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The OMG newsletter recommends at least 15 companies each month, using the writers’ experience of small caps to give you a winning edge. Last week they wrote about Johnson Service Group’ and Science in Sports. Read about these Opportunities 4 Material Gains!
Mid-week Tip
Profit set to bounce back at Johnson
Johnson Service Group (LSE: JSG) are 116.4p , Mkt Cap £480m, which is higher than last week’s recommendation. It has had a tough time over the past two years. Hotel and catering linen hire is important to the business and that slumped during the initial lockdown. Subsequent restrictions have also held back the business – most recently the Omnicron-related restrictions in December and January. The hotel and catering operations are back to around 85% of pre-Covid levels and the recovery continues. Revenues will not get back to previous levels this year, but the operational gearing means that profit will be much higher. Costs are fixed, which will delay some of the pain. Management has also successfully implemented price rises to cover some of the cost increases. Of course, competitors will have the same cost pressures without the benefits of the productivity improvements from capital expenditure. The current expectations for 2022 appear achievable, but even if there are additional challenges during the year there is going to be a sharp recovery. The share price fell nearly 10% after the results were announced. The multiple is 16 times forecast earnings and that could fall to 13 in 2023. Johnson Service Group has net debt of £22.3m and Investec expects that to fall to £8.1m by the end of 2022 even after additional capital investment. There could be a return to dividend payments. This decline provides a buying opportunity
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Performance kick
Science in Sports (LSE:SIS) 54.6p Mkt Cap £74.3mScience in Sport (SIS), founded in 1991 is a sports nutrition business that develops, manufactures, and markets innovative nutrition products aimed at the higher value end of the market to professional athletes, sports and fitness enthusiasts and the active lifestyle community. It reports finals to December 2021 this Wednesday. The Pre-Finals Trading update reported that on £60m turnover the EBITDA profit would improve to £2.2m. Its Online sales had increased 40% to £35m overall- the Group’s digital platforms were up by 28% with a 53% increase in third-party marketplace sites. Online sales accounted for 56% of total sales and remain a critical driver of ongoing growth. It raised £4.5m at 37p in April 2020 to accelerate investment, and there is cash of around £5m. It’s taken a long time to gain this traction which should lead to improving profitability. Longer term buy.
Missing ingredient
Itaconix (LSE: ITX) 3.75p, Mkt Cap 3.5p. Since the emergency share placing at 1.1p in 2020 when £1.76m was raised the share price, in this proprietary plant-based polymer technology platform, bean-stalked to 17p in 2021. Founded in 2002, its innovative essential ingredients are used to improve the sustainability of everyday consumer products while adding a technical advantage. The 156% surge in 2020 revenue to $3.29m (but with a loss of $1.6m) turned out to be Covid panic buying of its hygiene and detergent polymer/ingredients. This ‘unsustainable’ boost was revealed in the 2021 interims as sales growth returned to a more sedate pace 26% at $1.4m with a loss of $0.2m. Second half comparatives will be tougher. The sales strategy is characterised by Ignition, Traction, and Take-off. This year’s potential take-offs include two dishwashing detergents which are already launched in the US and set to be launched in Europe. The 2021 trading update is set show total revenues at $2.6m and an increased loss. Cash is anticipated to be $0.7m. That will suffice for the time being but further fundraisings seem likely. A speculative buy on further weakness.
Reviews
views
DEST – 52p – Funding until partner secured
OMIP – 6.25p – 4 Fans
MWE – 62p – Russia withdrawal
MEAL – 21p – Cash to reboot growth
IOF – 19.25p – Director buying
BLV – 240p – Digital buy
NBI – 171p – Return to dividends
AMYT – $6.30 – FDA asks for more info on EB drug
GLAN – 77.5p – Arden trims forecast
ORPH – 15.5p – Additional capacity
KETL – 245p – New products
DNL – 35.5p – No automatic reimbursement in Scotland
BILN – 257p – Painting acquisition
Finally: Third World war anxiety and lower GDP growth with increasing Inflation and interest rates create conflicting policy dilemmas for the Chancellor mini-budget on Thursday the 24th of March.
OMG! Opportunity for Massive Gains is a Premium Newsletter on ADVFN with two reports each week written by experienced small cap specialists. To get trips like this every week, sign up here.
