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  • Writer's pictureMark Watson-Mitchell

Small Cap Catch Up – Severfield, Springfield, Keller, Kitwave and H&T Group

Severfield (LON:SFR) – Finals Due Next Wednesday Ahead Of Expectations


Last September, when I wrote about the UK’s market leader in the design, fabrication and construction of structural steel, the Thirsk-based group’s shares were just 60.5p.


Last night they closed at 71.80p and still look very cheap to me.


In the Pre-Close Trading Update, issued on 17th April, CEO Alan Dunsmore stated that:


“The Group is performing well, the outlook is positive and our businesses are well-positioned in markets with excellent long-term growth opportunities.


Whilst there remains some uncertainty in the wider economy, we are seeing an improvement in market conditions which, together with our high-quality order books, diversified activities and operational delivery capabilities, provides us with confidence for the year ahead.”


The end March 2024 Final Results, which are due to be announced next Wednesday, 19th June, will be ahead of market expectations.


Analyst Joe Brent at Liberum Capital has a 130p Price Objective on the group’s shares.


He is looking for the 2024 year to have seen sales down to £480m (£492m) but with pre-tax profits up at £35.8, (£32.5m), lifting earnings to 8.6p (8.5p), easily covering a 3.7p (3.4p) dividend per share.


For the current year the analyst looks for £551m revenues, £36.6m profits, 9.3p earnings and a 4.0p dividend per share.


The group’s shares, which hit 74.80p on 20th May, are unnervingly close to breaking through my recent 75p Target Price, which could well happen after next week’s Finals are announced.


They closed last night at 71.80p, valuing the whole group at only £221m.


(Profile 12.09.19 @ 62p set a Target Price of 88p*)

(Profile 08.09.23 @ 61p set a Target Price of 75p)


Springfield Properties (LON:SPR) – Insider Sells Stock


Founder Sandy Adam, the Chairman of this Scottish housebuilding group, which I featured on Monday of this week after the pivotal Barratt deal, sold 125,000 shares at 96.23p each last Friday.


That disposal does not bother me too much because the boss has a massive 37,888,019 share position in the equity, some 31.9%, after the sale.


The group capitalised at £115m with its shares closing last night at 97p.


I remain very confident that it will not be too long before my 120p Target Price is achieved.


(Profile 05.03.19 @ 114p set no Target Price)

(Profile 26.10.22 @ 92p set a Target Price of 120p)


Keller Group (LON:KLR) – JP Morgan takes stake


I was interested to note that JP Morgan Asset Management Holdings has just announced that it now has a 5.04% stake, controlling some 3,680,048 shares, in the equity of this group which is the world’s largest geotechnical specialist contractor.


Just under a month ago the group’s AGM Trading Update stated that the strong momentum shown in its full year results in March 2024 had continued through the period, with overall performance materially ahead of the prior year.


The group stated that the momentum, combined with a strong order book and recent contract wins, gives it a good visibility and enhanced confidence in performance for the remainder of the year.


“Accordingly, we now anticipate full-year performance to be materially ahead of the Board's original expectations.”


The group is expected to announce its Interim Results on Tuesday 6th August.


Its shares, which a consensus of analysts look for 1,355p as the average Price Objective, closed last night at 1,211p, valuing the group at £880m.


A very good Hold.


(Profile 10.08.20 @ 643.5p set a Target Price of 750p*)


Kitwave Group (LON:KITW) – Ready To Deliver Again


This delivered wholesale business, which came to AIM just over three years ago, is due to declare its Interim Results, for the six months to end April, on Tuesday 2nd July.


The North Shields-based group, which has some 32 depots across the UK specialises in selling and delivering impulse products, frozen, chilled and fresh foods, alcohol, groceries and tobacco to approximately 42,000, mainly independent, customers.


It has a diverse customer base, which includes independent convenience retailers, leisure outlets, vending machine operators, foodservice providers and other wholesalers, as well as leading national retailers.


Established in 1987, the £247m group's growth to date has been achieved both organically and through a strategy of acquiring smaller, predominantly family-owned, complementary businesses in the fragmented UK grocery and foodservice wholesale market.


Analyst Mark Photiades at Canaccord Genuity Capital Markets rates the group’s shares as a Buy, looking for them to rise to 455p.


His estimates for current year to end October are for sales of £678.8m (£602.2m), with adjusted pre-tax profits of £29.0m (£27.5m), earnings of 29.9p (28.7p) and a dividend of 11.3p (11.2p) per share.


For the coming year he sees £710.1m of sales, £31.0m profits, 32.0p earnings and a lift in dividend to 14.0p per share.


On 16th May I suggested that a ‘top-slicing’ at 382p per share might be expected, giving fresh scope for investment at lower prices.


After falling back to 348.60p at the end of May, the shares which touched 409p at the start of May, closed at an attractive 353p, especially ahead of the Interims.


(Profile 14.02.22 @ 145.5p set a Target Price of 180p*)


H&T Group (LON:HAT) – Insider Buys More Stock, New Target Price


After having taken over the role of Chairman in April last year, it was interesting to note that Simon Walker has been buying further shares in H&T, which is the UK’s largest pawnbroker and also a leading retailer of new and pre-owned jewellery and watches.


On Monday of this week, he bought 9,965 @ 387p each, taking his holding up to 30,000 shares.


Just a month ago, at the group’s AGM, the company announced that trading in the first four months of the current year, covering January to end April, had been in line with expectations during the period.


The company stated that:


“Demand for pledge loans continues to be buoyant and April 2024 was a record month for lending.


Consistent with last year, redemptions in March and April were higher than average as customers chose to collect their items, often to wear them at religious and family celebrations.


This is expected to reverse in the coming months.”


Analyst Gary Greenwood at Shore Capital Markets is looking for the current year to end December to show adjusted pre-tax profits of £33.5m (£26.4m), with 57.2p (48.7p) earnings and 18.5p (17.0p) of dividend per share.


For next year he sees £36.7m profits, 62.7p of earnings and a 20.0p per share of dividend.

The analyst has a ‘fair value’ of 530p on the shares, which closed 15p down yesterday at just 376p, capitalising the company at only £162m.


These shares are significantly undervalued, in my opinion, and could well be in for a price recovery before or shortly after the H1 Trading Update, which is expected early next month.


I now set a new Target Price of 470p.



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

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

(Profile 12.06.24 @ 380p set a new Target Price of 470p)

 

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

 

 

 

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