First up CALNEX, which updated the market yesterday and subsequently saw the shares trot up to a £1.22p close, well ahead of my entry point last October at 52p.
There is plenty of previous comment here for anyone that may be interested in the company, which designs and produces both hardware and software products and solutions that are used to test and validate telecom and data systems.
The company has been growing nicely in recent years and with the 5G roll out, has ample opportunities for growth serving what is a critical area for its customer base.
The company is headed by CEO and founder Tommy Cook and is run both cautiously and conservatively, which is a welcome theme as I much prefer those operators that under promise and over deliver.
Yesterday, the company announced that as a result of continued strong trading through the first half of full year 2022 it now expects both revenue and profits to be materially ahead of market expectations.
In more recent weeks as with many stocks the shares had been drifting a bit, no doubt on worries over supply chain issues and the widely reported chip shortage.
In the release yesterday, Calnex rightly touched on this concern, but stated that to date it had experienced no negative impact so far on this front, but wisely continues to closely monitor the situation.
Indeed, the prospects continue to look very positive with all regions served seeing trading returning to pre-Covid patterns with the exception of China which has been flat.
Importantly, Calnex products appear to be both critical and highly rated which bodes well for further progress, making it a continued hold for me and one to add to, should there be any fall back in the share price.
Although at the current price the shares do not look cheap, they are likely to still attract buyers, given that there is a decent and building cash position, which could be used for a suitable and strategic acquisition.
Additionally, there are plenty of growth opportunities ahead, so those with a longer term horizon may wish to pay a bit more now for growth tomorrow.
With broker Cenkos upgrading its forecast numbers, Calnex currently trades on a PER of 24, falling to 23 next year with adjusted pre-tax profits of £5.6m and £6m pencilled in accordingly.
Those figures come on anticipated revenue for the year in progress of £20.2m and £22m for next year, which with adjusted EBITDA of £8.8m and £9.8m looks very attractive.
Of particular note, is the anticipated year end net cash position which is forecast to come out at £15.2m rising to £18.2m next year, which provides it with ample fire power to add something earning enhancing along with continuing to invest in the business.
Given the ongoing evolution of the telecom markets and data centres then Calnex certainly looks well placed for longer term growth and returning to the current valuation it could be argued that if the positive cash position is stripped out, then the valuation looks even more appealing.
Next up, is CAPITAL GROUP (CAPG) which, as with Calnex and others to follow has been covered here previously, so there is further info for anyone interested in taking a look.
I bought into this one last December at 62p, so after another very positive update to the market, the shares at a current 84p have thus far delivered a 35% gain.
However, they continue to look extremely cheap given the trading picture for both the near and medium term and are now, despite the shares moving forward trading on a PER of only 7.
Single digit ratios are often ascribed to companies set to disappoint or which endure structural problems, neither of which apply here.
The company works extensively for major gold miners with a strong emphasis on Africa, where it provides services across the board to serve mining operations.
This covers a multitude of areas providing for drilling and extraction to lab services, where with the latter, it tests and analyses minerals that have been extracted.
In its update this morning, Capital stated that it had enjoyed another strong quarterly performance which has seen broker Tamesis upgrade its full year guidance, which now sees full year revenue raised to the region of $220m-$225m.
With some 90% of revenues exposed to the precious metal, CAPD’s fortunes are clearly aligned to the performance of gold and whilst not everyone’s cup of tea, sits well in my portfolio against some of the more tech focused holdings I have.
Indeed, as other sectors are suffering from uncertainty, CAPD’s end market is continuing to look positive with the macro conditions looking positive.
In addition to its overall business operations the company also has some investments that it has made and these too are performing very well.
In a fairly recent update on this investment portfolio the valuation as of last month stood at $54.2m which was a marked increase on that cited in June of this year of $31m.
The positive returns were driven by investment holdings in Predictive Discovery and Firefinch both of which are quoted on the Australian stock market.
Given the strong fundamentals of the business and positive outlook it is disappointing and surprising to see the lack of real headway in the share price where the broker now has a £1.40p target price.
Clearly, there has been a persistent seller for sometime now, which has curtailed the gains to the current levels.
However, at some point the exit will surely be complete and that should pave the way for more serious gains. In the meantime, I’m happy to sit tight and also take the dividend that is on offer which adds further to the investment case.
Music to my ears this morning from GEAR 4 MUSIC (G4M), which delivered a positive and reassuring Trading Update, that should put to bed some of the negative comments that have recently emerged on a few of the bulletin boards.
These came about after the on-line musical instrument retailer’s shares retraced on what was fairly thin volume, but in my view were in part based on supposition as opposed to anything more concrete.
Fears about supply chain issues were arguably the key driver here, so the update today which stated full year expectations remained on track were most welcome.
After such an excellent performance last year throughout lockdowns and the like, the year in progress was always going to see a step back on those superb numbers.
However, key here is a continued positive picture and importantly a maintaining of decent margins which appears to be the case.
In fact, trading has been slightly ahead of the market expectations on a sales and margin front, which has come on the back of those global supply chain issues, so a decent performance thus far.
The company is very well run, cautious and increasingly looking ahead of the game, which was previously apparent from its early decision following the Brexit vote to establish European hubs.
Those already located in Germany and Sweden have now been followed up as previously reported with additions in Spain and Ireland, which puts the business in an even stronger position for continued growth.
Additionally, the company also took the decision to increase stock which is now up 30% year-on-year and that sees the business comfortably placed as it approaches the highly important and busy Christmas period.
The company has also recently made an acquisition in the form of AV online, a retailer of home Cinema and HiFi equipment and next year it is also set to launch its own second hand musical instrument sales platform.
Not surprisingly, the shares have rallied this morning to a current £800.00 an 8% increase on yesterdays close, which will steady the nerves of some holders no doubt.
Looking at broker Singer’s numbers ahead for the year in progress G4M is expected to deliver a pre-tax profit of £7.8m on revenue of £156m rising next year to a profit of £10.5m on £179m.
The EPS figure for next year 2023 is set at 40.3p which sees the stock trading on a forward PER of 20, falling to 17 thereafter, so the shares remain attractive and remain a strong hold for me.
Another company going well is 1Spatial (SPA) and there has been plenty of positive news flow that looks set to continue and the shares are sitting at 41.5p against my entry point of 28p.
I haven’t got the time right now to go into further detail on SPA, but plan to add more in due course following another catch up with management.
Talking of catching up and just to emphasise that not everything moves in the right direction, I’ll touch briefly on ROSSLYN DATA TECHNOLOGIES where last week I caught up with CEO Paul Watts.
The shares are down to south of 4p at present valuing the business at just £13m and sees me very much under water with an average purchase price of 5.5p.
Despite the weakness though, I believe Watts, who has been in the role less than a year very much has the experience and ability to drive this underperformer forward and thus reverse the downward trend.
Net cash which is close to £6m isn’t an issue and the software products appear to be at the higher end, which should provide the opportunity to leverage and drive organic growth.
I may have to bide my time with this one of course, but if the CEO can begin to demonstrate delivery in the next six to twelve months, then the shares could begin to recover and pave the way for more meaningful gains.
This is another that I shall be adding further comment on in due course, as positive news hopefully breaks and it is worth recalling that Gresham continues to hold close to 30% with Amati and Octopus both well known respected names, also with sizeable stakes.
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