Interest rate rundown and two share tips from the OMG newsletter

Interest rate rundown and two share tips from the OMG newsletter

The FTSE 100 improved 1.8% to 7,228, while the AIM All Share followed with a 1.5% increase. For the FTSE 100 the cause maybe, the higher pound and for Aim the political fire beneath the bellowing smoke of a no deal crash-out on the 29th was nearly extinguished. The under reported Chancellor’s Budget Statement recorded a robust economy with growth higher than forecast, 3.5m jobs created, Inflation on target and improved Public Finances.

This Tuesday the warm economic glow could continue if Average Earnings and Employment are reported to be unchanged at 3.4% and 4%, given that CPI (Consumer Price Inflation) remains flat at 1.8%. There should be no surprise that the Interest Rate Decision on Thursday should be unchanged at 0.75%.

There is plenty of US news on Wednesday and our forward indication is that US Interest Rate raises will be push into the distance which we rather suspect will be the same for Brexit.

Two small cap tips from the OMG newsletter:

Empresaria (LSE: EMR)

72.5p (71p/74p)

Mkt Cap: £35.5m

Next results: Interims, September

Empresaria (LSE: EMR) produced the expected modest increase in underlying pre-tax profit last year. Profit will continue to be held back this year as further investment is put into the development of the international staffing group. However, there was a surprise increase in the dividend.

A small rise in the dividend was expected but not a 52% increase to 2p a share. That was still covered six times by earnings – even though higher minority interests reduced earnings per share. Net debt was £17.1m and this should continue to fall without acquisitions.

The businesses in Germany and Japan were held back by legislative changes and the effect will continue into the first half of this year and then there should be a recovery in comparative revenues.

Other parts of the group have offset the dip in contribution from the problem areas. However, there are too many economic uncertainties to expect more than modest growth this year.

Allenby expects full year pre-tax profit to grow from £11.4m to £11.6m. The share price has perked up but the prospective multiple is still six times earnings and the forecast yield is 3%.

The main focus is organic growth. Empresaria has strong bases in many international markets and exposure to many different sectors.

Trading strategy: The shares are too cheap.

Original recommendation: 88p/91p

Symphony Environmental Technologies (LSE: SYM)

6.75p (6.5p/7p)

Mkt Cap: £10.4m

Next results: Interims, September

Symphony Environmental Technologies (LSE: SYM) has reported a 7% increase in 2018 revenues to £8.8m, with the growth coming from the antimicrobial d2p product range.

The pre-tax profit slumped from £430,000 to £38,000, following a rise in marketing investment. Net debt was £80,000 at the end of 2018.

The Middle East remains a market with significant potential and d2p revenues will continue to grow.

There are still potential problems with the EU not including oxo-biodegradable material in its environmental legislation.

The profit could bounce back to £600,000 this year. The shares are trading on 17 times forecast 2019 earnings.

Trading strategy: Buy.

Original recommendation: 14.5p/15.5p

The author of the original recommendation has an interest.

This article is an extract from the OMG Newsletter by Jon Levinson.