Anexo, Surface Transforms, Gattaca, PayPoint, Helical, Marlowe, Angling Direct, Robinson, PCI-PAL +
20th August 2021
Small-cap round-up featuring Anexo Group, Surface Transforms, Gattaca, PayPoint, Helical, Marlowe, Angling Direct, Robinson, PCI-PAL, Capital Limited, Kingswood Group, MPAC Group and McBride
Anexo Group (LON:ANX) – bid talks are off, shares are now a buy
The potential bid by DBAY Advisors is off the table and now the credit hire and legal services provider can get back to its business again.
Chairman Alan Sellers, who was involved in the approach, commented that “The group’s activities continue to accelerate as UK lockdown measures ease, especially with the imminent release of pent-up case settlements as the UK Courts system begins to open. Cash collections remain consistently high and, with road users increasing, the number of vehicles on the road is reaching record levels.”
It appears that trading is ahead of expectations, no doubt more will be told on Monday 13 September when the group announces its interim results to end June.
Analyst Andrew Simms at Arden Partners rates the shares as a ‘buy’.
Upping his estimates, he now goes for the current year to end December to come in with sales of £97m (£86.8m) and adjusted pre-tax profits of £21.5m (£16.1m), with earnings jumping from 11.4p to 14.8p and covering a 2p (1.5p) dividend per share.
Better still Simms is confident enough of the group’s trading prospects to pencil in £111.6m of revenues for next year, generating £26.1m of profits and 18p of earnings, with a 2.4p dividend per share.
Arden has put out a 280p price objective for the shares, which fell back 8.5p to 133p on the ‘discussions off’ news.
At that level I would suggest that they are worth jumping into ahead of the interims.
(Profile 23.04.20 @ 134p set a Target Price of 175p)
Surface Transforms (LON:SCE) – mega-contract win releases price brakes
The manufacturers of carbon reinforced ceramic brake discs announced a contract award on Wednesday, which boss Kevin Johnson states is a very significant win for the company.
The customer is a major mainstream US automotive company, one of the most respected names in the industry. The contract, which could be worth £20m, is likely to start in 2024.
Analysts Raymond Greaves and Michael Clifton at finnCap currently have a 69p price objective on the group’s shares.
Over at Zeus Capital, which is NOMAD and broker to the company, analyst Robin Byde is valuing the shares at 80p.
The interims to end June will be declared on 13 September.
The shares at 63p obviously remain speculative until its really starts to get into production and pumps in the profits to back up the valuations.
(Profile 19.09.19 @ 17p set a Target Price of 30p*)
(Profile 08.01.21 @ 50p set a Target Price of 65p*)
Gattaca (LON:GATC) – entered the next stage of its recovery
On Tuesday morning the UK’s leading specialist engineering and technology staffing business issued a Trading Update for its year to end July.
Pre-tax profits and net cash will be above market expectations when the group announces its finals on 4 November.
Sanjay Vidyarthi, analyst at Liberum Capital, rates the shares as a ‘buy’ looking for 275p. He goes for £400m of fees last year and £3.2m of pre-tax profits, worth 6.34p in earnings.
For next year he sees £476m income and £6m profits, generating 13.64p in earnings and covering a 3p dividend per share.
For the year to end July 2023 he estimates £521m revenues, £9m profits and 20.64p in earnings, covering a 5p per share dividend.
In June the group’s shares touched 288p and have since fallen back to the current 210p, at which level they offer good short-term investment appeal.
(Profile 10.05.21 @ 148p set a Target Price of 185p*)
PayPoint (LON:PAY) – OFGEM out of the way helped share spurt
I always like to see ‘insiders’ tucking more stock away in their companies.
So, when I noted the recent purchase by various of this payments solutions group’s directors at prices from 630p to 640p, I was pleased to see the subsequent rise in price to 682p.
It has an electronic point of sale services retail network that is positioned across some 28,000 convenience stores, larger than all the banks, supermarkets and Post Offices put together.
Its Collect+, which is a tech-based delivery solution, allows parcels to be sent, picked up and dropped off at thousands of local stores.
The company’s digital payments platform, MultiPay, enables cash through to digital transactions and cash solutions providing vital consumer access across its extensive retail network.
Following the recent agreement with Ofgem it has made certain voluntary commitments in redress and that has helped kick in something of a relief rally, with the shares ending the week a clear 100p higher at around the 696p level.
This Profile stock has been a slow burner but could well see my price objective being achieved before the year is out.
(Profile 17.02.21 @ 598p set a Target Price of 750p)
Helical (LON:HLCL) – a clear green premium for best-in-class
I was pleased to see the latest figures from Remit Consulting’s REMark Report showing that the collection of rent from commercial property tenants has continued to pick up from Covid-19 times.
It stated that overall an average of 78.6% of the rent due was paid within 35 days of the due date at the end of the June quarter,
The report covers 125,000 leases on 31,500 prime commercial property investments across the country.
That is good news for my favourite prime property group. Its portfolio really is top notch and rented out to top name tenants, mainly in central London and Manchester.
However, I am sure that Helical’s tenants are paying up on a much better rate than the REMark average.
In fact, as at 14 July, the group reported that 87.3% of its June quarter rent had been collected.
The group’s shares are trading at around the 481p level and remain a very firm hold.
(Profile 11.06.19 @ 389p set a Target Price of 489p*)
Marlowe (LON:MRL) – it takes guts to walk away
It is very ballsy to walk away from a bid situation that you initiated because the other side was not too keen to talk. So many bidders stick to their target and up their price – in an effort to win through.
Not so for this group – a clean break was right and further bid expenditure was curtailed in the abandonment of the contested approach.
Analyst Peter Renton at Cenkos Securities rates the shares of this group as a ‘buy’.
It offers a range of special services which cover: property compliance, health and safety, fire safety and security, water treatment, as well as air quality services.
He estimates that the current year to end March 2022 will see revenues increase from £192m to £280m, while adjusted pre-tax profits could jump from £17.1m to £32.2m, worth 33.4p per share in earnings.
Last Tuesday Alex Dacre, the group’s CEO, bought another 3100 shares for himself at 807.2p each, taking his holding up to 4,660,502 shares representing 6.04% of the group’s equity.
A lovely positive pointer, as far as I am concerned.
Just two months ago they touched 909p each, but that was before the Restore bid approach in late July.
They close the week at around 809p, at which level I foresee further institutional nibbling.
(Profile 30.01.20 @ 468p set a Target Price of 550p*)
PCI-PAL (LON:PCIP) – stunning ARR rates
In late July, the global cloud provider of secure payment solutions for business communications, stated that the year to end June had seen a 66% advance in its revenues to around £7.3m, while its pre-tax loss will be lower than expected.
Although it is still losing money the group is actually doing very well, building up its Total Annual Contract Value.
Its TACV is how the company is judged upon its future recurring revenue – that was 41% higher at £9.5m as at the year end. It signed 195 new customers last year (100 previously).
Throughout the year it continued to achieve high customer retention rates. Net retention exceeded 100%, as a result of upselling demand from its existing customers.
Regular column readers will know by now just how much I love to see ARR rates from the tech sector companies and PCIP rates so highly it is impressive.
That is why I do not worry about the losses as it is building up its business, those ARR rates are its springboard of further growth.
Analyst Lorne Daniel at brokers finnCap estimates for last year it will have lost £3.5m pre-tax.
For the current year to end June 2022 he sees £10.4m of revenues and a slightly bigger development loss of £4.1m.
Then for 2023 he has pencilled in £13.9m of revenues and a halved loss of just £2.2m.
The broker’s price objective is 125p a share, which looks conservative taking a medium-term view.
The group’s results will be declared on Monday 6 September, by which time could the shares, now 89p, be on their way back up to trade around the 121p level reached in late March this year?
(Profile 11.02.21 @ 76p set a Target Price of 95p*)
Capital Limited (LON:CAPD) – the long slog continues
Focused on the African resources markets, this mining services group yesterday announced its half-time results to end June.
They showed a 7% increase in the number of drill rigs to 106, together with an excellent 28.1% rise in the utilisation rate at 73%.
Revenues rose 51.6% to $98.7m, while its net profits after tax came out 35.3% better at $18.4m. Interim earnings were 140.1% up at 6.7c per share. Even the net asset value per share was 19.2% to the fore at 86.3c.
Capex was 295.7% higher at $27.7m, while net debt rose to $32.8m ($0.1m), representing a net debt/equity level of 20.1%.
Despite the slight ‘fogging’ of these figures, which included $5.7m of equity investment gains, these were good results.
Tamesis Partners suggest that all parts of the group’s business – drilling, mining, investments and laboratory work – are set to grow materially.
They see revenue for the end December year rising to $201.8m ($135m) while its profits after tax could increase from $24.6m to $25.9m, with its earnings coming out at 13.6c (18.1c before the recent funding issue).
Tamesis have a price objective of 135p on the group’s shares.
I sincerely hope that this group is now getting itself into forward gear, so too its share price, which has been impeded by holder disposals of 3m shares @ 77p each, combined with the big issue of 51.8m Placing shares @ 58p each last December.
By the way Investor Meet will be holding an investor presentation for the group next Wednesday.
The group’s shares, which eased on the results to 80p, may take a lot more time to get up to my price objective.
(Profile 23.07.19 @ 48p set a Target Price of 76p*)
(Profile 22.10.19 @ 61p set a Target Price of 100p)
(Profile 03.08.20 @ 77.5p set a Target Price of 100p)
Kingswood Holdings (LON:KWG) – another growth deal
Mid-week this wealth and investment management group stated that it had completed the £4m acquisition of Admiral Wealth Management, a North Lincolnshire based Chartered Financial Planning firm.
The deal consolidates and adds scale to its existing presence across North Lincolnshire and Yorkshire, it also boosts Kingswood's UK client facing advisory team to 66 people and increases UK funds under advice/management to £4.5bn from circa 8,500 active clients.
The group is currently in active negotiations on another eight possible acquisitions as part of its strategy to continue to grow its financial planning and investment management reach across the UK and internationally.
Its interim results, which should be announced inside the next month, will justify the recent buying decisions of a number of the group’s directors.
This week the group’s shares touched 34p in response to the growth news and close the week at around 32p.
(Profile 03.12.19 @ 20p set a Target Price of 30p*)
Angling Direct (LON:ANG) – great first half, hopes for continuation
The specialist fishing tackle and equipment retailer issued a first half Trading Update on Wednesday.
For the six months to end July the group, which sells over 20,000 fishing tackle items through both its online and its shop retail operations, showed an advance of 19.5% in revenues at £38.4m.
Of those sales some £18.4m was online, while £19.9m was store-based.
The end of period saw net cash of £19.6m against £21m previously.
That was a quite good sales performance considering that its retail stores were closed from the start of February until mid-April.
It now has some 39 stores across the UK, while its digital side not only handles UK business but also covers the French, German and Dutch languages in their European markets.
We will have to wait until 13 October for the interim figures and statement.
In the meantime, I note that Matthew McEachran, analyst at Singer Capital Markets, has upgraded his current year estimates for the year to end January 2022. He is looking for £72.5m sales (£67.6m) and £2.7m (£2.6m) adjusted pre-tax profits.
For 2023 he goes for £80m sales and £2.8m profits, based upon which he puts out a fair value of 100p plus per share.
Yesterday they closed at 70p. If they drift back to much below 70p before the interims, the shares could well be worth a little position.
(Profile 29.10.19 @ 58p set a Target Price of 100p)
MPAC Group (LON:MPAC) – presenting itself very well
The high-speed packaging and automation solutions group will be featured in an online investor webinar on Thursday 2 September.
The subject for discussion will be the now global group’s interim results for the six months to end June.
After a slow start, following my Profile on the group, the shares have had a very steady, but heady rise, in share price, while the group itself has expanded significantly.
MPAC is a good story, so the presentation should be a good use of time.
Having peaked at 618.6p earlier this month, the shares have subsequently eased back on a combination of profit-taking and market sentiment.
Now trading at around 575p they remain a firm hold.
(Profile 19.12.19 @ 182p set a Target Price of 235p*)
Robinson (LON:RBN) – price is about right until recovery shows through
The interim results from this custom manufacturer of plastic and paperboard packaging covered the half year to end June.
Revenue was up 19% at £21.2m, while the loss before tax was a sad £0.6m, compared to the previous £1.1m profit. Worse still net debt was £13.7m (£6.6m).
Robinson, which provides products and services to major players in the fast-moving consumer goods market including McBride, Procter & Gamble, Reckitt Benckiser, SC Johnson and Unilever, is hoping that raw material prices have steadied after the recent rises amid supply hassles.
The group’s two surplus properties are still under negotiation for disposal in the current half year, with a gross value of £3.4m against a book value of £1m. There are other property assets that are surplus to needs, possibly worth a further £4m.
Analysts Raymond Greaves and Michael Clifton at finnCap consider that the group has a sum of the parts value of 150p a share.
They estimate £48.3m of sales for the year to end December, producing a £1.7m adjusted pre-tax profit worth 8.7p in earnings and able to cover a 5.5p dividend per share.
The shares, which have been up to 179p this year, are now at around 115p and looking at about the right price until recovery shows through in 2022.
(Profile 02.04.20 @ 55.5p set a Target Price of 80p*)
McBride (LON:MCB) – a core business worth backing
This company is the European leader in manufacturing and supplying private label and contract manufactured products for the domestic household and professional cleaning and hygiene markets.
It has had a rough time in the last few months, caused by raw material price rises and supply problems.
Unfortunately, it has knocked the group for six, bringing about yesterday’s Trading Update giving guidance of around a 60% profit fall below previous market estimates.
We will get a further update on Tuesday 7 September, when the group announces its final results for the year to end June.
Surprisingly the company’s shares only fell back 10% on the news to trade at the end of the week at around the 77p level.
Having been as high as 98.8p, within a 0.7p whisker of achieving my early March profiled price objective, I am disappointed.
However, this group’s management will cope with its material hassles and come back fighting. It is an excellent example of fundamental manufacturing in the UK and it has a very strong position in its marketplace.
The shares are a firm hold, let us wait for the finals comments before taking advantage of this price fall.
(Profile 10.03.21 @ 79.5p set a Target Price of 99.5p)