Time to clean up with the Small Cap picks

4 mins. to read
Time to clean up with the Small Cap picks

Braemar Shipping Services (LON:BMS) – great value not to be missed

Did you see this week’s statement from this group’s peer Clarkson (LON:CKN)?

That group reported that trading was upbeat in all its divisions, especially in its broking and financial divisions, with City brokers raising their current and coming year profit projections.

Braemar is a real favourite of mine and I see it emulating the Clarkson trends, where that company is on 22.5 times 2022 price earnings estimates.

Indications are that Braemar’s February year-end figures will be very good and justify a rise back over the 310p level for its shares, which are now just 216p.

That 310p peak was reached towards the end of July this year, I predict that the shares will be back there again very soon.

Great value not to be missed.

(Profile 05.12.19 @ 185p set a Target Price of 250p)

(Profile 20.05.20 @ 99p set a Target Price of 150p)

Johnson Service Group (LON:JSG) – time to clean up?

After I first profiled this leading UK textile services provider, at 196p in late December 2019, the group’s shares rose in price to 216p. That was just before the end of February 2020.

Within days Covid-19 impacted the market and hit its shares for six, falling to 89.5p a month later. They tried a summer rally but fell back to 87p by early November.

The story has been very much just reacting to ‘lockdowns’ and the attendant pressures upon client business, with hotels and restaurants being closed and linen requirements reduced significantly.

From turning over around £1m a day in 2019, the group reported just two thirds of that figure. That swung the pre-tax profits from just under £1m a week down to a loss of £325,000 each week.

However, this trading year, to the end of this month, is expected to see evidence of partial recovery, and then a bounce-back to previous operating levels next year.

The Trading Update announced a couple of weeks ago inferred that the group anticipated a further recovery of hospitality volumes as we go into 2022.

Analyst Andrew Gibb at Arden Partners has this week upped his estimates to £270.3m sales this year and £6.7m pre-tax profit.

But looking into next year he sees £352.4m sales (2020 – £229.8m) and £46.9m profits, worth 8.6p per share in earnings.

The last two years must have been a real management headache and no doubt it is pleasing to see significant indicators of full recovery.

With its shares at 135.4p currently it is not surprising to see that Arden has a ‘buy’ rating on them with a price objective of 200p.

We should be getting a Pre-close Trading Update in a month or so.

Ahead of that I am setting a new Target Price of 160p on the shares.

(Profile 24.12.19 @ 196p set a Target Price of 250p)

Journeo (LON:JNEO) – definitely going in the right direction

Can we be only a few days away from another Trading Update from this advanced information systems provider.

Recently it has been winning new contracts for its Fleet and its Passenger solution systems. The latest was announced on Monday, £0.8m worth of technology and software for North Wales.

Then yesterday the £9.4m capitalised group stated that its agreement with Arriva Bus had been extended by one year, which is worth another £1.6m in revenue.

Analyst John Cummins at the group’s brokers, WH Ireland, estimates a ‘fair value’ of 150p for its shares, currently just 110p.

Having been up to 138p in late September, the shares having drifted back, look to be good value now.

I now see them climbing back up again, with 150p being an easy 2022 aim.

I set a new Target Price of 140p.

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

And Finally …..

Solid State (LON:SOLI) – record revenues and order books

This value-added computing, power, and communications products designer, manufacturer and supplier, really looks good.

Yesterday’s Interim Trading Update to end September, saw increased revenues at £39.4m (£33.1m) and adjusted pre-tax profits were 28.2% better at £3.27m, while earnings were up 27.7% at 32.7p (25.6p), and even the dividend was 19% higher at 6.25p (5.25p) per share.

At the end of September, impressively the group’s order book stood at a record £61.5m, against the end March figure of £41.3m.

But better still, that had increased further by the end of November, to some £70.3m.

Market estimates for the full year to end March 2022 revenue range around £78.4m, with £5.9m profits and earnings at some 59.5p per share.

Looking forward the next year could see £81m of sales and £6.15m of profits.

David Buxton at finnCap, the company’s brokers, currently has a price forecast on the shares of 1260p, against last night’s closing price of 1070p.

The shares, which are now trading at around twice my profile price aim, are destined to go higher.

(Profile 15.08.19 @ 404p set a Target Price of 546p*)

PS By the way I fancy National World (LON:NWOR) for a quick pick-up, now just 24p.

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

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