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  • Writer's pictureMark Watson-Mitchell

Small Cap Catch Up – HAT, MCB, COST, MRL, JNEO and GMS

H&T Group (LON:HAT) – Sustained Profitable Growth

My long-term favourite pawnbroking group has reported for 2023 a 39% improvement in its pre-tax profits at £26.4m (£19.0m), while its Pledge Book was 28% higher at £129m (£101m), producing a 36% uplift in its PB net revenue at £69.5m.

The group’s balance sheet has stayed strong and its net assets at £177m give a per share value of 403.3p.

CEO Chris Gillespie stated that:

"The Group has made significant progress in 2023, delivering record profits and strong growth in a challenging environment for both businesses and individuals.

Pawnbroking is our core business and is attracting increasing numbers of new customers.

Throughout the year, we saw record demand for our pawnbroking service and this has continued into 2024, with January being a new record month for lending.”

Analyst Gary Greenwood at Shore Capital Markets has a ‘fair value’ on the group’s shares of 515p.

He estimates that the current year to end December will see £33.5m profits, 57.2p earnings, triple covering a dividend of 18.5p per share, leaving the group’s net asset value at 442.1p per share.

This group continues to grow and I continue to rate highly the upward potential for its shares from the current 385p.

(Profile 06.07.22 @ 332.5p set a Target Price of 400p*)

(Profile 30.01.23 @ 429p set a Target Price of 500p)

McBride (LON:MCB) – Targets Beaten

Just three weeks ago (21st February) I noted that the shares of this Manchester-based cleaning products maker were close to breaking my Target Price barrier, that has been well within 4p of achievement before bad figures upset the price.

Following a weekend tip by Lucy Tobin the shares enjoyed almost trebled turnover and hit 101p at one stage, 7p up on the Friday close.

Lucy Tobin underlined the company’s very low price-to-earnings ratio of then some 6.5 times next year’s earnings, before concluding that readers should stock up on the shares – she was right in her call.

The group, which is winning business from its rivals, is currently valued at around £165m, with its shares now trading at some 97.60p.

Hold very tightly.

(Profile 10.03.21 @ 79.5p set a Target Price of 99.5p*)

(Profile 17.07.23 @ 31.15p set a target Price of 38p*)

Costain (LON:COST) – Better Margin Expected Growth

This group shapes, creates and delivers pioneering solutions that transform the performance of the infrastructure ecosystem across the UK's transport, energy, water, and defence markets.

The year to end December reported revenues lower at £1.33bn (£1.42bn) while adjusted pre-tax profits were up at £44.2m (£34.2m), leaving basic earnings better at 12.2p (9.9p) and paying out an unchanged 1.2p dividend per share.

Impressively the group ended its year with a net cash balance 32.8% higher at £164.4m (£123.8m).

For the current year and going forward the group has a strong opportunities pipeline as well as having in excess of £1bn of revenue secured for 2024 at its year-end, representing more than 80% of expected revenue.

CEO Alex Vaughan stated that:

"The quality and balance of our forward work across our two divisions gives us good visibility on future revenue and margin.

We have more than 80% of expected revenue secured for 2024 and our forward work stands at around three times 2023 revenue.

We see continuing momentum in the business and remain confident in the Group's growth prospects."

Analyst Andrew Nussey at Peel Hunt considers that the company is an undervalued stock in an undervalued sector, with its shares trading on just 5.6 times forecast earnings.

Nussey reiterated his Buy recommendation while increasing his Price Objective from 80p to 95p.

Over at Liberum Capital its analysts Joe Brent, Alex O’Hanlon and Sanjay Vidyarthi also rate the group’s shares as a Buy, looking for 100p in due course.

They estimate that current year sales will be £1.22bn, with £46.5m pre-tax profits of £46.5m, generating 12.3p of earnings and covering 1.2p per share of dividend.

For the group’s 2025 trading the analysts go for £1.22bn sales, £52.1m profits, earnings of 13.8p and a 1.4p dividend per share.

The shares touched 72.45p on Tuesday in response to these results, before drifting back to an almost unchanged 66p.

At that level the £190m capitalised group’s shares certainly are an undervalued stock, trading at 5.5 times current year price-to-earnings and just 4.9 times its 2025 hopes.

(Profile 05.09.19 @ 155p set a Target Price of 250p)

(Profile 02.08.21 @ 55p set a Target Price of 69p*)

(Profile 24.08.23 @ 50p set a Target Price of 62p*)

And Finally ….

Marlowe (LON:MRL) – Looking Very Cheap

At the very end of February, I called the shares of this safety and regulatory compliance services group as an extremely attractive proposition following its deal with Inflexion, the Private Equity group.

In one quick blow that leaves the company with two main operating subsidiaries and net cash in the bank, after a chunk of cash being given back to shareholders.

The terms of just how that will be handled, to the tune of £150m cash, have not been announced, I just hope that it is not by way of a share buyback programme.

I marked the disposal as a pivotal moment for Marlowe, with its shares then at 512.50p.

They closed last night at only 528p, still looking cheap to me.

(Profile 30.01.20 @ 468p set a Target Price of 550p*)

Journeo (LON:JNEO) – Even More Orders

This group, which is a leading provider of information systems and technical services to transport operators and local authorities, has this week announced further orders for its Bus Safety Systems.

The £1.9m purchase for a small batch of the Transport For London fleet, could well be the first stage of a massive programme over the next couple of years, covering the 9,000 vehicle fleet – so far with only 1,000 being applied with Journeo’s CMS Systems.

Analyst Andrew Renton at Cavendish Capital Markets has a Price Objective of 385p on the group’s shares, which closed last night at just 262p.

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

(Profile 24.03.23 @ 147.5p set a Target Price of 175p*)

Gulf Marine Services (LON:GMS) – pumping higher

The contract awards are coming in thick and fast for this self-elevating, self-propelled liftboat fleet of 13 vessels.

The Order Book has now risen from $373m, declared a few days ago, to a massive $463m.

This material increase in the group’s Order Book is not to be ignored.

We are now looking for sales this year, to end December, of $167.7m ($151.7m), while expecting adjusted pre-tax profits to almost double to $52.0m ($27.3m), boosting earnings to 4.1c (2.0c) per share.

At the current 19.35p all I can say is that they are going higher!

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

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


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


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