Small Cap Round-Up: Internet, Broking, Sites and Drilling

Small Cap Round-Up: Internet, Brokerage, Sites and Drilling

CentralNic Group (LON:CNIC) – grossly undervalued at 6x earnings

I just love this stock. It’s total money machine and its stocks are grossly mispriced.

As I look around the market, I am so often amazed at the gross ratings some companies achieve.

But when I see companies of real value that aren’t valued, the ignorance of the market frustrates me.

CentralNic is one such company.

This global internet platform company, which generates recurring revenue by selling online presence and marketing services, reported that it saw accelerated organic growth in the third quarter of the year.

The group’s global CEO, Ben Crawford, stated:

“CentralNic continues to build momentum in the third quarter, bucking typical seasonal trends, with year-over-year organic growth now reaching a record 66%, further accelerating from the 62% reported for the twelve-month period ended June 30, 2022.

“This continued reliable financial performance has enabled us to refinance at a significantly improved interest rate with a pool of quality lending banks that have the resources to continuously support CentralNic’s growth strategy. We look to the future with even greater confidence.”

The group drives the growth of the global digital economy by developing and managing online marketplaces that enable businesses worldwide to buy website and email domain name subscriptions, monetize their websites and acquire customers online.

It complements its organic growth by identifying and acquiring cash-generating companies in its industry with retirement income and exposure to emerging markets, and then migrating them to the CentralNic software and operating platforms.

And what I really like to see is the fact that Central is Nic a virtually pure recurring revenue business with a high inherent cash conversion of consistently over 100%. This is absolute magic for any PLC Finance Director – just imagine how easy it is to arrange new lines of funding should the need arise. Completely confidence-inspiring for any banker.

For the year to date, Zeus Capital analyst Bob Liao has revised up his estimates to $709.6 million in revenue ($410.5 million) and adjusted pre-tax income of $68.7 million ($31.9 million), a profit of 20.9 cents (11.8 cents) per share.

He is targeting conservative sales of $752.2 million for next year, with earnings of $74.7 million and earnings of 22.0 cents per share.

The group will report its Q3 results on Monday 22nd November at which point I would expect an upbeat statement to generate more interest in the company’s shares.

At the current 132.5p, they’re trading at just 7x this year’s earnings and 5.9x next year’s earnings – at these levels it’s an almost guaranteed winner for investors who are willing Be patient as the market begins to see its true value.

(Profile 07/12/21 @ 89p set a target price of 110p*)

finnCap (LON:FCAP) – a takeover by Panmure, will it succeed?

When Sam Smith, one of Britain’s leading brokers, stepped down as CEO of the brokerage and corporate arranger in early September, it was perhaps a sign of change.

The company announced yesterday that it has received a request from competitor Panmure Gordon to combine the two companies.

The discussions are at a very early stage and may well come to nothing.

For my part, however, I would be unhappy if finnCap lost its independence.

I realize that brokerage fees have been much lower over the last year while the corporate side has also taken a significant hit due to the lack of new issuance and deals.

This was already reflected in the share price falling from a high of 39p last November to a recent low of just 12.5p.

On the news, the group’s shares jumped 20% to 17p, well below my profile price from April last year.

With a capitalization of £31m, the company had about £13m in cash at the end of August.

(Profile 04/14/21 @ 40.25p set a price target of 50p)

Hercules Site Services (LON:HERC) – Significant infrastructure needs

These infrastructure workforce specialists expect sales to rise 38% to over £45m for the year to the end of September.

In addition to the labor supply, there is also a construction service company and a suction dredger company. Considerable demand across the industry has helped all of the group’s revenue streams,

Group CEO Brusk Korkmaz stated:

“We anticipate that HS2 and other key infrastructure projects will continue to drive growth in our recruitment business in 2023 and our dredge fleet is expected to expand to 30 vehicles by calendar quarter 2023 to meet customer demand.

We also anticipate that additional broadband fiber deployment contracts will add to the momentum the construction projects team has been building over the past year.”

Encouragingly, the group’s brokers, SP Angel, have a buy rating on the shares, currently 44p, with a price target of 74p – which would be a very useful gain.

My target price from earlier this summer is lower, but unfortunately the stock hasn’t even surpassed my strike price yet. That could change by January, when the group announces its final numbers.

(Profile 5/4/22 @ 52p set a price target of 64p)

Capital Limited (LON:CAPD) – There is still good upside potential in the price

The mining services group announced its Q3 trading update for late September yesterday. It showed that the group is on track to meet market expectations for the full year.

Tamesis Partners analysts are now expecting revenue of $283.8 million ($226.8 million) for the year, with pre-tax income of $40.7 million ($82.0 million). ) halved and earnings per share are 15.1 cents (36.8 cents).

For the coming year, they are targeting sales of $317.8 million and earnings of $53.4 million, which translates to earnings of 21.2 cents per share.

Although there is always a seller in the market when there is good news, I would actually expect the stock to trade at 82.7p right now

still have some good upsides left to chase.

(Profile 7/23/19 @ 48p set a target price of 76p*)

(Profile 10/22/19 @ 61p set a target price of 100p*)

(Profile 8/3/20 @ 77.5p set a price target of 100p*)

And finally……

Revolution Bars Group (LON:RBG) – another round on the horizon?

From a low of 9.8p, shares in this bar group have firmed a fraction to close around 23.6p last night, despite the delay in their final, which was due yesterday.

The delay is due to the fact that the group is at a very advanced stage in its search for another beverage company.

I don’t expect the numbers to differ from those already listed. Instead, after the negotiations have been completed, appropriate audit closure procedures are carried out.

Let’s hope such a deal is successful and complements the Revolution group in terms of increasing revenue.

We need good news to push the stock higher again.

(Profile 10/13/21 @ 24.25p set a target price of 31p)

Smiths News (LON:SNWS) – Delivers its own news

Before that newspaper and magazine distribution deal announced its final version on Wednesday, November 9, the company announced on Monday that it had completed two contract renewals.

With Frontline and Seymour, the magazine distributors, the group has secured distribution worth around £180m a year through 2030.

CEO Jon Bunting explained:

“We are pleased to confirm this new agreement with both Frontline and Seymour. Long-term partnerships with publishers and distributors are at the heart of our business model and allow us to continue to increase efficiency and provide excellent service to publishers, retailers and ultimately millions of consumers across the UK.”

Shares in the group, which were 41p a year ago, have subsequently fallen to 27p before rising to 34p this week on renewal news.

Hopefully the current firmness can continue through November and beyond.

(Profile 7/24/20 @ 20.25p set a price target of 27p*)

(Profile 6/24/21 @ 39.5p set a target price of 55p)

(asterisks * indicate target prices have been met since the profile was published)

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