Compliance, motors, microwave, fans and fit-outs
Marlowe (LON:MRL) – possible £650m disposal adds attractions
Assuring safety and regulatory compliance is what this group’s business-critical services and software provides, and it is showing some improvement of late.
The results for the year to end March declared a 47% improvement in revenues to £465.7m (£315.9m), while its adjusted pre-tax profit was 41% better at £53.6m (£42.0m).
Earnings came out at 45.3p (37.7p) per share.
Analyst Peter Renton at Cenkos Securities rates the acquisitive group’s shares as a Buy.
He is estimating further advances this current year to end March 2024 to £505m sales, £62.5m profits, together with earnings of 48.9p per share.
Over at Berenberg, their analyst Calum Battersby also has a Buy out on the shares, with 800p as his objective.
He sees the potential for both a medium-term re-rating and significant earnings growth.
At Friday night’s closing price of 576p the group is capitalised at around £625m.
But it is important that I also note that recent market whispers suggest that the group is contemplating the sell-off of its testing, inspection and certification division, with £650m possibly being the currently negotiated disposal value.
The TIC side services largely revolve around keeping its customers business premises safe and compliant with relevant regulation and legislation, addressing compliance requirements across fire safety & security, and water & air hygiene.
This division had a revenue last year of £272.6m (£221.7m) and made an adjusted pre-tax operating profit of £25.6m (£21.4m).
If the market rumours prove to be well-founded then such a disposal would clear the group’s £160m net debt position and leave it very well funded for future impactive acquisitions.
The group’s shares, which peaked at 840p last September, were up to 675p a week ago, before easing back to the 576p level.
Hold very tight for further action to come.
(Profile 30.01.20 @ 468p set a Target Price of 550p*)
Vertu Motors (LON:VTU) – gently motoring ahead
Last week’s AGM Trading Update by this leading automotive retailer guided the market that the current year results to end February 2024 will be in line with market expectations.
For the first three months to end May the group delivered a trading profit above prior year levels, despite the continued inflationary-driven cost headwinds.
CEO Robert Forrester stated that:
"I am pleased to report that trading remains positive. Used car pricing has remained firm and we have gained market share in the new car market. The performance of our high margin aftersales business has remained strong.”
Analysts Carl Smith and Mike Allen at Zeus Capital have an average valuation on the shares of 108p, which offers a 50% upside on the current 70p.
Boosted by the recent Helston acquisition, they are going for revenues for the year to end February to lift 17% to £4.71bn (£4.01bn), boosting adjusted pre-tax profits some 22% to £48.0m (£39.3m), generating earnings of 9.9p (8.7p), easily covering a dividend of 2.5p (2.2p) per share.
Over at Liberum Capital analyst Sanjay Vidyarthi is reported as saying that the market supply-demand environment ‘is likely to remain favourable’ and the ‘sector is in play’.
“Vertu remains our top pick. A current-year 2024 price/earnings of 6.6 times is too cheap.”
We should be getting a further update on current-year trading when the group publishes its Interim Trading Update in early September.
In the meantime, the shares could well have some climbing to do, not for chasing but heading to 80p?
(Profile 12.10.20 @ 30.5p set a Target Price of 40p*)
CML Microsystems (LON:CML) – looking for further property developments
I like this group, which develops mixed-signal, RF and microwave semiconductors for global communications markets.
The group's vision is to be the first-choice semiconductor partner to technology innovators, together transforming how the world communicates.
Its rating is far higher than I would normally select, however I really do believe that its shares are under-rated.
The results for the year to end March showed a 22% increase in revenues to £20.64m (£16.96m), while adjusted pre-tax profits advanced 71% to £3.6m (£2.1m), taking earnings up 67% to 22.1p (13.2p), double covering the 11.0p (9.0p) dividend per share.
For the current year Martin O’Sullivan at Shore Capital is looking for £23.1m revenues, £4.4m profits, 27.3p earnings and a 13.2p dividend.
He sees the shares returning to the 600p level.
The £72m group has some £22m of net cash and has a healthy order book at more than double pre-Pandemic levels, stretching well into 2024.
The current trading period is expected to be a further year of improvement, with solid growth in revenues and operational profitability.
The shares, having touched 596p, are now at 460p and well down on my late February price, but that makes them more attractive, especially as there are some latent property advantages.
(Profile 27.02.23 @ 560p set a Target Price of 650p)
Volution (LON:FAN) – is it getting hotter?
In just over two weeks, we shall be seeing the next Trading Update from this leading international designer and manufacturer of energy-efficient indoor air quality solutions.
Just a couple of weeks ago it completed its 20th acquisition since coming to the market nine years ago, this time of a company in Slovenia and Croatia.
Analyst Charlie Campbell at Liberum Capital rates the shares as a Buy, looking for 460p in due course.
His estimates for the year to the end of this month are for sales to have risen to £324m (£308m), taking adjusted pre-tax profits up to £62.9m (£60.9m), earnings to 24.5p (24.0p) and a fractionally better dividend of 7.5p (7.3p) a share.
For the coming year he sees sales of £347m, profits of £66.8m, 25.7p of earnings and a 7.8p dividend.
The shares, which touched 456p in late May, are currently trading at around the 380p level.
That values the global group at £752m, showing the shares are undervalued as far as I can see.
Come 20th July we shall get an up-to-date summary of current trading, which I look forward to helping the shares regain their recent strength.
(Profile 23.05.19 @ 174p set a Target Price of 250p*)
Morgan Sindall Group (LON:MGNS) – a much better fit sees profits higher
This construction and regeneration group surprised the market last Thursday by declaring a profit upgrade.
Its ‘fit-out’ division has been performing exceptionally well and boasts a healthy forward order book for the group’s second half year.
The group subsequently gave market guidance that the anticipated net prospects for the rest of the group leads the company to expect its full year profits to be ahead of previous expectations.
The Interims will be announced in one month’s time, when we should be getting a better picture of trading.
The group’s shares have risen to close at 1835p, up over 100p on the better news.
(Profile 14.05.19 @ 1300p set a Target Price of 1600p*)
(Asterisks * denote that Target Prices have been achieved since Profile publication)