|
SMALLCAP Report
London's FTSE Smallcap closed the month at 2003.77, a 22.8 per cent discount to its valuation a year ago. However, the index has shown recent signs of life, inching ahead seven per cent from 1858.19 at the start of the May to current levels. As ever, there were a number of small cap ventures vying for attention with upbeat announcements. Courier bobs and weaves
For instance, support services-quoted express courier Business Post sped ahead 11p to 423.5p after Government-appointed postal regulator Postcomm granted it access to Royal Mail's postal facilities in a move opening up competition in the industry. Business Post will now start a delivery service that takes bulk deliveries of letters from large companies before sorting them and transporting them to the local delivery offices of the Royal Mail. The Royal Mail will then put them through people's letterboxes.
The day after this news the shares were marked 8.5p lower to 415p, as punters more than likely took profits. This fall came in spite of Business Post posting some racy annual numbers, showing a 6.6 per cent rise in profits to £16.1 million on sales up 18.7 per cent to £156.3 million. This profit figure was slightly ahead of forecasts from Numis, as was the 16.9p dividend. For the year to next March, pencil in profits of £17.9 million and earnings of 23.5p for a forward rating of almost 18 times.
Media plays and Metalrax marked up
In the media sector, fledgling firm Sterling Publishing perked up 1.75p to 10.75p on a bullish trading statement for the year to March. It expects to report reduced full year losses after a second half that produced a profit, thanks to cost controls and efficiency management. Despite the uplift, the shares are still sitting off the year's peak of 14.5p.
Buyers also snapped up photo-booth operator and photo processing mini-lab maker Photo-Me International, sending the shares 4.5p higher to 43.5p, a 52-week peak, on advice from dealers that the company represents a good recovery play. Though profits softened from £8.2 million to £1.3 million in the half to October, as sales sagged from £106.5 million to £95.6 million, Kodak recently put in an order for its digital mini-labs. City brokers believe there's a potential market of between 200,000-300,000 machines over the next few years as digital phases out analogue.
Another stellar stock stoking up was the engineering specialist Metalrax, which moved 1p higher to 80p on an upbeat AGM statement from chairman Eric Moore, who said first quarter profits were ahead of 2002. We suggested Metalrax looked good value and sported a tidy yield at 71p on these pages back in April. Last year, profits were lifted 6.3 per cent to £12.3 million on a record turnover of £111.7 million.
Thorntons feels the heat
Other small caps wilted in the market heat. Thorntons, the upmarket chocolate maker and seller, melted away 14.3 per cent to 122.5p – against 52-week peaks and troughs of 151.5p and 105p – after warning a poor Easter would result in flat profits this year. Chief executive Peter Burdon lamented a weak Easter in the confectionery market that was affected by exceptionally hot weather dragging down sales in the week leading up to Easter Sunday. Investors should now expect pre-tax profits for the year to June 2003 to be in line with last year's £7.1 million.
And investors should count out receiving any good news from Abacus Group. The Newbury-based firm, which distributes electronic components throughout the UK and 'the Nordic regions', clocked up some pretty uninspiring half-time figures to March, unveiled in a quite threadbare interim statement. Profits pre-tax and goodwill eased off from £4.8 million to £4.2 million on lower sales of £73.2 million, down from £79.4 million. Chairman Harry Westropp remarked that there have been no signs of recovery in the electronic products industry since the downturn started some two years ago. Over the past year, the 209p shares have been as high as 374.5p and as low as 180p.
Looking Forward
First touted by the GCI team in October 2001 at 197.5p, the tool hire group Speedy Hire unveils its preliminary figures to 30 March on 11 June, and there should be bumper numbers if the group's pre-close period trading statement is anything to go by. The company says like-for-like sales in the eleven months to the end of February were seven per cent ahead of the previous year. Broker TD Waterhouse suggests profits of £17.4 million and earnings of 29.3p for 2003, rising to £19.3 million and 32.5p for 2004. At the current 310p, well above our original recommendation price, the stock trades on an undemanding 10.6 times earnings. On house broker Oriel Securities' 2003 earnings estimate of 31p, the shares are on an even lower rating of ten times. Keep holding.
|
