Start of the week small-cap round up featuring UP Global Sourcing, Renewi, Xpediator and Robinson.

UP Global Sourcing (LON:UPGS) – weighing it all up – a cracking deal

In what looks to me to be an excellent deal this group last Thursday announced the £32m+ acquisition of Salter Brands.

Dating back to 1760, Salter, which is the UK market leader for bathroom and kitchen scales, is believed to be the UK’s oldest housewares brand. Today it also sells kitchenware, diagnostic and healthcare products. Retail groups like Tesco, Sainsbury, ASDA, Argos, LIDL, Amazon and eBay take their products.

UPGS has been selling Salter goods since 2011 – so a good relationship must already exist. So, on the face of it this acquisition makes a great fit.

Selling to over 300 retailers across 37 countries, the Oldham based Ultimate Products markets a series of well-known brands focused on the home covering Audio; Heating and Cooling; Housewares; Laundry; Luggage; and Small Domestic Appliances.

Its brands include Beldray (laundry, floor care, heating and cooling), Intempo (audio), Constellation (luggage), and Progress (cookware and bakeware).

To help to fund the purchase UPGS had a £15m gross Placing of new shares @ 210p each.

Analysts Chris Wickham and Hannah Crowe at Equity Development have estimated current year revenues for the group to rise from £116m to £133m for the year to end July 2021, with EBITDA rising from £10.4m to £13m, earnings up from 7.9p to 10.2p amply covering a 5.1p dividend.

For the 2022 year with Salter included they see sales increasing to £162m, EBITDA of £18.5m. earnings of 13.7p and a healthy 6.9p dividend per share.

The group’s shares rose from 212p to 228p on the back of the deal, while Equity Development put out a fair value increased rating from 200p to 275p per share.

Despite the good rise in share price over the last year, more than trebling, I suggest that they remain a strong hold.

(Profile 13.07.20 @ 74.8p set a Target Price of 100p*)

Renewi (LON:RWI) – waste is a state of mind

It is not often nowadays that you see companies doing a share consolidation. But that is just what this waste-to-product company is proposing – a 1 share for every 10 held.

That will reduce the number of shares out in the marketplace, obviously jacking up the price substantially.

The reason stated is that it should help the group get better exposure to index inclusion, while enabling a more consistent valuation of its shares.

Considering that this enterprising group has some 165 operating sites across Europe and is a strong proponent of turning waste into useful materials such as glass, paper, wood, metal, plastic, building materials compost and energy – I feel that its proposal makes a lot of sense and should be backed.

Toby Thorrington, analyst at Edison Investment Research, sees current year revenues to end March 2022 rising from €1.69bn to €1.8bn and pre-tax profits growing to €55.8m (€47.1m) worth 5.2c (4.5c) in earnings per share.

For the next year he goes for €1.85bn of revenues, €72.2m of profits and 6.8c per share in earnings.

Waste will always be a growing market and efficient operators will prosper – the shares at 53.6p continue to look great value and obviously going a lot higher.

(Profile 09.10.20 @ 24p set a Target Price of 35p*)

Xpediator (LON:XPD) – getting carried away

Last Friday’s AGM Statement from the Braintree-based international freight management group was bullish.

In fact, based on positive trading trends for the first six months of the year, it was able to increase market guidance in respect of its expected performance for this current year to end December.

The group is well placed to push pre-tax profits up to £8.5m, the market was previously anticipating around £7.6m.

On the basis of the upgraded indications, analyst Robin Byde at Zeus Capital is reckoning a valuation increase from 70p to 85p a share.

We should get even more information come the September interims announcement, but the AGM news was good enough to boost the share price by 5% to 75p, they were only 62p at the start of this month.

It has taken some time and a lot of heartache in between my first profile on the company and the price objective that I originally set.

A cautious ‘recovery’ hold.

(Profile 28.05.19 @ 50p set a Target Price of 90p)

Robinson (LON:RBN) – a neat undervalued package

This custom manufacturer of plastic and paperboard packaging group’s shareholders were told, by way of last week’s AGM Statement, that raw material price inflation was cutting into its margins.

The group is also experiencing product shortages as weather-related and shipping issues impact production.

Despite such pressures sales and its order book are both expected to have increased in the year to end December. Against that the company has made various operational cost savings.

Robinson provides products and services to major players in the fast-moving consumer goods market including McBride (another of my Profile favourites), Unilever, Procter & Gamble, SC Johnson and Reckitt Benckiser.

The company’s broker, finnCap, has made no change to its estimated earnings for the year. It is looking for £51.1m of sales and an adjusted pre-tax profit of £2.7m, worth 14.2p in earnings per share and amply covering a 5.5p dividend.

The brokers have a price objective of 195p, against the current market price of 117p.

Remember that it has an interesting chunk of ‘spare’ property that is very capable of profitable development by a ‘third party’ – that has a latent value to the group.

We have seen the shares up to 179p over the last year and I consider that investors prepared to take the margin recovery view would do well taking out or adding to a position in the group’s shares.

(Profile 02.04.20 @ 55.5p set a Target Price of 80p*)

(Asterisk* denotes that Target Prices have been achieved since profile publication)

Profile company results, meetings and updates expected within the next two weeks: