• Mark Watson-Mitchell

Small Cap catch-up: UPGS, BONH, HTG, SCHO, MACF and FDEV

UP Global Sourcing Holdings (LON:UPGS) – UP, UP and away


In the middle of August this homewares brands group announced its Pre-Close Trading Update for its year to end July.


Salter and Beldray are amongst its many brands.


According to market research nearly 80% of every UK household owns at least one of the group’s brands.


They indicated revenues up 13% to a record £154.2m (£136.4m), while underlying pre-tax profits jumped 42% to £15.8m (£11.2m). That would see earnings of 13.8p (10.6p) per share, sufficient to cover at 38% increase in dividends to 6.9p (5.0p) per share.


For the current year Darren Shirley and Clive Black, analysts at Shore Capital, estimate £169.1m of sales, £17.0m of profits, 14.5p earnings and a 7.2p per share dividend.


Jumping well into next year they see £179.2m of revenues, £18.4m profits, with 15.4p earnings and a 7.7p dividend.


We will have to wait until 3 November for the finals to be published, but in the meantime, I see the shares, now 119.5p, starting to edge higher again. They touched 228.38p this time last year.


So, a move to 150p could be an easy stride.


(Profile 13.07.20 @ 74.8p set a Target Price of 100p*)


Bonhill Group (LON:BONH) – setting a new Target Price


This business information, events and data group has recently sold off its Business Solutions and Governance division for £723,000.


That disposal leaves the group operating as a global financial services specialist, now focussed upon expanding its abilities in the US, the UK, Europe and Asia.


The deal is now expected to be less capital intensive, with improving margin profile and drive as it progresses into 2023.


The £6m market capitalised group is estimated, by analyst Roddy Davidson at Shore Capital, to see revenues rising to £18.9m for the year to end December (£16.4m) and helping to turn it around from an adjusted loss of £0.2m to a profit of £0.6m, with earnings of 0.5p (loss of 0.2p) per share.


The better margins show through clearly next year in Shore’s estimates for £20.9m sales and £1.6m profits, with 1.2p earnings per share.


My price aim of last November has been clearly shot out of the window.


Accordingly, I am now banking on a recovery from the current 5p and setting a new Target Price of 7p a share.


(Profile 05.11.21 @ 10.75p set a Target Price of 14p)


Hunting Group (LON:HTG) – the cycle is turning up again


Providing energy services to the world’s leading upstream oil and gas companies is what this £457m group does on a totally global basis.


In the six months to end June its revenues increased from $244.4m to $336.1m while its operations generated a $1.7m adjusted profit ($26.5m loss).


There was a marked increase in both enquiries and orders, with the latter book being up from $215m at the end of last year to over $400m currently.


For the full year analyst Daniel Slater at Arden Partners has estimates for $695.7m sales ($521.6m) and an adjusted pre-tax profit of $10.7m ($40.6m loss), with earnings of 5.0c against the previous loss of 26.2c per share.


Showing its confidence in its future prospects the group’s Board is expected to increase its dividend to 9c (8c) per share, even though it is uncovered.


For next year Slater is looking for $781.9m sales, $30.3m profits, 14.2c earnings and a 10c dividend per share.


Arden Partners have a Buy out on the shares, with a price objective of 370p.


I have followed this group, and its cyclical sales and profit gyrations, for over five decades and always rated its operations and its management highly.


The shares closed last night at 283p after having jumped up over 50p since last Thursday’s results announcement.


Hold very, very tight.


(Profile 15.03.21 @ 275p set a Target Price of 350p*


Scholium Group (LON:SCHO) – its shares are collectable


As my Master Investor colleague Simon Cawkwell mentioned last Friday, the shares of this collectibles group currently appear seriously undervalued.


On Thursday of last week, the rare books, modern prints and arts dealer reported its results for the year to end March this year.


They showed revenues up from £5.15m to £8.13m, with a pre-tax profit of £0.18m (loss of £0.44m). That is its first profit in some four years.


The £6.12m valued specialist has stock standing at a figure of over £9m, with no debt but a cash position of £0.5m.


The net asset value is computed by the group at 69p per share, which compares to a 45p market price.


The company states that


“Trading conditions have improved over the year and the group's retail premises have enjoyed at least a return to something approaching normality following the closures of the prior Covid impacted year.


Trading for the first four months of the current year has been profitable, which is encouraging, and net cash is positive. The current global political and economic environment is not only depressing but challenging and it is difficult to forecast the future prospects of the business though based on current trading we remain cautiously optimistic.”


The company will be closing down its Mayfair Philatelics has been accounted for by establishing a loss of £0.32m ahead of the last year’s profits.


This is a good hold at these levels, it would be good to get an AGM Statement, however this has not been a usual custom for the tiny company.


(Profile 29.11.21 @ 36p set a Target Price of 45p*)


· NOTE: "Collectable" describes items able to be collected. (e.g., payments, shares, keys). While "Collectible" describes items considered worthy of collecting by enthusiasts (e.g., coins, stamps, rare books).


Macfarlane Group (LON:MACF) – coping with the pressures


The Interim results to end June from this packaging manufacturing and distribution company reported a 14% advance in sales to £139.21m (£122.14m, but with a 3% increase in pre-tax profits to £8.86m (£8.59m), while earnings jumped 14% to 4.36p at the half-way stage (3.83p).


It achieved a solid performance in the first half, especially when compared to a strong trading period in H1 2021, despite a slowdown in spend from the e-commerce sector and significant inflationary pressure on operating costs. That is as well as having made strategic IT investments and incurred start-up costs on the group’s new North-west of England distribution centre.


Group Chairman Stuart Paterson stated that:


“We expect to experience a continuing challenging environment with inflationary pressure on our operating costs and slower demand from our e-commerce customers.


Overall, the group is confident that the effectiveness of our strategy, the diversity of the customers and sectors we serve, the quality of our people, and the resilience of our business model will ensure 2022 will be another year of growth for Macfarlane.


Our expectations for the full year 2022 are unchanged.”


Analysts Robin Speakman and Akhil Patel at Shore Capital have current year estimates of £284.4m sales (£264.5m), while adjusted pre-tax profits could be £22.7m (£22.0m), with earnings of 11.4p (10.7p) and a dividend of 3.3p (3.2p) per share.


For 2023 they have pencilled in £300.2m revenues, £24.4m profits, 11.6p earnings and a 3.5p dividend per share.


This time last year the group’s shares were up to 146p, but closed last night at around the 102.5p level, which in my opinion is undervaluing the company.


(Profile 08.07.20 @ 77p set a Target Price of 100p*)


Frontier Developments (LON:FDEV) – management uplift ahead of recovery


Ahead of the Cambridge-based videogames develop and publisher announcing its final results on 21 September, the company announced a number of various Board appointments as David Braben moved up to become President and Founder of the group.


Analyst William Larwood at Liberum Capital, the group’s NOMAD and Joint Broker, is looking for the year to end May to have shown sales of £114.6m (£90.7m) but with a halved pre-tax profit of £11.7m (21.3m), dropping earnings down from 60.9p to just 29.3p per share.


He does, however, estimate a swift recovery in the current year to £139.8m sales, £24.3m profits and earnings per share of 55.8p.


Last Friday the group’s shares hit 1616p before falling back during this last week.

At last night’s closing price of 1381p the shares are a hold awaiting the recovery.


(Profile 01.10.19 @ 1000p set a Target Price of 1500p*)


And some very quick comments …..


In three weeks or so we will see the full final Statement from The Brighton Pier Group (LON:PIER). The end July Update was very positive. Since hitting 89p in early August the shares have eased back to a lowly 74.5p. Very tempting at that level.


Earlier this week H&T Group (LON:HAT) looked to be a strong market, edging ever higher, peaking at 479p. The shares closed last night at 457p. This column has had a good run with this company since 6 July when the Profile was 332.5p. If they ease off to around the 420p level, I may be tempted to follow-up my comments on the group and then set a new Target Price.


And finally, have you seen the way that Futura Medical (LON:FUM) shares have performed in this last week? From 36p last Friday, they have risen well to 51p at one stage on Wednesday on the back of some very good news on its Phase 3 results. The Interim results are due out on Tuesday 13 September. The shares closed last night at 40.5p – they could prove to be an interesting short-term punt.


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

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