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Writer's pictureMark Watson-Mitchell

Kitwave, 1Spatial, and Porvair

Kitwave (LON:KITW) – Broker Has 455p Price Objective – 53% Higher Than Current Price


The Kitwave expanding delivered wholesale business, with a network of 32 depots it supports delivery throughout the UK to a diverse customer base, which includes independent convenience retailers, leisure outlets, vending machine operators, foodservice providers and other wholesalers, as well as leading national retailers.


Yesterday the group declared its Interim Results for the six months to end April.


They showed sales up 8% to £297.0m (£275.0m), but with a lower adjusted operating profit of £10.8m (£11.7m), which is slightly behind due to investment and lower levels of demand in the group's Foodservice hospitality customer base.


However, alongside the benefits of the increased investment in infrastructure and the inclusion of trade from Total Foodservice in H2 2024 will lead to the company's annual financial performance having an increased second-half weighting.


Progress towards the group’s operational and financial targets, give the Board confidence of achieving a positive outcome for the full-year results.


Such a performance will reflect both continued organic growth and the benefit from acquisitions made over the past couple of years. 


CEO Ben Maxted stated that:


"Despite the slight shortfall in operating profit in H1 2024 and the continued wet weather in May and early June, we expect to be in line with market expectations for the full year ending 31 October 2024."


I note that Henry Lowson, the £321m Royal London UK Smaller Companies Fund manager is reported to have picked up a stake because he believes the wholesaler may be small but that it is a mighty competitor.


Lowson stated that:


‘Although Kitwave operates in a market with larger peers, it differentiates itself as it has the infrastructure and operations to service smaller businesses profitably and reliably with small, frequent deliveries.”


At Canaccord Genuity Capital Markets analyst Mark Photiades rates the group’s shares as a Buy, looking for 455p, stating that:


“We continue to believe this valuation is too low given the Group's strong cash generation, robust balance sheet and considerable further consolidation opportunities available.”


For the year to end October he estimates sales of £678.8m (£602.2m) with adjusted pre-tax profits of £29.0m (£27.5m), with earnings of 29.9p (28.7p) and a dividend of 11.3p (11.2p) per share.


For the coming year he sees £710.1m sales, £31.0m profits, 32.0p earnings and a 14.0p per share dividend.


In reaction to the Interim Results, the £209m capitalised group’s shares fell over 11% to 297p, some 37p lower on the day.


At the current levels I would suggest that buyers will nibble away at cheap stock.


(Profile 14.02.22 @ 145.5p set a Target Price of 180p*)


1Spatial (LON:SPA) – Analyst Has A 270p Potential ‘Fair Value’


At 11am on Friday (5th July) this group will be holding its AGM.


Based in Cambridge, with operations in the UK, Ireland, USA, France, Belgium, Tunisia and Australia, the group is a global leader in providing Location Master Data Management software and solutions, primarily to the Government, Utilities and Transport sectors.


Globally its clients include national mapping and land management agencies, utility companies, transportation organisations, government and defence departments.


The group should be issuing an AGM Trading Update on Friday, hopefully following up bullishly upon recent reports that the company had enjoyed a solid start to trading in the current financial year to end January 2025.


The company has previously reported that it has a growing sales pipeline and increased levels of recurring revenue, giving confidence of it delivering further progress in FY 2025.


Last night the shares which closed at 68p capitalising the company at £76m, have been tagged analyst Dan Ridsdale at Edison Investment Research, as having a potential ‘fair value’ of 270p a share.


(Profile 12.05.21 @ 41.5p set a Target Price of 52.5p*)

(Profile 22.04.24 @ 58.5p set a Target Price of 75p*)


Porvair (LON:PRV) – Quieter First Half To Be Followed By A Stronger Second Half


On Monday the specialist filtration, laboratory and environmental technology group, announced its Interim Results for the six months to end May.


They showed revenues up 5% to £94.6m (£90.6m), with adjusted pre-tax profits 2% higher at £12.5m (£12.2m), easing its adjusted earnings 4% lower at 19.5p (20.3p)


Its businesses design and manufacture a range of bespoke consumable filtration products that are used in a range of niche filtration markets. 


It operates in three divisions: Aerospace & Industrial; Laboratory; and Metal Melt Quality.


CEO Ben Stocks stated that:


"2024 is unfolding as expected. Over the first six months, strength in aerospace and petrochemical markets, helped by the benefit of 2024 acquisitions, has offset weakness in industrial and laboratory consumables and foreign exchange headwinds. This has been in line with management expectations.


The trading outlook for the second half of the year is positive. Order books across the Group are strengthening with lead times now returned to more traditional levels. The benefits of the 2023 acquisitions continue to come through, and several larger petrochemical orders will start to ship towards the end of the year.


The Group's fundamental demand drivers have not changed. Porvair remains well positioned to take advantage of tightening environmental regulation; the growth of analytical science; the need for clean water; the development of carbon-efficient transportation; the replacement of plastic and steel by aluminium; and the drive for manufacturing process quality and efficiency. It is these trends that have driven the Group's consistent longer-term trading record.


The Board expects a healthy second half which will allow the Group to move into 2025 in good shape."


At the start of June this group’s shares were trading at 745.70p, last night they were down to just 619p, valuing the whole group at £287m.


They may ease more on further profit-taking, after having risen nearly 43% from just 522p at the end of last October, however I do expect medium-term investors to be taking advantages of price dips to add the shares to their portfolios.



(Profile 05.10.20 @ 510p set a Target Price of 600p*)

(Profile 17.08.23 @ 605p set a Target Price of 700p*)

 

(Asterisks * denote that Target Prices have been achieved since Profile publication)

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