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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 Keller’ and ActiveOps. Read about these Opportunities 4 Material Gains!
Mid-week Tip
Construction remains a strong market in many countries around the world and this requires solid and uncontaminated foundations. That means using the type of geotechnical skills provided by Keller (LSE: KLR), which has operations around the globe. Demand for Keller’s services is shown by the order book, yet the valuation is modest.
To the end of 2021, there was a record order book of £1.3bn, with £787m of this in North America. That was before the latest contract win.
Keller has gained a contract in Saudi Arabia, that could end up generating hundreds of millions of pounds. The NEOM project involves constructing a new city and there will be an initial £50m in revenues generated in the next 12 months.
On top of this trading continues to be robust. Margins are starting to recover. Higher costs are being recovered from clients and Keller is on course to meet expectations.
There is a second half weighting to the business. Peel Hunt has not changed its forecasts, but there is scope for an upgrade later in the year.
The share price has fallen by around one-quarter so far this year. Keller offers potential share price upside combined with an attractive dividend yield of 5.8%. The prospective 2022 multiple is seven. Buy. 749p Mkt Cap: £544.6m
Results Preview
ActiveOps (Aim: AOM) 74p, Mkt Cap: £53m Finals Wednesday 6th July
AOM’s active operations to support organisations across the world started more than 15 years ago. Its solutions help clients improve employee productivity and optimise their costs. Its technology, in true military style, arms client managers with the information and intelligence required to align and deploy their front lines staff equipping them with the right tools, processes, and skills to execute business objectives. Finals for the 12 months to March are reported on Wednesday and in 2021 despite revenues of £20m it lost £2m. There are extraordinarily high levels of recurring revenue at over 95% and gross margins a ‘reasonable’ 83%. September’s Interims reported a loss of £0.2m on £11.5m revenue and added five new enterprise customers At the Interims in September net cash of £10.9m remained from the disposal, so its well-funded for expansion. At breakeven the operational leverage effect should cause a rerating. Buy
Reviews
APP – 31p- Platform for growth
AQSG – 28p- Foundation for expansion
ITX – 5.3p – AGM rebellion
UBG – 28.5p – Multi-brand platform launch
IGR – 89p – Customers remain supportive
MER – 189p – Cash conversion benefit
PGH – 270p – Enhancing acquisition
W7L – 134p – Strong UK sales
AUTG – 14p – Recovery potential
Finally
If, record inflation is primarily supply-side issues and high energy costs the rise can be resolved by peace and international goodwill so the Interest Rates raise tsunami will be avoid much to the relief of consumer spending. So, we consider any panic selloffs as a medium-term buying opportunity.
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.
