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  • Writer's pictureMark Watson-Mitchell

Small Cap catch up – SDY, VTU, HFD, CARD and KETL

Speedy Hire (LON:SDY) – 6.5x pe and a yield of 7.8%

As Schroders reduce their stake in the UK’s leading tools and equipment hire services company, now fractionally below the 13% level, I note that the Martin Currie Investment Management company has been adding to its holdings in the group, now up to 23.25m shares, some 5.03% of the equity.

The company held a Capital Markets Day on 11th July, at which the new CEO Dan Evans informed those present about his five-year plan for the group, looking for a compound annual growth rate of 8% and a £650m turnover by the end of that period.

The group will be holding its 2023 AGM in the City on Thursday of next week (7th September), ahead of which I would expect a Trading Update to be issued.

Analyst Charlie Campbell at Liberum Capital is positive about the group’s prospects and rates the shares as a Buy, looking for a price objective of 70p.

He estimates that the current year to end March 2024 the group revenues will rise to £456m (£441m), while pre-tax profits could come in at £33.0m (£30.7m), taking earnings up to 5.3p (4.9p) enabling a 2.7p (2.6p) per share dividend.

For the next year he sees £477m sales, £37.0m profits, 6.0p earnings and a 2.9p dividend.

On those estimates the shares of the £178m capitalised Speedy Hire at just 34.5p trade on 6.5 times current year earnings and yield almost 7.8% - making them a definite purchase for growth portfolios.

(Profile 15.10.19 @ 52p set a Target Price of 75p*)

(Profile 01.06.22 @ 47p set a Target Price of 60p)

Vertu Motors (LON:VTU) – vehicle supply easing while costs are tightened

Yesterday morning the UK’s fourth largest automotive retailer announced a Trading Update covering the five months to end July.

Boosted by its December 2022 acquisition of Helston the £238m capitalised group reports that it has delivered a trading profit above the prior year levels.

Furthermore, the Board anticipates that with an improving supply of vehicles and a strong control on costs, the full year results for the year to end February 2024 will be in line with current market expectations.

Analyst Carl Smith at Zeus Capital has a valuation estimate on the group’s shares at 108p against the 68.80p at which they currently trade.

He sees revenues up from £4.01bn to £4.71bn, with adjusted pre-tax profits of £48.0m (£39.3m), generating earnings of 9.9p (8.7p) and covering a dividend of 2.5p (2.2p) per share.

Its shares are trading on a mere 7.02 times earnings, clearly showing that there is still a good upside potential in owning the stock.

(Profile 12.10.20 @ 30.5p set a Target Price of 40p*)

Halfords Group (LON:HFD) – looking for a better journey ahead

Wednesday of next week (6th September) will see the UK’s leading motoring and cycling services and products retailer hold its AGM for the year to end March 2023.

We could well see a Trading Update for the first 20 weeks being announced just before that meeting.

After the 43% fall in the 2023 profits, due to the cost-of-living crisis, this year might see a slight recovery.

Investors are already anticipating that the current year will show some profit growth overall, however the first half year could well come through with a slower return, but with hopes that the second half will get the group back into gear.

Halfords customers shop at 393 Halfords stores, 2 Performance Cycling stores (trading as Tredz and Giant), some 643 garages (trading as Halfords Autocentres, McConechy’s, Universal, National Tyres and Lodge Tyre) and have access to 264 mobile service vans (trading as Halfords Mobile Expert, Tyres on the Drive and National), 479 commercial vans and 5 HME Cycling vans.

The £471m capitalised group’s 219m shares are well spread with institutional investors holding in excess of 50% of the equity.

Just over two years ago the group’s shares were riding high, peaking at over 430p, since when they have been pedalling backwards to the current 183p.

However, I was interested to note that Lombard Odier Asset Management has recently been adding to its holdings and it now sits at over 5% of the equity.

Market expectations for the current year are now guided for some £53.5m pre-tax profits, while the analyst consensus Target Price is 225p.

The Interim Results are due to be released on Wednesday 22nd November.

This column has enjoyed success with its selection of Halfords shares in July 2020 and despite Covid saw a 275% subsequent price rise.

It could well be that the shares are now due for another move upwards, next week’s AGM and Update will make interesting reading.

(Profile 02.07.20 @ 156.5p set a Target Price of 180p*)

Card Factory (LON:CARD) – just keeping you posted

Just as the Swiss-registered Teleios Capital Partners is gradually easing back on its holding in this greetings card and gifts retail group, back from 20% of the equity in May this year, to now 15.65%, there is a buyer in the background.

JP Morgan Asset Management has been gently building up its holding, now 5.44%, some 18.65m shares.

On 7th August the group’s Trading Update for the first half period to end July declared that the business was materially ahead of its Board’s expectations.

It stated that the second half outlook gives it some confidence that the full year will be in excess of previous market hopes.

The £349m capitalised retailer is expected to see some £511m (£463m) sales revenues in the current year to end January 2024, while pre-tax profits are estimated out at around £60.7m (£52.4m), with earnings of 13p and paying a dividend of only 1p a share.

The analyst consensus average Target Price is now 144p, compared to last night’s closing 101.70p.

Hold tight, it feels as though they are heading higher again, possibly ahead of the Interims being announced next month.

(Profile 05.08.20 @ 42p set a Target Price of 60p*)

(Profile 10.05.23 @ 213.5p set a Target Price of 265p*)

Strix Group (LON:KETL) – now get switched on again

In just over three weeks’ time (21st September) this global leader in the design, manufacture and supply of kettle safety controls and other complementary water temperature management components, will be announcing its interim results for the six months ended 30 June 2023.

On the same day the group will be holding a Capital Markets Event in London, for analysts and institutional investors, which will provide an update on the medium-term strategy, the level of net debt and the progressive dividend policy going forward.

Analyst Andy Hanson at Zeus Capital considers that the group’s shares are currently trading at a 40% discount to its sector peers.

He is estimating that the full year to end December will show revenues up over 45% to £155.6m (£106.9m), while its adjusted pre-tax profits could increase 34% to £29.7m (£22.2m), generating earnings of 12.0p (10.8p) and a dividend of 6.3p (6.0p) per share.

For the coming year he goes for £171.6m sales, £33.8m profits, 13.8p earnings and a 6.8p dividend.

In early August 2021 the shares were up to 375p.

This time last year the group’s shares were trading at over 160p, they closed last night at only 91.5p, valuing the whole group at just £218.5m.

The shares are trading on only 7.6 times current year price-to-earnings, while yielding a likely 6.9% - making the shares, based on the Zeus numbers, incredibly appealing.

(Profile 31.12.19 @ 196p set a Target Price of 250p*)

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


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