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  • Writer's pictureMark Watson-Mitchell

Renold, STV Group and Argent BioPharma

Renold (LON:RNO) – Military Order Book Boost

Yesterday this industrial chains and torque transmission products group products, which are used in a wide variety of industries including manufacturing, transportation, energy, steel and mining, announced a £10.6m contract with the Royal Canadian Navy.

The order for flexible couplings for the Canadian Surface Combatant ships, with other military work recently awarded, means that Renold's military order book has increased by £13.1m, over recent months.

CEO Robert Purcell stated that:

"I am delighted that Renold are working with Irving Shipbuilding Inc on the next generation of Canadian warships.

The award of the Canadian Surface Combatant contract builds on the success of our naval flexible couplings business which is already working on the British and Australian naval programmes and this success underpins our belief in the Renold Hi-Tec product range.

This excellent long-term contract will further reinforce our Couplings business performance and shows the on-going benefits of our product development strategy combined with our manufacturing and engineering excellence."

In the middle of last month analyst David Buxton at Cavendish Capital Markets raised his Price Objective for the group’s shares from 58p to 65p.

For the year to end March he is looking for the group to report revenues of £241.4m (£247.1m), while adjusted pre-tax profits could be £21.7m (£18.6m), lifting earnings to 6.6p (5.9p) per share.

For the year now underway he sees £243.2m sales, £22.7m profits and 6.8p earnings per share.

In the last six weeks the group’s shares have risen from 36.00p to hitting 51.80p on Tuesday, the day before the order was announced.

On 6th March in this column, I declared that the shares, then 39.5p, continued to be lowly rated – a view that I still hold now that they are trading around the highest levels for over five years.

The company is valued at some £106m with its shares currently at around 50.50p, offering some very appealing upside, with my 60p Target Price now being an easy objective.

(Profile 04.06.19 @ 30p set a Target Price of 60p)

(Profile 08.11.23 @ 29p set a Target Price of 36p*)

STV Group (LON:STVG) – Still So Undervalued

This group’s strategic vision is to transform STV into a digital streaming and content-led media company, maximising the value of its linear Broadcast channel while growing its Digital and Studios divisions to take advantage of the accelerating market in global video.

The award-winning production business of STV Studios is one of the UK’s leading producers of scripted and unscripted content and Scotland’s biggest production group, creating world class content for a range of UK and international broadcasters and streamers.

The group’s Broadcast division runs commercial Public Service Broadcaster, STV, which operates the Channel 3 licenses across central and north Scotland.

It offers viewers a strong network schedule of programming alongside its own locally produced news, current affairs and factual entertainment shows.

STV is the most-watched peak-time channel in Scotland and is home to some of the most popular shows on television.

It is advertiser funded and its reach as a marketing platform is unrivalled in its home market.

National sales of linear spot and sponsorship, and VOD advertising on STV Player, are managed by our national sales agent, ITV, and Scottish clients are serviced by the dedicated Scotland sales team.

It offers a ‘one stop shop’ to regional clients, helping them with advert creation and design, campaign structure, and post campaign research.

STV's rapidly growing broadcaster streaming service, STV Player, gives viewers in Scotland the opportunity to watch STV shows on their terms, live or on demand.

Across the UK, its free service offers viewers an extensive catalogue of content from the UK and around the world.

STV Player is now pre-installed in three-quarters of the UK’s connected TV homes and is available on all major platforms, including Sky, NOW, Virgin Media, Amazon Fire TV, Freesat, YouView and Freeview Play.

The group has exceeded the stretching three-year diversification targets its management set, with some 75% of its profit coming from outside traditional broadcasting by the end of 2023, well ahead of the group’s 50% target.

On 4th March I wrote that:

‘The current year Outlook statement from the Glasgow-based group, which is valued at around £93.5m, will be well-studied.

Even so I continue to believe that this company is being unduly lowly rated, especially with its shares at just 200p each, they were over 315p this time last year.’

After dipping to 181p a few days later, the shares ended March having touched 243p, before easing back to 214p on Monday of this week from where they have subsequently risen again.

In my view the still low price offers investors a neat opportunity to buy into a cheaply rated equity.

Analyst Roddy Davidson at Shore Capital Markets has recently upgraded his estimates to suggest that the current year to end December could see the group returning revenues of £175.2m (£168.4m), lifting adjusted pre-tax profits to £18.4m (£17.0m), taking earnings up to 27.7p (26.1p) and hoisting its dividend to 12.0p (11.3p) per share.

However, Davidson is bullish about the next two years – 2025/2026 – looking for £220m then £247.3m in revenues, £23.4m then £26.8m in profits, 34.6p and 39.8p earnings and dividends of 12.4p then 12.8p respectively.

Those estimates give the shares, now 242p, a very cheap rating, making them a screaming purchase for investors looking for undervalued growth and profitability, whilst yielding an attractive 5.0% plus.

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

(Profile 05.02.24 @ 188.5p set a Target Price of 235p)

Argent BioPharma (LON:RGT) – Very Early Days But With Big Potential

Yesterday I had a chat with Roby Zomer, the CEO of this new drug discovery company.

After having recently undergone a major transformation, a recapitalisation, together with big changes in its operational base and its management too – it looks as though Argent is ready to progress into a cashflow positive situation by the end of next year.

In the pharma sector that could be seen as almost near-term.

Using cutting-edge nano technology, the company is taking a multi-receptor approach and is focused on developing and supplying accessible and ethically produced plant-derived medicines.

Its approach combines in-house research with technology, all discovering and producing treatments for unmet medical conditions.

The company is concentrating upon treatments relating to the Central Nervous System and Immunology.

Its investigational medicinal products include CannEpil, and CimetrA.

CimetrA is a phyto medicine based on natural ingredients from Curcumin and Boswellia serrata, delivered in the nanoparticle delivery system, which is being developed for acute lung injury and acute respiratory distress syndrome.

It is in phase II clinical trial for the treatment of SLE Lupus, anti-inflammatory, and SARS COVID-19.

CannEpil is a phyto medicine based on phytocannabinoid, is in phase I clinical trial and is being developed for the treatment of refractory epilepsy and cerebral palsy.

The company has another four drugs in its ‘backseat’ for development.

The recent work done by the Management has reduced its monthly operating costs to around £300,000, while the fresh funding has left it with £7m cash at bank and zero debt.

With its shares currently trading at around 20p, the company has a market capitalisation of just £9.2m, while Premier Miton and Chelverton Asset Management are two of the group’s institutional holders.

Obviously at this early stage of the company’s development, its shares will remain just option money on the potential success of any its drugs – even so they could well prove to be an interesting gamble.

(Profile 02.05.24 @ 20p set an early Target Price of 25p)


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


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