The H1 results are pretty underwhelming. I do consider that HMLH are substantially undervalued - and have good upside potential. But once again there's no catalyst for a re-rating, and once again integration and other investment/costs are the apparent reason for the masking of decent revenue and operating profit growth.
However....a glimmer of hope from today's Finncap update.
They retain their Buy and 45p target. And they have upgraded their revenue forecast for the year by 6% to £25.5m, whilst conservatively leaving their EBITDA and PBT forecasts unchanged at £2.6m and £2.2m.
In particular, the "record pipeline of 17,000 units, compared with 8,000 the previous year, is very encouraging".
Given forecast 4.1p EPS for this year - with a 0.4p dividend - HMLH remains cheap imo, especially with pretty high revenue visibility. A 45p-50p share price is justifiable, but how long it will take to get there is another matter.
The 22nd August RNS shows the CFO transferring £24,000 of shares into his SIPP. Logically one can infer this means he believes the share price will increase and he wants to protect any gains. Let's hope so.
The dreadful events at Grenfell Tower on the 14th June remind us all how critically important it is that we as property managers fulfil our duties in advising our clients on the fire risks inherent in blocks of flats.
As the circumstances that gave rise to this tragic event are revealed in the coming weeks and months, we anticipate they will reflect mostly on the safety design and fabric of the building. There is however so much that can be done procedurally and organisationally to reduce fire risks. HML as professional managing agents will re-double our efforts to ensure that fire risk is professionally assessed and mitigated wherever possible.
Our thoughts and prayers are with the victims and their friends and families who have so unfairly been affected by this tragedy."
The group has issued a positive trading update for the year to March 2017 confirming earnings in line with market expectations. The group has a very high visibility to revenue and a predictable cash flow profile. We believe its strategic mix of organic and acquisitive expansion is capable of sustaining double-digit unit annual growth in a large and fragmented market. We retain our 48p target price, implying potential share price upside of 19%."
As our investment approach is flexible, it gives us the freedom to use a range of different asset classes and investment strategies throughout the economic cycle. We specialise in finding the best fund managers across a range of different asset classes and sectors. Our dedicated investment management team create a diversified portfolio which will aim to generate the best risk adjusted return for your portfolio. Our in-house research team assess all investments prior to purchase. Investments are usually, but are not confined to, collective investment vehicles, both on and offshore."
Finncap have today raised their price target to 48p, and their forecast for this year starting on Saturday to 4.3p EPS.
Finncap themselves say their forecasts are conservative. 48p represents 20% upside from here, which is fine by me for the moment. It's good to have some slow and steady stocks in the portfolio - though the volatility is such that if HMLH ever gets any press/tip attention then it usually moves up 2p-3p at a time.
At the current 40p HMLH looks like pretty good value to me. It's also possible that with 2.1p EPS in the bag from H1, this year's forecasts of 3.8p EPS may also be beaten.
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