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  • Writer's pictureMark Watson-Mitchell

Small Cap catch up: BMS, ZTF, CURY, NGHT, GMS and TIG

Braemar (LON:BMS) – looking totally undervalued


Yesterday morning’s Trading Update for the year to end February 2024 declared that the shipping services group had achieved a strong year in line with market expectations.


Revenue is expected to be not less than £150m (£153m) with underlying operating profit of not less than £18m (£20m).


That really was quite a year that its management must surely hope was now well out of the way.


The £73m capitalised group kept a positive cash position with net cash at 29th February 2024 of £1m (£7m), which was a decrease from the prior year after the cost of the internal independent investigation conducted and concluded last year, certain tax payments and share buy backs during the period.


As for this new year the company has informed investors that its total forward order book is some 47% up at $83m, which is a good advance from the $65.6m book as at end October last year.


With its finals due to be announced in May it is worth reminding readers that analyst Ian McInally at Cavendish Capital Markets has previously estimated that the current year revenues could rise to £154.4m, with adjusted EBIT of £18.2m, worth 36.5p in earnings and enabling a 14.9p dividend per share.


Come the May figures we could well see upgrades helping to pinpoint just how undervalued this group’s shares are at last night’s closing price of 256p.


I still find it hard to understand why these shares are so lowly valued, they are destined to rise above the 300p level fairly soon.


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

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


Zotefoams (LON:ZTF) – pivotal time with ‘wonder foam’ material


Further to my recent comment on this group on 6th March I am now even more convinced that this group is ready for a major uplift over the next year or so.


The Final Results for the year to end December were up to market expectations and clearly showed the ongoing investment cost that the cellular materials technology group is committing to its revolutionary new foam material ReZorce.


It is about to get underway with a paid research trial in filling 150,000 cartons made up in its mono-material recyclable barrier packaging.


If successfully completed, then the group could begin to appoint strategic partners as it gets its packaging out onto a $60bn market-place.


It could prove to be an incredible pivot point for Zotefoams and take it into another global league.


CEO David Stirling stated that:


“In our MEL business unit, we continue to make good progress against the commercialisation objectives we have set for ReZorce, with some important milestones expected to be reached in Q2.


Investment to support this will continue during 2024 as we determine the optimal pathway to realising the opportunity presented by this technology.


As a result, and while we remain mindful of the uncertain economic backdrop, 2024 is expected to be another year of good progress for Zotefoams.”


Analyst Caroline de La Soujeole at Singer Capital Markets rates the group’s shares as a Buy, setting a 500p Price Objective.


For the current year to end December she estimates £141.0m (£126.9m) in sales to lft adjusted pre-tax profits to £14.7m (£13.1m), with earnings of 22.3p (19.1p) and paying out a 7.54p (7.18p) dividend per share.


By the 2026 year she sees £160.3m sales, £22.8m profits, 34.5p earnings and a dividend of 8.47p per share.


Last night the group’s shares closed 3p lower at 351p.


Hold on tightly for the inevitable uplift in share price.


(Profile 26.06.19 @ 600p set a Target Price of 750p)

(Profile 06.03.24 @ 330p set a Target Price of 395p)


Currys (LON:CURY) – awaiting the next bid excursion


Despite two of its potential bidders walking away from a possible fray, this electrical goods retail group has upped its current year guidance.


It Board was adamant that its shares were worth a great deal higher than the market was suggesting bidders might wish to pay.


So, the news that sales have been stronger than expectations, gave way to an upgrade of 11% on previous thoughts.


Positive like-for-like sales returns in the last three months helps the group to guide for at least £115m in adjusted pre-tax profits.


Add in the fact that the Kotsovolos disposal is now underway and a certain positivity is springing back into the Curry’s overall perception.


CEO Alex Baldock stated that:


"We've been working to get the Nordics back on track, while keeping up the UK&I's encouraging momentum.


Both are progressing well, despite still-challenging markets, and we now feel confident to raise this year's profit expectations to at least the top of our previous guidance.


Stronger trading, selling more of the solutions and services that boost margins and build customers for life, and strong cost discipline have all been important.


We expect to finish the year in a net cash position, with our already healthy balance sheet and liquidity further strengthened by the sale of Kotsovolos.”


Russ Mould at brokers AJ Bell reckons that the trading update vindicates the group’s decision to fight off takeover interest and that investors would have been annoyed had it not delivered such a strong update because that would have strengthened the argument to accept a bid.


Analysts Adam Tomlinson and Wayne Brown at Liberum Capital have Buy note out on the group’s shares, looking for 135p in due course.


The year to end April 2024 is estimated to show through with £9.07bn sales (£9.51m), with pre-tax profits of £115.3m (£119.0m), generating earnings of 8.1p (8.3p) per share, with a nil dividend against 1.0p previously.


The group is expecting to announce a Trading Update on 14th May, which will give market observers further food for thought.


I am now convinced that other potential bidders are playing a calm game, just waiting to see what develops over the next couple of months.


Better in than out – would be my summation, with the shares hovering around the 60p level, after having touched 72.45p in the bidding time less than three weeks ago.


(Profile 10.07.23 @ 49p set a Target Price of 61p*)

(Profile 18.12.23 @ 50.05p set a Target Price of 61p-65p*)


Nightcap (LON:NGHT) – possibly a sitting target


At the current £10m market capitalisation, this cocktail bars group looks to me to be a sitting duck.


The work that Sarah Willingham and her team have performed over the last few years has been impressive in the way that it has built up its operating estate.


Five acquisitions and the opening of 13 bars has been handled during a period of very challenging times for any management group.


By the end of this current trading year to 30th June it will have boosted its estate to 46 venues from just 19 in 2021.


In that same period group revenues have multiplied ten times from £5.97m to £an estimated £59.80m at end June this year.


During that time span gross profits will have risen from £4.55m to £47.24m.


CEO Sarah Willingham stated that:


"We expect the second half of FY2024 to continue to be uncertain and challenging, but I believe hospitality has gone through the worst of this downturn with many economic indicators showing a likely recovery later on this year.


In the meantime, we continue our focus on leading our sector in terms of quality, innovation and training.


Our ambition to become a leading company from a digital perspective is gathering pace, with several new systems and integrations launching this quarter.


These are all initiatives that will position Nightcap well for further acquisitions and organic roll-out of our leading brands when the market allows.


I remain very excited about the future prospects for Nightcap and look forward to the next year of fun and hard work, surrounded by the most brilliant people, as our synergies bed in, the economy settles and we start to benefit from the successful integration of all of our businesses."


Analyst Matt Butlin at Allenby Capital has current year estimates out for this end-June of a considerably lower pre-tax loss of £2.89m (£4.86m loss).


Other operators in this particular sector must be looking on at just how Nightcap is faring, perhaps with a view to pounce on the group before far better and less restricting times return, by which time the group’s shares, now just 4.20p, could be winging very much higher.


Disappointed yes – but I have not lost faith that this little group will turn out to be something of a Cinderella in its sector.


(Profile14.11.22 @ 9.5p set a Target Price of 12p*)

(Profile 11.01.24 @ 5.65p set a Target Price of 7p)


Gulf Marine Services (LON:GMS) – elevating share price


Well it is now apparent that the shares of this Abu Dhabi-based operator of 11 self-propelling, self-elevating vessels have done well in the last few weeks.


Last night they closed at 21.30p, well above my recently set Target Price, trading in good numbers at around the 21p to 21.50p range.


In my view they are surely heading higher and should not be sold yet, more good contract news could be imminent.


(Profile 30.11.23 @ 13p set a Target Price of 16p*)

(Profile 22.01.24 @ 15.95p set a Target Price of 19.50p*)


Team Internet Group (LON:TIG) – Berenberg ups Target Price to 185p


After this week’s results analyst Ciaran Donnelly at Berenberg upped his Target Price to 185p, while rating the shares as a Buy.


He noted that the results were 7% ahead of his firm’s forecasts for gross sales and 6% ahead for adjusted earnings.


In terms of the full-year 2024 outlook, Donelly stated that the group’s management is confident that it will meet current market expectations.


He said the valuation was an ‘undemanding’ 8.2 times full-year 2024 price to earnings and that the shares offer a free cashflow yield of 14%.


They closed last night at 134.80p – which is a level way below its peers, I stay confident of my Target Prices being achieved this year.



(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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