Small-Cap catch-up featuring Devro, K3 Capital, Safestyle and notes for AGM’s next Tuesday
Devro (LON:DVO) – ‘if the skin fits’ – take the profit and reinvest
This group is one of the world’s leading manufacturers of collagen products for the food industry.
It offers edible and non-edible collagen casings, films, and plastic casings for use in the production of a range of sausages and other meat products.
The company, which sells its products to food manufacturers through distributors and agents, operates in Latin America, Russia and the East, the Middle East and Africa, South-East Asia, China, North America, Continental Europe, Ireland, Japan, Australia, and New Zealand.
Last Friday morning the company made two important announcements.
The second, issued at 7.01am, was a Trading Update for the four months to end October, declaring that the business in that period had been strong, some 16% better than the corresponding period last year.
Volume growth and operating margins were both up, in fact better than the Management expectations.
The announcement prior to the Update, by just one minute, was concerning the agreed cash acquisition of the group by a Dutch company, Saria Nederland.
The bid was at 316.1p in cash, valuing the group at £540m, a level that was a healthy 65% up on the previous closing price and 80% up on the average price for the month ahead of the bid.
It looks like a done deal, especially with such a big premium in bid price, and with the market continuing to trade the group’s shares fractionally below the offer value at around the 303p level.
Currently, I hear no whispers of a counter-bidder in the wings, certainly the market price tells us that too, so I would understand holders being tempted to take the sale price in the market so as to take profits.
This column has had a cracking run with the Profile Selection, which is now a 103% capital gain.
(Profile 28.04.20 @ 149p set a Target Price of 180p*)
K3 Capital Group (LON:K3C) – Shore Capital initiate with a Buy
I was interested to note that brokers Shore Capital are rating this group’s shares as a Buy.
The £203m capitalised group, states Shore, is a professional services business advising UK SMEs, that has a volume-based approach that is resilient to cyclical downturns.
The broker goes on to observe that transformational acquisitions have improved the balance of the business model to provide three distinct service lines (Business Sales, Tax and Restructuring).
Shore Capital considers that windfall mergers and acquisition transactions and big-ticket administrations provide significant upside potential to its numbers.
Initiating coverage of the company sees the brokerage rating the shares, currently at 292.5, with a ‘fair value’ of a handsome 410p.
I like the feel of such an upside to these shares, especially ahead of an Interim Trading Update due out within the next couple of weeks.
(Profile 21.10.20 @ 147.5p set a Target Price of 200p*)
Safestyle UK (LON:SFE) – a good medium-term purchase
Oh dear, oh dear, oh dear.
The recent political turbulence hit this windows and doors group’s sales, dropping some 7.6% behind expectations.
But the better news is close at hand.
The last three weeks have seen a big return on the sales front, growing by over 30% in the last three weeks.
However, the bottom line will take another big hit for the year, with brokers now looking for a possible £4.5m loss for the year to the end of this month.
Analysts are already looking for £165m sales next year to bounce it back into profit, with £3.6m anticipated, worth 2.1p in earnings.
For the 2024-year sales of £180m could see the group treble profits to £10m, worth almost 6p a share in earnings and thrice covering a 2.0p dividend per share.
The group’s shares closed last night at only 26p, at which level they are now clearly a medium-term purchase.
(Profile 06.01.21 @ 36.5p set a Target Price of 48p*)
And finally …….
Look out for a load of interesting comments emanating from just four of next Tuesday’s AGM’s.
The Brighton Pier Group (LON:PIER) – a Cenkos Buy
When, in September, this venue and bars operating group announced its results for the year to end June, it declared record figures but stated that the group’s trading would be uncertain during the balance of 2022.
So let us hope that it can come up with some truthful but smoothing comments to cheer its investors up again.
The company’s brokers Cenkos Securities rate the shares, now just 59p, as a Buy.
Hopefully, this company has an acquisition programme to add sparkle to its share price.
Its AGM is being held next Tuesday at 1pm on the Brighton Palace Pier.
(Profile 30.06.21 @ 61p set a Target Price of 75p*)
Gattaca (LON:GATC) – a Liberum Buy
This engineering and technology staffing solutions group is holding its AGM on Tuesday at The Solent Hotel, Whiteley, Hampshire at 9.30am.
Could the early start for the meeting help to generate interest in the group’s progress this year?
Matthew Wragg, the group’s CEO, recently stated that he was excited about the journey that the company was on and the start that it had made.
Liberum Capital rate the shares as a Buy, with a recently upgraded price objective of 110p, compared to the current 72.5p. Are they ready for another upward run?
(Profile 10.05.21 @ 148p set a Target Price of 185p*)
Nightcap (LON:NGHT) – an Allenby what?
There are a lot of market ‘specialists’ who continually call down the shares of this bars group.
Against their opinions I continue to feel that Sarah Willingham and her management crew will battle their way through the current ‘macroeconomic’ hassles. Sensibly it has already declared that it is scaling right back on its new bar opening programme.
I hope that a constructive and positive AGM statement comes from the 10am AGM at the offices of Allenby Capital in the City.
The shares closed last night at just 8.5p.
(Profile 14.11.22 @ 9.5p set a Target Price of 12p)
Rosslyn Data Technologies (LON:RDT) – a Cenkos Buy
Another AGM being held in the City next Tuesday is that of this cloud-based data analytics platform company.
At 10.30am at the office of its PR I wonder whether Paul Watts, the CEO, will tell those present of the recent contract wins and the strong momentum now underway.
Brokers Cenkos Securities rate the shares, now 1p as a Buy.
(Profile 12.08.20 @ 5.75p set a Target Price of 7.5p*)
(Asterisks * denote that Target Prices have been achieved since Profile publication)