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  • Writer's pictureMark Watson-Mitchell

MEX, AML, CHG, HTG, STVG and TIG - Tortillas, Fast Cars, Chaff, Tubes, Media and the Internet

Tortilla Mexican Grill – Potential Profits Beginning To Look Tasty

Ahead of this group’s AGM on Tuesday of next week, and then its H1 Trading Update next month, I have no problem in suggesting readers might gain from now taking a position in its equity.

The Business

Tortilla Mexican Grill (LON:MEX) is the largest and most successful fast-casual Mexican restaurant group in the UK.

Founded in October 2007 by Brandon and Jen Stephens, it is the UK's largest fast-casual Mexican restaurant brand with a fully customisable and authentic California-style Mexican menu.

Tortilla which, is headquartered in London and employs more than 1100 people, operates 87 restaurants globally, including through franchise partnerships in the UK with SSP Group and Compass UK & Ireland, and in the Middle East with Eathos.

The brand serves more than 6m customers every year.

Food provenance and quality is a critical component of its proposition.

The group’s brands Tortilla and Chilango are known for their high quality, fresh and customisable product ranges of burritos, tacos and salads, designed for quick lunchtime bites or evening occasions, with all fillings being prepared fresh daily, free from artificial flavours or preservatives.

MEX operates a multichannel order strategy, offering customers dine-in, self-serve, take away, click and collect and delivery options.

The group has a clear strategy to grow, primarily in the UK, through the roll-out of new sites, franchising opportunities, cloud kitchens and strategic partnerships.

The primary objective of the group’s growth strategy is to increase its UK presence, and over the next five years it is targeting the launch of circa 45 new sites.

This expansion will comprise ‘traditional’ sites, as well as smaller sites that support the delivery channel, franchises and ‘cloud’ kitchens.

The Company's principal activity is the operation and management of restaurants trading under the Tortilla brand both within the United Kingdom and the Middle East and under the Chilango brand in the United Kingdom.

Management Comment

CEO Andy Naylor stated that:

"Recent years have seen Tortilla expand strategically through a multi-channel approach, strengthening our operational model as a springboard for sustained, profitable growth.

Throughout 2023, we dedicated ourselves to building resilience, especially enhancing profitability, as we recovered from macro events in 2022.

Our efforts included streamlining costs, bolstering franchise partnerships, augmenting efficiency via technology investments, and enriching our team with fresh talent, all while continuing site deployments.

These initiatives have solidified the foundation for our continued success.

"The appetite for Mexican cuisine is surging, and Tortilla, as the dominant market leader in the UK, has an unparalleled set of advantages to capitalise on this burgeoning opportunity across the UK and Europe.”

The Equity

There are some 38.66m shares in issue.

The larger holders include Quilvest & Partners (20.41%), Canaccord Genuity Wealth (13.83%), SFM UK Management (11.58%), Hanover Investors Management (5.64%), Schroder Investment Management (4.41%).

Private holdings of note include founder Brandon Stephens (8.30%), Navin Patel (6.81%), Nadine Benchaffai (3.98%), Luke Johnson (3.62%) and former CEO Richard Morris (3.56%).

Analyst’s Views

Analysts Richard Finch and Russell Pointon at Edison suggest that the group’s sweet spot is its healthy, customisable product at a competitive price.

They are looking for the current year to end December to show through with £73.8m in revenues, against £65.7m in 2023, helping to lift pre-tax profits to £0.7m from last year’s £1.1m loss, taking its earnings up to 1.3p (2.8p loss) per share.

Jumping forward into 2025 their figures hint at £83.7m at the tills, more than doubling profits to £1.5m, generating 3.1p in earnings per share.

Anna Barnfather and Nishant Dahad at Liberum Capital rate the group’s shares as a Buy, with a Price Objective of 115p.

The broker’s estimates for 2024 suggest £72.0m sales, £1.4m pre-tax profits and 2.7p of earnings.

For 2025 they see £80.0m revenues, £2.6m profits and 5.7p per share of earnings.

With an estimated £88.0m of sales in 2026, MEX could make £3.9m PBT and 7.8p in EPS.

My View

The mean consensus of analyst views is that the group’s shares are rated as a Buy, with a 105p average Price Objective.

In my view as the group’s Management switches its concentration from its ongoing roll-out programme to its franchised offer, it will start to show through some meaningful profits, which in turn will more than justify a share price far higher than last night’s closing 52.5p, at which level the group is valued at only £20.29m.

I now set a Target Price for the shares of 65p.

(Profile 06.06.24 @ 52.5p set a Target Price of 65p)


Small Cap Catch Up featuring Aston Martin Lagonda, Chemring, Hunting, STV and Team Internet


Aston Martin Lagonda Global Holdings (LON:AML) – Interims Due Within Weeks Edges Shares Higher

I like the way that the shares of this luxury car maker reacted from a recent low of 125p – within just a few days they edged back up to 158p on ‘cheap’ buying.

The group recently reported that it is to launch and deliver four new models in 2024, which should help to drive significant growth in its second half year to end December and even further over the next few years.

The Interim Results should be declared before the end of next month, when I would anticipate a bullish update.

The company’s shares, which have been up to 396.20p since my first Profile a year ago, closed last night at just 157p up 10.30p on the day – from which level it could well prove to be an excellent time for risk-tolerant punters to take a new view of the stock.

(Profile 10.05.23 @ 213.5p set a Target Price of 265p*)

Chemring (LON:CHG) – Record Order Book Underlines Growth

Just look at how the shares of this high technology products group have progressed over the last week, from 374p to 400.50p, ahead of Tuesday’s Interim Results announcement.

They showed that the group’s order book has grown over 39% in the last year, to a massive £1.04bn – which is a record for the company and gives it an impressive medium-term revenue coverage going forward.

CEO Michael Ord stated that:

"The momentum seen in 2023 has continued with another period of record order intake and an order book of over £1bn, the highest in Chemring's history.

This strong order intake across both sectors has further increased our order cover for the second half of 2024 to 93% and the Board's expectations for the full year are unchanged.”

It reported that the group's longer-term growth prospects are strong, underpinned by robust activity levels, its leading technological offerings, its people, high barriers to entry, and the investments it continues to make in its strong, high-quality business.

Investec, the group’s broker, is estimating underlying pre-tax profits of £69.8m (£67.9m) for the year to end October.

The shares are now 380.50p.

(Profile 20.06.19 @ 177p set a Target Price of 300p*)

(Profile 20.10.23 @ 278p set a Target Price of 350p*)

Hunting (LON:HTG) – Trading Update Early Next Month

The global engineering group has announced another significant contract with the Kuwait Oil Company, to supply its oil country tubular goods, worth $86m.

That takes the KOC orders up to $231m for OCTG casing.

CEO Jim Johnson stated that:

"We would again like to thank KOC for this order and the confidence shown in Hunting's proprietary premium connection technologies and strategic OCTG supply chains.

The order supports our improving outlook for 2025, as international and offshore activity continue to accelerate."

Analyst Daniel Slater at Zeus Capital is looking forward to the group’s next Trading Update on Tuesday 9th July.

He is looking for the current year to end December to show sales up to $1.08bn ($929m) with adjusted pre-tax profits of $91.2m ($50.0m), lifting earnings to 38.8c (20.3c) and covering a 13.0c (10.0c) per share dividend.

This £682m capitalised group’s shares look excellent value at 411p.

(Profile 15.03.21 @ 275p set a Target Price of 350p*)

(Profile 12.04.23 @ 240p set a Target Price of 300p*)

STV Group – Institutional Company Visit Perks Up Its Shares

Yesterday a site visit for institutional investors at its Glasgow head office was accompanied by a very positive Trading Update from the media group.

CEO Simon Pitts stated that:

"STV continues to make strong strategic progress and remains on track to deliver its ambitious growth plans out to 2026.

Total advertising revenue grew 5% in Q1, in line with guidance, and there is good advertising momentum in Q2 which we expect to be up 15-20%, driven by Euro 2024.

STV Studios continues to perform strongly, securing major new orders from Netflix, Sky and Discovery in the first half despite the challenging commissioning environment, and is on track to hit target revenues of £140m in FY26.

We have a fantastic programming line-up for the rest of 2024, kicking off next week with live and exclusive coverage of the opening game of Euro 2024 between Germany and Scotland on STV and STV Player."

Analyst Roddy Davidson at Shore Capital Markets sees scope for forecast upgrades if the advertising spend outlook continues to improve, with the prospect of lower interest rates and a less uncertain political backdrop becoming potentially favourable factors.

For this year to end December he is looking for revenues of £165.8m (£168.4m), with adjusted pre-tax profits of £18.2m (£17.0m), earnings of 27.4p (26.1p) and a 12.0p (11.3p) dividend per share.

For next year his figures suggest £229.2m revenues, £24.7m profits, 36.6p earnings and 12.4p per share dividend.

He reckons that the company’s shares have a ‘fair value’ of 40% higher than the current level.

The shares are now 288p after touching 295p yesterday and they have a lot higher to climb yet.

(Profile 10.12.21 @ 345p set a Target Price of 425p)

(Profile 05.02.24 @ 188.50p set a Target Price of 235p*)

Team Internet Group (LON:TIG) – Are They Heading Higher Yet?

I have to say that I was very pleased to see that the shares of this ‘money machine’ hitting my 200p price level that I suggested was possible just two weeks ago, when they were 180.60p.

They were up to 202.63p yesterday before closing at 199.80p – a good Hold.

(Profile 12.07.21 @ 89p set a Target Price of 110p*)

(Profile 17.04.23 @ 123p set a Target Price of 150p*)

(Profile 18.01.24 @ 124.60p set a Target Price of 156p*)


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












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