Small Cap Catch-Up: Opportunities To Clean Up?
Centaur Media (LON:CAU) – Margins Improving, Take A Positive View
Could this be a good time for patient ‘risk tolerant’ investors to take a view on this £56m capitalised group showing some corporate strength by the end of the current year?
At last night’s closing price of just 38p the shares are trading at their lowest level for three years, yet it is still reporting improving profits.
Centaur is an international provider of business intelligence, learning and specialist consultancy that helps ambitious leaders see around corners and deliver change in the Marketing and Legal verticals.
The group’s suite of brands, which includes Econsultancy, Marketing Week, MW Mini MBA, Festival of Marketing, Influencer Intelligence and The Lawyer, provide deep sector expertise across the Marketing and Legal industries based on its customers’ needs.
Two weeks ago, the group issued a Trading Update for its year to end December 2023, guiding a slip in revenues but a growth in year-on-year margins.
Swag Mukerji, Chief Executive Officer, commented:
“Centaur continues to perform well despite the macroeconomic uncertainty that characterised 2023 for our customers.
During this time, we have taken financial and operational steps to improve the efficiency of our business and I am very pleased that we have exceeded the profit margin target set out over 3 years ago.
I am particularly proud that, despite the extreme upheaval of the last few years, we have significantly grown our profits and built a business with a high proportion of strategically valuable revenue generated from blue-chip customers.
This provides a strong platform for our future strategy, which we will outline following our preliminary results.”
Analysts Fiona Orford-Williams and Milo Bussell, at Edison Investment Research, have estimates for revenues for the year to end December 2023 of £37.2m (£41.6m) but with pre-tax profits increasing to £7.4m (£5.2m), hoisting both its earnings up to 3.7p (2.7p) and also its dividend to 1.4p (1.1p) per share.
Cautiously they look for £40.0m sales this year, with £7.6m profits, 3.7p earnings and an increased dividend of 1.6p per share.
The analysts have a peer comparison valuation of 64p out on the shares.
Over at Singer Capital Markets, analysts Tom Like and Harold Evans, have a Buy rating on the shares, seeking a Price Objective of 78.0p in due course.
They were impressed by the predicted record margin performance being shown by the group, with their estimates being £37.2m revenues in 2023, £7.5m adjusted pre-tax profits, worth 4.1p in earnings per share.
For the year now underway they have pencilled in £40.0m sales, £7.9m profits, 3.9p earnings and a 1.64p dividend per share.
A year ago, this group’s shares were trading at 54p, before peaking at 56p on 15th March upon the 2022 Finals being published.
The company and, therefore, the analysts will be updating come Wednesday 13th March.
However, in the meantime, I fancy the group’s shares as an interesting situation, especially taking a 2024 view.
(Profile 03.03.21 @ 33p set a Target Price of 41p*)
Sanderson Design Group (LON:SDG) – Continuing To Improve
Just over a month ago the shares of this interior furnishings, fabrics and paints group were trading at 111p, they closed last night at around the 128p level.
The highest they touched in 2023 was 148p, that was at the end of April, just after the group announced its Annual Results for the year to end January 2023.
The lowest they have traded in the last year was 95p last August, at the time of its Half Year Trading Update.
That announcement guided that market expectations would be met, however it also sounded out a cautious warning about the general economic environment.
Subsequently to that price reaction by investors and the Interim Results in early October, the group’s shares have been edging gently better, aided somewhat by new licensing deals with some major retail names.
The gradual improvement in the group’s shares gives me a certain confidence that its imminent Final Trading Update will show continuing balance sheet strength and not too much of a fall-back in adjusted pre-tax profits for the year just concluding.
As far as I am concerned, I believe that Sanderson is a ‘classic design’ business of global recognition and deserves a far better rating than that currently accorded to its shares.
It is an international luxury interior furnishings company that designs, manufactures and markets wallpapers and fabrics together with a wide range of ancillary interior products and it has some top design brand names in its portfolio.
Analyst Matthew McEachran at Singer Capital Markets rates the group’s shares a Buy, looking for 204p as his Price Objective.
His estimate for the last year show sales down £2m at £109.9m, while adjusted pre-tax profits could be nearly 5% lower at £12.0m, easing back its earnings to 12.8p (14.3p) but maintaining its dividend at 3.50p per share.
The analyst expects £114.1m sales this coming year to end January 2025, with £13.0m profits, 13.5p earnings and an increased dividend of 3.69p per share.
Towards the end of November last year Close Asset Management doubled its holding to 10.00% of the group’s equity, following a purchase of stock at around the 114p level – I am convinced that as a longer-term holder this fund manager will do very well with the position.
Shocks permitting, I really do believe that these shares will continue to improve over the next few months and retain my view that they are totally undervalued at 128p.
(Profile 24.04.23 @ 135p set a Target Price of 168p)
Team Internet Group (LON:TIG) – Outperforming Expectations
I will not bore you anymore with comments on this global internet solutions business, other than to state that Monday’s Trading Update for its 2023 year was very encouraging indeed.
Analysts Bob Liao and Carl Smith at Zeus Capital believe that it has extended its track record of upgrading and outperforming expectations.
They were impressed by the double-digit growth in both the Online Presence and the Online Marketing segments of the group’s business.
Looking ahead they believe that the company has strong long-term growth opportunities including international expansion, new partner development and vertical integration.
Their conclusion is that the group’s shares are very attractively valued.
Over at Edison Investment Research their analysts Max Hayes and Dan Ridsdale remarked that the group has made solid advances on all fronts.
They consider that the rating looks low given the company’s growth profile, diversity and growing track record.
The shares, which closed at 134.40p, remain a good Hold.
(Profile 12.07.21 @ 89p set a Target Price of 110p*)
(Profile 17.01.24 @ 124.60p set a Target Price of 156p)
Accrol Group Holdings (LON:ACRL) – Wet Wipes Are Important For Growth
Earlier this month the shares of this tissue converter were trading at 39p, since when they eased back to a mid-month low of 34.38p.
I mentioned the wet wipe maker a week ago, noting that the market was expecting some strong half performance results to be announced.
Yesterday morning the group declared its Interim Results to end October last year.
They were good and indicated that despite an easing in sales revenues for the period to £100.3m (£121.1m), due to prices easing, the actual adjusted pre-tax profits were 56% ahead at £5.0m (£3.2m) at the halfway point.
CEO Gareth Jenkins stated that:
“We are pleased with the Group’s performance which has come in ahead of our initial expectations at the start of the financial year.
We continue to deliver by producing great quality and value products, which meet every consumer’s budget.
Our unrivalled retail relationships and robust supply model ensure that we can continue to deliver strong results in this dynamic market environment.
The Group is delivering on its strategy and is well positioned to deliver further growth, as it builds upon its broad customer base and market-leading products.”
Analysts Clive Black and Tom Fraine at Shore Capital Markets have already estimated that the full year, to end April, will show sales lower at £205.0m (£241.9m) while adjusted profits before tax could rise from £6.5m to £10.6m, almost doubling earnings to 3.2p (1.8p) per share, with a possible dividend of 0.5p (nil) per share.
The analysts have a ‘fair value’ on the shares of 50p, against last night’s closing level of just 34.45p.
At that level the whole group is capitalised at £110.3m.
Its shares are underpriced and could well head up through and above my recent Target Price before Spring is over.
(Profile 12.03.19 @ 22p set no Target Price)
(Profile 22.01.24 @ 34.60p set a Target Price of 39.75p)
(Asterisks * denote that Target Prices have been achieved since Profile publication)
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