Cyber security, Bricks, Shipbroking and Debts
Kape Technologies (LON:KAPE) – Teddy the price is not cuddly enough
What do you do when a company, in which you control 54.8% of the equity, is not being afforded a realistic market rating?
That must have been a quandary facing Teddy Sagi, the Israeli-Cypriot multi-billionaire financier whose cyber security software services group Kape Technologies was suffering such a low valuation.
So last December, when its shares were trading at only 225p, he approached the group’s Board with a 265p a share cash bid for the 45.2% that his Isle of Man-based Unikmind investment company did not already own.
The approach was rebuffed.
In a statement to The Financial Times Sagi commented:
“Having weighed the pros and cons of a public listing under the current macro uncertainties and thin stock market trading as well as new growth avenues, we are firm in our view that Kape’s next chapter in its corporate journey should be within the private arena.”
On Monday of this week Sagi, who also owns Camden Market in North London, came back with his offer to the Board, after he was enabled to do so following restrictions being lifted.
Again, the offer has been rejected by the Board, who advise shareholders to await their next comments.
Immediately it became public knowledge, the shares lifted in price to touch 295p before resting 35p higher on the day at 292p.
The dealing volume in the shares was nearly 100 times greater than the daily average, with some 31.8m traded on Monday.
Last night they closed at 292.5p on the back of some 3m shares being traded.
Such a cash offer may not succeed, however, what Sagi has now given the market is a very clear marker of the price that he is more than willing to pay for this cracking technology services group’s shares.
Hold very tight and remember that just fifteen months ago they were up to 455p – although it may take a long time before my 2021 Target Price of 600p is achieved.
I would guess that when he is able to, Sagi will dip into the market and soak up more shares.
No doubt he will table a proposal to shareholders that the group is taken private, but he will need at least another 21% of the group’s equity under his belt to secure such a voting victory.
Come on Teddy give shareholders a good cuddle with a better price than 285p for their shares – you know that you can afford it and you also know that the shares are worth well over 400p at least.
That does not mean that another bid would need to be around that price, but 325p a share feels a great deal more attractive.
(Profile 21.12.20 @ 172p set a Target Price of 215p*)
(Profile 01.11.21 @ 402.5p set a Target Price of 600p)
Brickability Group (LON:BRCK) – beating market expectations
This group has continued to trade strongly across all of its business divisions since its interims to end September last year.
Now the construction materials distributor is expecting to announce better than market expectations for its year to end March 2023.
Brickability is a leading construction materials distributor, serving customers across the UK and Europe for over 37 years through its national and local networks.
The group, which is the UK’s leading UK brick factor, supplies over 550m bricks annually and has over 55 locations across the country, with over 600 employees.
In addition, it has a roofing products supply and fit business, while also being a leading distributor of imported timber products, towel rails and radiators.
We will have to wait until late April, when the full year Trading Update is due to be announced, to assess its real strength in this year and its prospects going forward.
Analyst Andrew Gibb at Cenkos Securities rates the group’s shares as a Buy.
His estimates are for current year sales at £639.9m (£520.2m), with adjusted pre-tax profits of £40.1m (£34.7m) with earnings of 10.8p (10.1p) and an increased dividend of 3.2p (3.0p) per share.
Gibb concludes that the group’s current valuation does not reflect the inherent strengths of the business, which are its structural growth, its low fixed overhead base, its experienced management team and its diverse product mix.
The shares closed last night at 73p, valuing the group at £218m, which I consider is too low a rating – with 100p being very feasible based on those broker estimates.
(Profile 16.04.20 @ 39p set a Target Price of 55p*)
Braemar (LON:BMS) – continuing to trade well up to February year-end
The group, which is a provider of expert investment, chartering, and risk management advice to the shipping and energy markets, yesterday announced a Trading Update for the year to the end of this month.
It also announced its intention to propose a capital reduction process, which would increase the group's distributable reserves, to increase its capacity to pay future dividends and provide sufficient distributable reserves to cover all historic dividends paid.
The group has continued to trade well since the release of its interim results in November last year. The integration of the newly acquired Spanish and US businesses, announced in December 2022, has progressed well and both businesses are set to make an immediate and strong contribution to the group's trading in the next financial year.
A more detailed update on trading for the year ending 28 February 2023 and on expectations for the year to February 2024, will be given in a pre-close update to be announced in the middle of next month.
Consensus estimates for the year are for £130m (£101m) revenues, pre-tax profits more than doubling to £19.1m (£8.5m), lifting earnings up to 41p (37p) and paying a 12p (9p) dividend per share.
The group’s shares are currently trading at only 315p, giving the group a capitalisation of just £104m – that is without doubt a very low rating for such a progressive group, especially as its Management wants to give even better dividends.
I see these shares, which were up to 350p last September, lifting to 400p in due course.
(Profile 05.12.19 @ 185p set a Target Price of 250p*)
(Profile 20.05.20 @ 99p set a Target Price at 150p*)
FRP Advisory Group (LON:FRP) – slightly lowering the estimates
The nine-month Trading Update from this specialist business advisory services group, issued on Monday, was in line with market expectations for the company’s full year.
For the year to end April 2023 estimates now have been lowered slightly in profit terms, while revenues are unchanged.
The group provides restructuring advisory services which take in administrations and liquidations, while it also offers corporate finance, debt advisory, pensions advisory and forensic services.
The company has clearly stated that demand for its services is expected to increase as businesses continue to face rising inflation and higher borrowing costs.
Analyst Peter Renton at Cenkos Securities, the group’s brokers, is now estimating that the current year revenues to end April will be £100m (£95.2m), while lowering slightly his adjusted pre-tax profit estimates by 3% to £22.8m (£23.1m), giving earnings of 7.5p (7.6p) but with a higher dividend at 4.5p (4.3p) per share.
For the coming year he goes for revenues of £105m, profits of £24.4m, earnings of 7.4p but again with a higher dividend of 4.7p per share.
His end year net cash estimates for 2023 and 2024 respectively are £29.3m and £36.8m – which identifies the good cash generation, especially considering the end 2022 April year end was a net £18.1m.
At the end of November last the group’s shares touched 173p, since when they have dipped down to close night at 132p, in reaction to the nine-month update.
They may well drift off further before beginning to show some price recovery.
(Profile 15.02.21 @ 104p set a Target Price of 130p*)
(Asterisks * denote that Target Prices have been achieved since Profile publication)