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  • Writer's pictureMark Watson-Mitchell

Small Cap catch-up – BMS, JNEO, PMP, MPAC, BIRD, TEG, UPGS and SDRY

Braemar (LON:BMS) – Trading Update underlines low value rating

The Trading Update for the year to the end of February by this shipping and energy markets broker and adviser reported record revenues and profits.

The group is expecting that the year will have shown revenues almost 50% higher at not less than £150m (£101.3m) and underlying operating profits of not less than £20.0m (£10.1m).

Even cash generation will be shown positively with some £6.9m net cash at the year-end against a net debt of £9.3m).

The finals will be announced before the end of May.

Analyst Ian McInally at Cenkos Securities rates the £96m group’s shares as a Buy, using a dividend discount model to value the shares at 470p each.

His estimates for the end February year are for £150.5m sales, £19.5m profits, 51.4p earnings and paying a 12.0p (9.0p) dividend per share.

This group’s shares at the current 294p are substantially undervalued and look very capable of rising through the 350p level and then very much higher yet.

(Profile 05.12.19 @ 185p set a Target Price at 250p*)

(Profile 20.05.20 @ 99p set a Target Price at 150p*)

Journeo (LON:JNEO) – any more airports please

This provider of information systems and technical services to transport operators and local authorities is gradually, but surely, picking up new business that will go some way to the group doubling its revenues this year.

This £24m group is a leading Intelligent Transport Systems provider, delivering solutions in towns, cities, airports and the public transport networks that connect them.

The company works extensively with local and combined authorities, Network Rail and many of the largest multinational transport operators, supporting them as systems converge towards a more efficient and sustainable future.

Earlier this month it picked up a £1m contract with Transport for Wales.

That was followed two days later by an order for £0.7m from Network Rail for Southeastern Trains.

Ten days later it reported a £0.8m order from Network Rail for its Leeds Station. Displays.

Yesterday the company announced a £0.5m contract with Gatwick Airport, centred upon its airport-based information software applications.

That order makes up the trio of London Airports the company now serves – Gatwick, Heathrow and Stansted, while it will soon be working on additional business at Dublin and Bristol airports.

Analyst Andrew Renton at Cenkos Securities has a Buy out on the group’s shares, considering them to be trading at a very steep discount to its peers.

The group’s 2022 finals are due soon, he expects to see £18.0m (£15.6m) sales, with pre-tax profits of £0.9m (£0.4m), taking earnings up to 10.4p against 4.7p per share previously.

He is looking for the current year to end December to jack sales up to £33.0m, with more than trebled profits of £3.3m, worth 17.8p per share in earnings.

The group’s shares touched 154p earlier this month on the contract news.

Last night they closed at 147.5p from which level I take the view that they will rise to 175p or thereabouts over the next few months, especially as the good news flows more freely.

(Profile 07.04.21 @ 95.5p set a Target Price at 120p*)

Portmeirion Group (LON:PMP) – 600p price objective

As it recovers from the Pandemic hassles this pottery and homewares group is pushing its sales and profitability higher.

Yesterday’s results for the year to end December 2022 showed revenues of £110.8m (£106.0m), with adjusted pre-tax profits of £8.0m (£7.2m) generating earnings of 46.8p (38.7p) enabling a treble covered dividend of 15.5p (13.0p) per share.

Analyst Sahill Shan at Singer Capital Markets rates the group’s shares as a Buy, with a 600p price objective.

For the current year he looks for £113.4m sales, £9.5m profits, 51.7p earnings and a 17.22p dividend.

Singer’s suggest that the group will progress gradually over the next few years, going for £120.4m sales in 2024 and £125.7m in 2025, lifting profits to £11.4m and £12.6m respectively. That would see earnings up to 62.3p then 68.5p a share, amply covering dividends of 20.76p then 22.82p per share.

This continues to be a very appealing investment story.

The £52m capitalised group’s shares rose 7% on the results to close last night at 376p after touching 380p during the day.

(Profile 28.08.20 @ 376p set a Target Price at 480p*)

(Profile 25.11.22 @ 302.5p set a Target Price at 380p*)

MPAC Group (LON:MPAC) – broker estimates show good upside

This global packaging and automation solutions group saw its order book fall to £67.2m (£78.4m) by the end of December 2022.

However, group revenue was up 4% on the year at £97.7m (£94.3m), but with underlying pre-tax profits more than halving to £3.5m (£8.6m), slicing earnings down to 13.3p (39.7p) per share.

Net debt ended at £4.7m against £13.5m net cash previously.

Supply chain issues impacted during the year.

But this current year has already seen an encouraging intake of orders, while others are in prospect.

Analysts Robin Speakman and Akhil Patel at Shore Capital derive a share price of 410p for this group’s equity.

Their estimates for the current year to end December look for £106m sales, £7.0m adjusted pre-tax profits and earnings of 26.9p per share.

For the coming year they assume £120m revenues, £10.5m profits and 39.3p earnings.

Jumping even further ahead the analysts suggest £132.5m of revenues is possible, jumping profits up to £12.3m and earnings higher at 45.2p a share.

Over at Equity Development their analysts Hannah Crowe and Mike Jeremy have estimates out for the current year at £104.7m sales, £7.0m profits and 25.5p earnings.

For 2024 they see £115.7m revenues, £10.5m profits and 38.0p in earnings per share.

They have a ‘fair value’ of 485p on the group’s shares.

The group’s shares peaked at around 640p in September 2021, since when they have dropped as low as 210p, that was in January this year.

They rebounded to 330p earlier this month, since when they have fallen again reflecting market conditions.

We will get another Update from the £57m group’s Management come the AGM in May, in the meantime the company’s shares at the current 255p offer some good upside from current levels.

(Profile 19.12.19 @ 182p set a Target Price at 235p*)

Blackbird (LON:BIRD) – still very early stage by with so much potential

This little company is the market-leading provider of fully featured professional-grade video editing and production software which is cloud-native by design and from inception.

Gaining traction as it develops in its marketplace, the group is now winning blue-chip company business.

The results on Wednesday morning were much as expected – reporting sales to end December 2022 of £2.07m (£1.57m), while its net loss before tax was £2.01m (£2.17m loss).

Analyst Gareth Evans at Allenby Capital was impressed by the group’s progress on its new SaaS development, which is expected to be launched early next year.

He notes that the group’s order book is strong and highlights the fact that the balance sheet boasts £10.1m in cash.

The group’s shares dropped 25% on the results news, to trade around the 8p level, which is significantly below both my Profile and my Target price.

However, at this price patient medium-term investors should take a positive view of the massive upside potential as the £40m group’s new platform starts to get marketed.

(Profile 20.03.23 @ 10.5p set a Target Price of 13p)

Ten Entertainment Group (LON:TEG) – less than 9 times pe and on 5.1% yield

The 53 weeks to 1 January 2023 saw this social entertainment centres group lift takings by 87.7% to £126.7m (£67.5m) while adjusted pre-tax profits were up 842% at £26.1m (£3.1m), with earnings leaping from 5.9p to 29.3p per share.

The Bedford-based group, which operates some 49 centres across the country, stated that it delivered a fantastic customer experience to over 8m people last year.

Debt-free and boasting over £10m cash at the year-end the bowling alley and games venue group continues to expand and is looking to roll out another two centres in due course.

Analysts Anna Barnfather and Nishant Dahad at Liberum Capital rate the £193m group’s shares as a Buy, looking for them to rise to 400p each against the current 281.5p.

Their current year estimates are for £131m revenues, £28.4m profits, worth 32.8p per share in earnings.

They see the group lifting its dividend to 14.6p (10.0p) per share, giving an attractive 5.1% yield.

I consider that this group’s shares have a lot going for them trading on less than 9 times price-to-earnings and on such a good yield.

At 281.5p they are for buying.

(Profile 02.10.20 @ 135p set a Target Price at 170p*)

UP Global Sourcing (LON:UPGS) – less than 9 times pe and on 5.5% yield

On Wednesday of next week (29) the leading homewares brands group will be reporting its Interims for the six months to end January.

Way back on Valentine’s Day CEO Simon Showman told investors that:

"Amidst a tough economic climate, we are delighted that our products, especially those that are energy efficient and money saving, continue to resonate strongly with consumers. Global supply chain disruption has now eased, which has improved stock availability and supported the growing demand from our online customers.

Looking ahead, we expect that the current softness in global shipping pricing, as well as the partial recovery in Sterling, will provide additional relief against the ongoing inflationary backdrop.

We are increasingly excited by the positive impact that our robotics process automation programme is having on our business.

Our bottom-up, demand-led approach to automation enables us to concentrate efforts on the items that can most improve productivity, and this will ultimately enhance operating margins and drive an even better customer experience."

The £114m group expects that the full-year performance will be in line with market expectations.

Analysts Clive Black and Darren Shirley at Shore Capital are looking for the group to report well upon the group’s recent participation at the Ambiente Trade Fair held in early February at Frankfurt.

Their estimates for the year to end July 2023 are for an uplift in sales to £169.1m (£154.2m), helping to push up adjusted pre-tax profits to £17.0m (£15.8m), taking earnings up to 14.6p (14.3p) and lifting its dividend up to 7.3p (7.1p) per share.

Shore Capital foresees the coming year’s revenues at £179.2m, with £18.4m profits, 15.5p earnings and a 7.8p per share dividend.

The group’s shares touched 174p in early February, but eased back with the recent market turbulence to 131p, at which level they appear lowly rated on less than 9 times earnings and yielding 5.5%.

(Profile 13.07.20 @ 74.8p set a Target Price at 100p*)

And finally …….

Superdry (LON:SDRY) – sells IP rights for Asia-Pacific for $50m

The £90m iconic fashion brand has just pulled off a cracking deal out South in Korea.

The group has sold off its intellectual property assets in certain countries in the Asia-Pacific region for an upfront fee of $50m in cash.

In a deal just announced with the South Korean listed Cowell Fashion Company, it has agreed to sell the right to own and use the Superdry brand in the key countries across the Asia-Pacific region.

Cowell, which is involved in the licensing and manufacturing of apparel products for established global brands covering sportswear, underwear and accessories, will initially launch into its South Korean market, before expanding into China and other markets.

Superdry had previously pulled out of the China market just over two years ago.

Cowell and Superdry will work closely together in product development specifically for those markets for the next couple of years.

This deal leaves Superdry moving from a £10.8m net debt position into a net cash state at the year-end of some £23m.

And that compares with the group’s £88m market capitalisation ahead of the deal being announced.

Analyst Wayne Brown at Liberum Capital, who was already super bullish about the group’s prospects, rates the shares as a big Buy, with a 500p Target Price.

For the current year to the end of April he is estimating £604m (£610m) sales upon which a pre-tax loss of £5.8m (profit £21.9m) is expected.

But looking at the coming year Brown goes for £645m sales, £17.6m profits and earnings of 17.6p per share.

Even further ahead his figures for 2025 suggest £686m sales, £30.0m profits and 27.9p in earnings per share.

In one very astute deal Julian Dunkerton and his Superdry Management Team have created a wonder.

It helps to straighten the stretched balance sheet, gives the group more power going back into the Asian marketplace and shows just how undervalued the fashion group is at the moment. Superdry backed out of the China market in 2020.

However, it is more than possible that the group could well be seeking a fundraising in the near future.

Superdry shares, which touched 162p in early January this year, were down to just 101p earlier this week, but closed last night at 109p.

They are miles off my previous Profile price objective, even so at around the current price nimble punters could well enjoy a lucrative play.

(Profile 21.11.19 @ 454p set a Target Price at 600p)

(Asterisk * denotes that Target Prices have been achieved since Profile publication)


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