There is a lot going on within this group and I feel that its shares, at 4.2p, are undervalued and offer some big upside, writes Mark Watson-Mitchell.
“The outlook for 2021 is looking positive. Revenues from existing contracts, together with recent and anticipated new contract wins, are expected to put the company back on course for the double-digit growth in 2021 that we were experiencing prior to the Covid impact.”
That was from the 4 March trading update from the £12m capitalised Westminster Group (LON:WSG), which is a supplier of managed services and technology-based security solutions worldwide.
Something secure about this company
The group’s mission statement is “Westminster believes all citizens of the world have the right to personal safety and security.”
Its range of products is extensive and covers all forms of personal and site safety, anti-terrorism, risk reduction, defence and homeland security products and systems.
Those products can be delivered to the group’s clients anywhere in the world.
They take in screening and x-ray, detection, fire, vehicle and pedestrian management, surveillance, health and safety, inspection and search, and even explosive ordnance disposal and improvised explosive device disposal.
Global customers
The company has customers in 78 countries across six continents, including national governments, sports stadia, educational facilities, conference and exhibition centres, shopping malls, financial institutions, hospitality sector and medical centres.
The group provides equipment and services to organisations across a very wide range of sectors, such as government entities, non-governmental organisations, critical infrastructure, and commercial operations.
Names like BP, Mitie Group, the Royal Navy, HM Prison Service, the British High Commission in Ghana, Aberdeen Harbour, Menzies Aviation, AirBridgeCargo, BAT, the UN, Bhutan’s Anti-Corruption Commission, the Northern Ireland Prison Service, and the International Atomic Energy Agency are just a few of those in the list.
Covid-19 saw some contract negotiations suspended
Obviously, the pressures of Covid-19 were felt heavily by the company and a great number of contracts were either suspended or negotiations went into limbo, with many being carried over into this trading year from January onwards.
There are still quite a number of contracts that are needing to be signed off and will probably show through when the pandemic eases.
Now debt-free and cash rich
Early last December the group raised £5m through the placing of 125m new shares @ 4p each.
At that time the group’s CEO Peter Fowler stated that, “We have spent a number of years investing in our business, building our global presence and developing an impressive pipeline of large-scale opportunities, each of which, if secured, would lead to multi-million GBP step changes in growth. Accordingly, the Board and I believe we are now at an inflection point in our growth trajectory.”
That recent fund raising gave the group sufficient working capital going forward, while also allowing it to pay off some £2.6m of mezzanine loan facility and loan notes.
It is now debt free, apart from some small operating leases.
Good shareholder list
There are some 286.5m shares in issue.
The larger shareholders include Spreadex (7.87%), Janus Henderson (4.36%), Premier Miton (3.49%), Harwood Capital (2.97%), Canaccord Genuity Wealth (1.85%), Riverfort Global (1.57%), and Yorkville Advisors Global (1.57%).
Peter Fowler owns 6.501,794 shares, some 2.27% of the equity.
2020 results due and broker estimates are looking good
Either late April or early May could be when the group will announce its 2020 results.
Analyst Andrew Simms, at the company’s brokers Arden Partners, has estimated that group sales for last year actually improved from £10.9. to £11.7m, while the adjusted pre-tax loss for the year was just £0.1m lower at £0.7m.
However, Simms sees sales lifting to £16.7m this year to end-December and adjusted profits before tax will be some £1.5m, worth 0.5p per share in earnings.
There is a big proviso against any of the expected sales not actually coming through this year, but Simms appears positive in his ‘buy’ stance and his price objective of up to 19p, as compared to last night’s closing 4.2p.
My view
There is a lot going on within this group and I feel that its shares, at 4.2p, are undervalued and offer some big upside.
Hopefully, I will become even more confident about the company after its imminent results.
In the meantime, I see the shares easily moving upwards and through my target price of 6p, which I set now.
Follow ups featuring Tremor, Safestyle UK, Frontier Developments, Dekel Agri-Vision, Surface Transforms, Begbies Traynor, Costain Group, and Harworth Group…
Tremor International (LON:TRMR) – rumbling in New York’s jungle
What a stunning performer this stock has proved to be, with its shares now at 617p after hitting 700p at one stage, up nearly 450% on my profile price of 14 months ago.
And they appear set to go even higher yet.
The prospect of the programmatic advertising platform for digital video and CTV advertising group achieving a US listing for its shares has ignited interest.
Already it has submitted its SEC filing for a US IPO sometime in the next three months.
Analysts Michael Hill and Lorne Daniel at brokers finnCap have a price objective of 1,000p on the shares.
Stay aboard for the bumpy ride ahead.
(Profile 16.01.20 @156p set a Target Price of 235p*)
Safestyle UK (LON:SFE) – looking for 65p
On Thursday of next week (25) this retailer and manufacturer of PVCu replacement windows and doors will declare its 2020 results.
Analysts are estimating sales of £114m (£126m) and an increased pre-tax loss of £5.2m (-£1.5m).
However, we now know that this year has started well, and we could see £140m of revenues kicking in some £4m of profits and 2.4p per share of earnings.
Going into next year £150m of sales could see profits pick up to £7m, worth 4.1p per share in earnings.
The company’s broker, Liberum, is rating the shares as a ‘buy’ looking for 65p.
Despite improving 31.5% since my profile, just over two months ago, investors should hold very tight in my view.
(Profile 06.01.21 @ 36.5p set a Target Price of 48p*)
Frontier Developments (LON:FDEV) – sales still on the increase
This Cambridge-based video games developer and publisher could see sales for this year to end-May increase from £76.1m to £90m, with pre-tax profits rising from £18.2m to £22m and earnings up from 46.4p to 51.4p per share.
Olivia Honychurch at Liberum estimates £145m sales, £37.6m profits and 86.8p per share earnings.
Understandably she rates the shares, now 2,635p, as a ‘buy’ with a price objective of 3,540p.
Strong hold.
(Profile 01.10.19 @ 1,000p set a Target Price of 1,500p*)
Dekel Agri-Vision (LON:DKL) – double-digit increases
For the sixth month running this sustainable agriculture group has presented a double-digit increase in production, sales and prices.
Andrew Simms at brokers Arden Partners rates the shares as a ‘buy’ looking for 9.3p as his objective.
He is predicting a turnaround this year from an estimated adjusted pre-tax loss of €1.8m to a €0.6m profit to end-December.
Next year he sees a lift in sales to €44.3m kicking profits up to €2.5m.
This little penny stock, now 4.77p, has done well so far, up 138% in six months. I see no reason to sell yet.
(Profile 23.09.20 @ 2p set a Target Price of 3.5p*)
Surface Transforms (LON:SCE) – ready for fast acceleration
The manufacturers of carbon fibre reinforced ceramic automotive brake discs could well now announce its 2020 results next month, which is earlier than had been previously expected.
There is massive anticipation of this little company really breaking its way into the carbon-ceramic discs market, which is 97% dominated by one company.
And it is now achieving orders from OEMs in the global automotive markets.
Very much a longer-term hold, the group’s shares, now 64.5p, have massive upside potential, but remain speculative until it really begins to drive at higher speed.
(Profile 19.09.19 @ 17p set a Target Price of 30p*)
(Profile 08.01.21 @ 50p set a Target Price of 65p*)
Begbies Traynor (LON:BEG) – fair value of 140p
The news that last week this financial advisory group was successful in its £22m fundraising @ 105.50p per share has really helped to boost interest in the group’s shares.
Currently they are trading at around the 114p level, while Equity Development has a ‘fair value’ target of 140p, looking for £10.2m (£9.2m) adjusted pre-tax profits on the back of revenues of £76.5m (£70.5m) for the current year to the end of April.
Next year they see £88.9m of revenues and £13.6m of profits, worth 8.6p per share in earnings.
Now on very much of an expansion phase. Hold tight for the time being.
(Profile 26.11.19 @ 85p set a Target Price of 110p*)
(Profile 21.04.20 @ 93p set a Target Price of 110p*)
Costain Group (LON:COST) – is it climbing back up again
Yesterday’s finals announcement for the 2020 year showed revenues of £1.07bn (£1.17bn) with adjusted profits down from £34.6m to £13.9m and earnings slashed from 25.1p to just 5.8p per share.
Although revenues may well stand still this year, estimates are for profits to double, jacking earnings up to 8p and capable of a 2p dividend per share.
Analyst Joe Brent, at the infrastructure solutions group’s brokers Liberum Capital, rates the shares as a ‘buy’ looking for 80p.
They closed last night at around 71p. They have a very long way to even get back up to my profile price.
(Profile 05.09.19 @ 151p set a Target Price of 250p)
Harworth Group (LON:HWG) – beds and sheds increase in value
Confidence for this current year is being shown by this property regenerator and developer.
Yesterday it announced its 2020 results showing that its H2 saw a big swing around from the poor H1 outcome.
Property values are beginning to pick up again while its rent collections were 96%, with a vacancy rate of only 4.5%.
Its net development value was worth 160p per share at the year end, compared to its 125p share price.
Its brokers are rating the shares as a ‘buy’ looking for 145p.
(Profile 25.07.19 @ 130p set a Target Price of 170p)
(Asterisk* denotes that Target Prices have been achieved since profile publication.)