• Mark Watson-Mitchell

Prison, videogames, components, steel, and bars – all offer great value

STV Group (LON:STVG) – going for another ‘Screw’ looks good


This media group is totally under-rated.


It is not just about presenting television programmes for its Scottish viewers, instead it is also one of the UK’s leading content businesses.


It produces drama, entertainment and factual shows and enjoys a growing order book of commissions from BBC One and BBC Two, ITV, Channel 4, Channel 5, BBC Scotland, Discovery, Sky One and VH1/MTV.


Shows that it has worked upon include 20 series of Antiques Road Trip, nine series of Celebrity Antiques Road Trip with a further 140 episodes in production, six series of Catchphrase and five of Celebrity Catchphrase, The Yorkshire Auctioneer, The Bridge of Lies, Murder Island, and loads of other series.


The company recently announced that it had won the commission for a second series of the prison drama ‘Screw’ from Channel 4. The first series has been bought by Australian, New Zealand, Canadian and Spanish broadcasters.


The group should be announcing an Interim Trading Update in about a month’s time.


Analyst Roddy Davison at Shore Capital estimates that the current year will see revenues increase from £144.5m to £153.3m, with its adjusted pre-tax profits improving to £25.0m (£23.7m), lifting earnings to 42.1p (41.0p) and capably covering its 12.5p (11.0p) dividend per share.


For 2023 and 2024 respectively he estimates sales of £165.2m then £174.1m, generating profits of £28.4m then £31.0m, taking earnings of 45.7p and 49.5p, and dividends of 14.5p then 15.5p per share.


On those estimates the group will see its price-to-earnings ratio drop from 7 times this year, 6.5 times next year and just 6 times in 2024.


At the same time on Roddy Davison’s predictions the shares will yield 4.2% for this year. 4.9% for 2023 and then 5.2% for the year after.


Understandably Shore Capital considers that the company’s current stock valuation does not come close to reflecting its prospects or underlying attractions.


The broker has estimates of a ‘fair value’ for the group’s shares of 520p each.


At the current 295p the shares of the STV Group are an outstanding purchase for any portfolio, whether looking for income or growth. I stick to my price aim of 425p.


(Profile 25.04.19 @ 370p set no Target Price)

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


Frontier Developments (LON:FDEV) – better prospects for this year


On Tuesday morning the Cambridge-based videogames developer and publisher announced a Trading Update for the group’s year to end May.


It showed that the company had enjoyed a strong second half of its year and reported that sales were some 26% better at £114m, a record figure.


Despite such good sales, expectations are that last years adjusted pre-tax profits will show out at almost half of the 2020 £21.3m, estimating at £11.9m, worth 28.1p in earnings against 60.9p previously.


The current year now underway is estimated by analyst Ciaran Donnelly at Liberum Capital, the company’s brokers, to see sales revenues of £139.9m with profits doubling to £24.0m and earnings at 55.1p per share.


It has always been a highly rated games stock and appreciated due to its high cash generation. At the last year end it had £39m cash at bank, compared to its current £524m market capitalisation with its shares having leapt from 1068p on Monday night to closing the week at around 1340p.


Just think, in January last year the group’s shares were up to 3260p.


Liberum have a price objective out for its shares at 2110p, which hopefully shows more upside for them over todays price.


Hold tight.


(Profile 01.10.19 @ 1000p set a Target Price of 1500p*)


discoverIE Group (LON:DSCV) – massive orders show strength


This international group designs and manufactures innovative electronic components for industrial applications.


Earlier this week it declared its results for the year to end March 2022 showing a 25% growth in sales to £379.2m, while adjusted pre-tax profits increased from £27.2m to £37.6m, jumping earnings up from 22.4p to 29.4p in the process. The dividend was 10.8p (10.2p) per share.


Analyst Guy Hewett at brokers finnCap estimates that sales this year could be £400.0m, taking profits up to £40.0m and earnings higher at 30.8p per share, almost treble covering an 11.3p dividend.


The group stated that it is well positioned for further growth, with its order book standing at a record £224m, and its organic revenue showing real strength.


The brokers suggest that its shares could rise to 1220p against the current 703p.


A good hold.


(Profile 08.08.19 @ 438p set a Target Price of 550p*)


Severfield (LON:SFR) – record order books make shares look cheap


This market leading structural steel group saw its sales rise 11% from £363.3m to £403.6m in the year to 26 March 2022.


In that same period its adjusted pre-tax profits increased from £24.3m to £27.1m, lifting its earnings up to 7.2p (6.4p) and its dividend from 2.9p to 3.1p per share.


As at 1 June the group had a record order book for the UK and Europe, standing at £486m, comparing very favourably to the £393m level at which it stood on 1 November last year.


Even its Indian joint venture is looking to see better times as its demand strengthens.

Alan Dunsmore, Chief Executive Officer stated that


“We are delighted to be reporting a resilient and strong performance despite the ongoing market challenges.


The group's growth strategy is delivering a record order book with a broad diversity of sectors, geographies and clients, providing us with good earnings visibility through 2023 and beyond.


Although inflation and supply chain pressures remain, we are managing these well and the earnings visibility gives us confidence in maintaining our positive performance expectations for 2023.”


Analyst Alastair Stewart at Progressive Equity Research is looking for current year sales of £460.1m, taking profits up to £31.2m, worth 8.3p in earnings and paying 3.3p in dividends per share.


I have followed this company for decades and I still consider it to be a cracking little portfolio regular.


Capitalised at £192m with its shares at 62.40p, there is still a lot to go for as the group pushes ahead.


(Profile 12.09.19 @ 62p set a Target Price of 88p*)

(Profile 04.06.21 @ 79p set a Target Price of 100p)


Revolution Bars Group (LON:RBG) – I was too early then but now looks right


The shares of this premium bars operator have been an absolute dog since I profiled the company last October. They rose 2p to 26.25p and have subsequently fallen away to a mere 16.15p now.


Perhaps I was eight months too early with my initiation of the group.


Last Tuesday’s Trading and Property Update for its year to 2 July 2022, showed a continued strong performance. So much so that the group stated that it will come in slightly ahead of the highest expectations.


Analysts Nigel Parson and Michael Clifton, at the group’s brokers finnCap, have upped their estimates for the current year to show sales up from £39.4m to £141.1m and adjusted pre-tax profits coming out at £2.7m against the previous £20.9m loss, with earnings of 1.2p per share (16.8p loss).


For the coming year to end June 2023 they go for £159.9m sales, £4.2m profits, and 1.6p earnings per share.


The group, which has some 67 bars in operation, has a pipeline of new sites, with hopes to open another six bars in its 2023 year.


The brokers have a price objective on the shares of 36p.


I still like this company and consider that it has massive upside, particularly from the current lowly 16.15p share price.


Hopefully this will not continue to be a ‘dog’ as it progresses apace.


(Profile 13.10.21 @ 24.25p set a Target Price of 31p)


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

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