapidly rise to 55p and then above.

(Profile 24.07.20 @ 20.25p set a Target Price of 27p*)

(Profile 24.06.21 @ 39.5p set a Target Price of 55p)

IOG (LON:IOG) – fully funded and now ready to gas guzzle

On Thursday of last week this Net Zero UK gas and infrastructure operator announced a fundraising exercise for £8.5m @ 25p a share – increasing the issued share capital by only 10%.

It was rapidly completed by the group’s brokers, who reported an oversubscription for the stock.

That is good news.

It also rapidly turned the eased-back shares from trading at 25.5p after the announcement to peak at 28.4p during the day.

The quietly whispered market comment was that we could well get an announcement of the first gas coming through before the end of October.

By Friday’s close they were steady at 28p, at which level I reckon that they are now an even better investment, especially with the group properly funded going forward onto its next stage of expansion.

(Profile 06.09.21 @ 22.5p set a target Price of 30p)

Fuller Smith & Turner (LON:FSTA) – whose round is it next

The AGM Trading Statement from this premium pubs and hotel group reported steadily increasing sales over the period since lockdown ended.

The interims to 25 September will be announced on Thursday 18 November, when I would hope that even better trading will be commented upon for the group’s estate.

Analyst Douglas Jack at the soon to be floated Peel Hunt, suggests that the shares are an ‘add’ as he reflects positively about the group’s 900p plus per share net asset value.

The shares, which are now trading at around the 747p level, are well above my price objective – hold tight.

(Profile 17.08.20 @ 600p set a Target Price of 700p*)

RBG Holdings (LON:RBGP) – you cannot keep her down

The recently announced interim results to end June showed a very healthy 279% profits advance to £3.9m on the back of a 53.2% increase in revenues to £18.3m.

Nicola Foulston, CEO of this fast expanding but diversified legal services group, was bullish in her accompanying statement.

The group has had an excellent first six months which is reflected in our revenue and profit growth. With strong demand for all group services, we are on track to meet our recently upgraded market expectations for the full year. While acknowledging the economic conditions continue to be volatile, we look forward to the coming months with optimism and are excited about the long-term prospects for the group.”

Don’t underestimate this lady, nor the ambitions that she has for her business.

Analyst James Bayliss at Singer Capital Markets considers that the group’s shares are standing at a discount to its peer group. He puts out an intrinsic value of 160p on the group’s shares, now 140p.

He is estimating revenues of £45.5m for this year and then £56.2m next year, upon which he sees £9.1m pre-tax profits then £13m respectively, giving earnings of 7.9p then 11p per share.

Despite its excellent run upwards in price, since I profiled the company in early February this year, there is obviously still a lot more to go for with the shares now at just 140p.

Between now and the group’s next piece of corporate news, it is more than possible that the shares could rise to double my February profile price.

(Profile 05.02.21 @ 80p set a Target Price of 100p*)

Aquis Exchange (LON:AQX) – maiden profit at halfway

Last Thursday the exchange services group posted a good set of interim results to end June. They saw revenue 37% up at £6.7m, that helped to generate a maiden pre-tax profit of £1m.

Liberum Capital analyst Shailesh Raikundia, who rates the group’s shares as a ‘buy’ estimates £15.6m revenues for the full year and a £2.4m profit, worth 8.4p per share in earnings.

For next year his estimates are for £20m revenues and £4.2m profits, worth 14.7p per share in earnings.

The group is quickly making a name for itself with its various share trading markets, which, no doubt, is why Liberum rates the group’s shares, now at 717.5p, as capable of rising to 850p.

I am delighted that my profile on the company eleven months ago has proved to be quite prescient, however the rating is very high and could well take a few years to come down to more realistic levels.

The shares are not for chasing, until more expansive news is forthcoming.

(Profile 26.10.20 @ 435p set a Target Price of 606p*)

(Asterisks * denote that the Target Prices have been achieved subsequent to profile publication)


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