In this weekly summary, Mark Watson-Mitchell updates his readers on previous company profiles and other news of interest from the exciting world of small-cap shares…
Bloomsbury Publishing (LON:BMY) – the door is closed
“Your name’s not on – you ain’t coming in!”
I just have to admire the strength of the management edict at my favourite publishing house.
If staff have not had their Covid vaccine doses they will not be allowed to return to their offices.
That is an excellent prevention measure on behalf of all of the staff who have been dosed up. That decision was made after having taken medical and scientific advice, following the death of two employees at the group’s Indian division.
I wonder whether many firms are so specific in their regulatory controls.
Canaccord Genuity have recently been topping up their holdings in Nigel Newton’s group, now up to 13.02% of the equity.
The shares still look very good value at just 340p.
(Profile 28.02.19 @ 231p set a Target Price of 257p*)
(Profile 27.03.19 @ 238p set a Target Price of 270p*)
Halfords Group (LON:HFD) – no room for back-pedalling
Obviously, a proud man – Graham Stapleton, Chief Executive Officer of the UK’s leading provider of motoring and cycling products and services, last Thursday declared that, “We are delighted to have delivered a year of very strong financial and operational progress, especially in light of the extraordinary challenges presented by the pandemic.”
That was as the group revealed its results for the 52 weeks to 2 April, showing a strong performance driven by share gains in motoring services, strong demand in cycling and profitability improvements across the group.
There are not enough cycle makers in the world to be able to cope with meeting the demand of retailers. That may well be a bit of a supply problem.
These are wonderful results, which have been well heralded but still make the shares look cheap at 402p.
(Profile 02.07.20 @ 156.5p set a Target Price of 180p*)
Westminster Group (LON:WGS) – two big contracts mean this is undervalued
It was very interesting to note that less than a week ago fund management group Janus Henderson picked up their stake in this specialist security services group to 5.41% of its equity.
Of course, last week’s two items of important contract news make the shares look even more attractive.
And following last Thursday evening’s quick £2.5m fundraising for 43.86m new shares @ 5.7p each, which was well oversubscribed, the group has sufficient funds in the bank to strengthen its ability to handle its growing opportunities.
Understandably, this would have interested a number of small cap institutions to open up or increase their positions in the equity.
Remember analyst Andrew Simms at Arden Partners is going for £15.7m of sales to end-December this year (£9.9m), turning it around from a £0.8m loss last year to a £0.9m adjusted pre-tax profit, worth 0.3p per share in earnings.
Next year, he has forecast £23.7m sales and £5.3m profits, worth 1.6p per share in earnings. Allowing for the quick funding and subsequent equity dilution, he has dropped his ‘buy’ rating price objective from 19p to 18p.
Considering that the shares closed on Friday night at just 5.6p they are still obviously a cracking ‘penny stock’ punt. I see them trading up through the 10p level this year.
(Profile 17.03.21 @ 4.2p set a Target Price of 6p*)
Loungers (LON:LGRS) – what would you like sir?
Who would have wanted to be in the café/bar/restaurants business in the last year or so? It must have been just like powerboat racing, where you burn £50 notes within seconds.
This group, which has some 173 establishments in operation, is expected to have seen its sales fall over 50% from £166.5m to around £78.0m in the year to end-April.
That wiped out a profit of £2.0m in the previous year, dropping over into a loss of some £13.6m.
But let us look at what could happen when all the lockdown restrictions are ended.
Analyst Anna Barnfather at Liberum Capital is positive about the group’s current year prospects.
She is going for a big bounce back in revenues, to £211.5m, and a healthy £13.2m pre-tax profit, worth 10.3p in earnings per share.
Rating the shares as a ‘buy’ her price objective is 350p.
The group should be announcing its full-year figures on Wednesday 21 July, at which time we could well get a more current trading statement.
In the meantime, the shares, now 277.5p, are a hold.
(Profile 03.09.19 @ 205p set a Target Price of 275p*)
Kromek Group (LON:KMK) – sensing a higher price
This £67m valued UK technology group designs, develops and produces x-ray and gamma ray imaging and radiation detection products for the medical, security screening and nuclear markets.
A week ago, it announced that it had been awarded a $6m contract extension by the US Defense Advanced Research Projects Agency for the further development of a biological threat detection system.
Despite ongoing operating losses, the group’s broker, Cenkos Securities, is bullish about the group’s prospects going forward.
It is expecting a 50% uplift in group revenues in this current year to end-April 2022 and rates the shares, now 16p, as a ‘buy’.
They have got some motoring to do to get anywhere close to my price objective.
(Profile 22.02.21 @ 19p set a Target Price of 23.5p)
K3 Capital (LON:K3C) – upped price objective of 449p
Boy oh boy, we have enjoyed a very good ride in this company’s shares since I profiled it late last year.
Based in Bolton, with operations throughout the UK and overseas, it is a multi-disciplinary and complementary group of professional services businesses advising small and medium sized enterprises.
That takes in advice on mergers and acquisitions, taxation, business restructuring and recovery, amongst a plethora of other advisory services that it offers.
Last Tuesday it published a pre-close trading update which clearly outlines its better results for the year to end-May 2021.
Analyst Nik Lysiuk at finnCap estimates that the group will have more than trebled its revenue last year, from £15.0m to £46.0m, while more than doubling its profits from £6.4m to £13.9m, worth 16.4p (12.2p) in earnings and amply covering an increase in its dividend from 7.5p to 9.1p per share.
Market estimates for this year and next suggest £50.0m revenues then £60.0m, with £15.0m then £18.0m in profits.
Lysiuk has upped his price objective from 397p to 449p.
The shares closed last Friday night at just 365p – suggesting that there is still more to go for.
(Profile 21.10.20 @ 147.5p set a Target Price of 200p*)
OnTheMarket (LON:OTM) – ‘toppy’ at this level?
Analyst Robin Savage at Zeus Capital estimates that this property portal will see its current year revenues rise from £23.0m to £29.2m, but its adjusted pre-tax profits will fall almost 60% from £2.4m to £1.0m. That is to the end of January next year.
However, he has pencilled in a very strong pick-up for next year, to £35.0m in revenues and a more than quadrupled profit at £4.1m, which would be worth 3.8p per share in earnings.
The current share price of 95p actually feels ‘toppy’ especially considering the massive rise in national property values not being reflected in its profits.
(Profile 24.09.19 @ 96.5p set a Target Price of 175p)
(Asterisk* denotes that Target Prices have been achieved since profile publication)
Profile company results, meetings and updates expected within the next two weeks:
| Mon 21 | Randall & Quilter Inv Hldgs (RQIH) | AGM |
| Tue 22 | Idox (IDOX) | Webinar |
| Palace Capital (PCA) | Webinar | |
| Staffline Group (STAF) | Fins | |
| Trackwise Designs (TWD) | Fins | |
| Wed 23 | Angling Direct (ANG) | AGM |
| Joules Group (JOUL) | T/U | |
| Manolete Partners (MANO) | Fins | |
| Pebble Beach Systems Grp (PEB) | AGM | |
| Vertu Motors (VTU) | AGM | |
| Thu 24 | Redcentric (RCN) | Fins |
| Robinson (RBN) | AGM | |
| STM Group (STM) | AGM | |
| Westminster Group (WSG) | AGM | |
| Mon 28 | Futura Medical (FUM) | AGM |
| Tue 29 | Crimson Tide (TIDE) | AGM |
| D4T4 Solutions (D4T4) | Fins | |
| Hunting (HTG) | T/U | |
| Lamprell (LAM) | Fins | |
| Wed 30 | Block Energy (BLOE) | AGM |
| National World (NWOR) | AGM | |
| Stagecoach Group (SGC) | Fins | |
| Studio Retail Group (STU) | AGM | |
| Topps Tiles (TPT) | T/U | |
| Thu 1 | Polar Capital Holdings (POLR) | Fins |