Small-cap catch-up featuring RBN, TLY, BILN, CTG, ARBB, RCN, BOOM and BEG
Robinson (LON:RBN) – property sales will reduce corporate debt with profits recovering
Two years ago I published a Profile on this Chesterfield-based custom packaging specialist.
I stressed not only its potential profit-making but also detailed out that it had a fair amount of property on its books, most of which was surplus to the group’s requirements.
It was relatively substantial and had development possibilities.
The values of those properties gave the company a healthy asset backing.
The shares went up from 55.5p to above 164p over the following year before the various Covid-19 hassles impacted the company’s basic business and its profitability.
The shares have since been as low as 71p in the last month, before nudging up again to the current 77.5p.
Yesterday the company gave its shareholders an update on certain of its properties, which I consider could make the shares well worth buying again.
The company has been reorganising its manufacturing operations – the most important move has been to consolidate two of its sites into just one.
That has meant that its site in Sutton-in-Ashfield has been sold off for £2.47m, together with operational efficiencies to be affected at the cost of some £0.6m at its Kirkby-in-Ashfield site.
The sold site had a book value in Robinson’s accounts of £0.99m as at last December. The balance proceeds are being used to reduce bank debt to around £14.7m.
That sale follows another surplus property having been sold off in late March, worth £0.97m.
With its headquarters in Chesterfield, the company has three plants in the UK, two in Poland and also the recently acquired Schela Plast plant in Denmark.
The group’s origins date back to 1839 and today its main activity is injection and blow moulded plastic packaging and rigid paperboard luxury packaging.
It operates within the food and beverage, homecare, personal care and beauty, and luxury gift sectors.
The group provides products and services to major players in the fast-moving consumer goods market including Reckitt Benckiser, McBride, SC Johnson, Procter & Gamble and Unilever among many other customers.
Schela Plast specialises in the design and manufacture of plastic blow moulded containers, serving a number of the major fast-moving-consumer goods brands in Denmark and neighbouring countries.
Towards the end of March this year the company announced its results to end December 2021.
They showed sales up 24% to £46.0m (£37.2m) but declared a pre-tax loss of £0.1m (£1.8m profit). Signs for this current year could well have been taken then with the company declaring an uncovered 3.0p per share in final dividend.
At that time Chairman Alan Raleigh noted the very challenging conditions last year, such as input price inflation, pandemic hit customer demand and the ongoing uncertainty.
However, the group is now seeking substantial price increases from all of its customers, in order to boost its operating margins.
The Ukraine situation has had added hassles but the group is expecting a profits recovery.
Analysts Raymond Greaves and Michael Clifton at brokers finnCap look for revenues to improve to £52.9m this year, kicking in pre-tax profits of £1.4m, worth 7.2p in earnings and covering a full year dividend of 5.5p (5.5p) per share.
I would expect the brokers to review their current and coming year estimates if the company publishes an AGM Trading Update in June.
The group stated yesterday that it would expect further surplus Chesterfield property disposals being possible within the next year and a half, subject to planning approvals.
It has declared that its intention remains, over time, to realise the maximum value from the disposal of surplus properties and to reinvest those proceeds in developing the group’s packaging business.
The brokers have a ‘sum of the parts’ valuation on the shares of 125p each and that does not contain any value included for its £13.0m pension surplus, which is not recoverable.
I like this little £13.0m market capitalised company, it is definitely on the recovery track and its shares at 77.5p offer attractive upside possibilities.
I now set a new Target Price of 97.5p.
(Profile 02.04.20 @ 55.5p set a Target Price of 80p*)
Arbuthnot Banking Group (LON:ARBB) – profits set to increase
It is becoming evident that the private and commercial banking group will be benefitting from the trend for higher interest rates.
This is especially positive for the company because it not only has a large depositor’s book, but it also has access to inexpensive funding, which is very good news for its higher margin specialist lending companies.
Following the recent announcement of the group’s 2021 results, analysts Vivek Raja and Gary Greenwood at Shore Capital are now estimating pre-tax profits to more than double in this current year to end December.
They go for £10.7m (£4.6m), which should see earnings leaping four-fold to 57.6p (14.0p) per share, comfortably covering the 40p (38p) dividend.
For next year their estimates suggest £18.1m profits, 91.2p earnings and 42p in dividend per share.
Jumping even further ahead they have pencilled in £26.3m in 2024, then £38.3m in 2025, with earnings respectively at 129.5p and 187.2p per share.
The group’s shares are trading at around the 1000p level, having been as high as 1165p in the last year – four years ago they were 1610p, will they return to that level?
It is quite possible given another couple of years profit recovery.
(Profile 26.03.19 @ 1300p set a Target Price at 1640p)
Redcentric (LON:RCN) – significant and productive
The leading UK information technology managed services provider yesterday gave its investors an Update for its year to end March.
Revenues will be £93.1m (£91.4m), while its EBITDA will come out at £24.0m (£24.6m).
Operationally the company stated that the last year had been a very significant and productive one for the group.
In its own terms, it is now ‘structuring the business for growth’ and it boasts that it has an excellent platform on which to build both its capability and its scale through acquisitions.
The final results for the last year will be published on Thursday 21 July.
Peter Brotherton, the group’s CEO, stated that
“After several years of repositioning the business, we are now totally focused on both organic and inorganic growth. We have demonstrated that we can make highly accretive acquisitions both in terms of profitability and capability and our new £100m bank facility, supported by our strong cash generation, will enable us to continue to invest in our business."
Analysts Andrew Darley and Kimberley Carstens at finnCap have estimates for revenues to rise to £103.0m, with £16.1m of adjusted pre-tax profits, worth 8.2p in earnings per share. Their price objective is 190p for the group’s shares.
Unfortunately, the highest the shares climbed to since my Profile a year ago was 149p, some 21p short of my price aim.
Now at 124.50p the shares do look very capable of edging higher.
(Profile 19.04.21 @ 139.5p set a Target Price of 170p)
Billington Holdings (LON:BILN) – fair value of 350p a share
Earlier this week the leading structural steel and construction safety solutions group reported its results for 2021.
Revenues were up 25.3% at £82.7m, while underlying pre-tax profits were 23.5% lower at £1.3m (£1.7m), earnings dropped from 11.3p to 8.1p per share.
On the face of it those results look disappointing – however, I reckon that the group did well in the face of some very challenging conditions.
It is now ready to bounce back this year – with analysts John Cummins and Matthew Davis at WH Ireland estimating £90.3m sales this year then £100.5m next year, recovering profits to £3.0m then £4.0m respectively for 2022 and 2023.
That should see earnings coming out at 19.3p then 25.2p per share.
I really like this group and I see its shares climbing again back up to the 343p level that they were this time last year, they are now just 233p, showing some good upside potential.
The brokers consider that the ‘fair value’ is closer to 350p.
(Profile 02.04.19 @ 266p set a Target Price of 314.5p*)
Audioboom Group (LON:BOOM) – it has been a ten-bagger
The leading global podcast group enjoyed good trading in 2021.
Revenues jumped 125% to $60.3m, while its adjusted pre-tax profits turned around from a £2.3m loss to a positive £2.7m, with earnings showing at 15.8c (loss 16.2c) per share.
Analyst Michael Hill at finnCap is now expecting the group to show $83m then $106m revenues for 2022 and 2023. He estimates that $3.6m then $5.8m will be the profit lines for those two years, worth 20.7c then 33.0c per share in earnings.
This group’s shares have historically been overvalued in relation to its earnings. Even so Hill is confident enough to put out a price objective of 2250p per share currently.
They are trading at around 2060p, which is more than three and a half times the price this time last year.
They have risen almost ten times since my first Profile on the company.
They may well go very much higher, but I would discourage chasing them.
(Profile 09.07.19 @ 210p but with no Target Price having been set)
Christie Group (LON:CTG) – looking for a rise up in price
The business services group, which can trace its origins back some 175 years ago, saw a 45.1% advance in its revenues to £61.3m (£42.2m) for the year to end December last.
That bounce pushed it back into pre-tax profits of £3.9m (£5.7m loss), worth 13.7p (loss 16.7p) per share in earnings and paying a dividend of 3.0p (1.3p).
Shore Capital analyst Peter Ashworth considers that the group is significantly undervalued, with its shares trading on just around nine times current year earnings estimates of 12.2p. He sees £71m sales, £3.9m profits and a 3.5p dividend this year.
For next year he has estimates of £76m sales, £4.8m profits,15.0p earnings and a 4.0p dividend.
The shares, now at just 115p, have touched 139.60p in the last year and look to me as though they can rise back up there over the coming year, even possibly breaking through my price aim level.
(Profile 06.10.21 @ 124p set a Target Price of 155p)
Begbies Traynor Group (LON:BEG) – unlucky for some but lucky for others
The business mix of corporate recovery, financial advisory and property services consultancy benefits this group significantly from the misfortune of others.
For the year to the end of April 2022 analysts Vivek Raja and Jamie Murray at Shore Capital are estimating that revenues will have increased from £83.8m to £100.1m, with adjusted pre-tax profits of £17.4m (£11.5m) with earnings of 8.5p (6.7p) and a dividend of 3.2p (3.0p) per share.
They go for profits of £19.3m for the current year, worth 9.5p earnings and a 3.4p dividend per share.
This group, which has a 14% market share of UK insolvencies, is also doing well out of rising liquidations.
The group’s shares have topped out at 150.34p within the last year but are now at just 111p.
They are sure to go higher again soon.
(Profile 26.11.19 @ 85p set a Target Price of 110p*)
(Profile 21.04.20 @ 93p set a Target Price of 110p*)
Totally (LON:TLY) – great cash generation and profits build-up
Last Monday morning saw the Trading Update from this frontline healthcare services provider for the year the year to end March.
It has recently been a period of winning new contracts and extending existing business, while at the same time bedding down new acquisitions, together with the ongoing development of its digital services.
The Update, predicting better than consensus expectations, enabled analysts to review upwards their last and current year estimates.
Analyst Ian Jermin, at Allenby Capital the group’s NOMAD and joint broker, has pencilled in £126.0m revenues for last year (£113.7m), with adjusted pre-tax profits of £3.50m (£2.50m), lifting earnings up from 1.49p to 1.99p, enabling a 0.75p per share dividend (0.50p).
He reckons that net cash will carry on expanding the group’s coffers, going for £15.3m at the March year-end (£14.8m).
Encouragingly Jermin has estimated £140.0m of revenues for the current year, generating a profit of £5.7m, worth 2.97p in earnings and easily covering a maintained 0.75p per share dividend. His year end cash guesstimate is £17.2m.
For the year to end March 2024 Allenby Capital has estimated £160.0m sales revenues helping to jump the group’s profits up to £7.9m, worth 4.13p in earnings and covering a 0.85p per share dividend. Year-end 2024 cash could be an impressive £22.3m.
That cash build-up is quite a feature, certainly not to be ignored.
It, therefore, is very evident that Totally is really showing a good solid construction as it grows, both organically and by way of strategic acquisitions.
The £90m capitalised group’s shares have proved to be a very healthy market in the last few days, closing at 47.50p last night after more than trebled daily average dealing volumes, with 1.48m traded, making well over 8m changing hands this week since the Update.
(Profile 12.03.20 @ 12p set a Target Price of 18p*)
(Profile 25.06.21 @ 38.5p set a Target Price of 50p)
(Asterisks * denote that Target Prices have been achieved since Profile publication)