Yesterday saw a massive dealing volume in the shares of Severfield (LON:SFR) and it could well pay investors to take note.
Could it be more than reaction to imminent results, or is something afoot?
The Business
The Thirsk-based group, valued at some £179m, is involved in the designing, manufacturing, fabrication, construction, and erection of steelwork activities in the UK, Ireland, Europe, and India.
It serves contractors, developers, engineers, and architects.
The company provides its services for various projects, such as industrial and distribution, nuclear, health and education, commercial offices, power and energy, stadia and leisure, retail, transport, data centres, and process industries.
Severfield manufactures metal decking products; plate girder sections, rectangular and/or circular apertures, optimal section profiles, and intumescent coating products.
It provides steel-framed modular equipment rooms and housing; steelworks, including the main structure, mezzanines, stairs, balustrade, and platforms; staircase fabrication; composite and non-composite plain and cellular beams; and offload and edge protection systems, as well as delivers constructional steel products.
Examples Of Some Of Its Projects
Its projects include Stadia & Leisure, Transport infrastructure, Commercial Projects, Industrial Projects, and Health and Education Projects.
Stadia & Leisure projects have included the Fulham FC Riverside Stand, the Tottenham Hotspur Stadium, Wimbledon No.1 Court, the V&A Dundee and others.
Its Transport infrastructure projects have included Ordsall Chord, the Ely Southern Bypass and the Manchester Airport Multi-Storey Car Park.
Commercial Projects notably include 22 Bishopsgate, The Shard and the Arbor Bankside Yards.
Its Industrial Projects include the BRS2 Distribution Centre, the Luton Regional Distribution Centre and the Stafford Regional Distribution Centre.
Mega Dealing Volume Yesterday
The dealing activity in yesterday’s market was almost 13 times the daily average for the stock – with some 5.44m shares traded against the normal 425,000 being turned over each day.
The group’s shares closed at 56.40p last night, up 1.40p on the day, some 2.55% better.
Over the last year they have been as low as 48.10p and as high as 76.20p.
Nearly 70% of the group’s shares are held by institutional investors.
Research Estimates
It would appear that the catalyst for the very strong action yesterday, was possibly a piece of investment research published in the morning by Progressive Research.
At the group’s brokers, Liberum Capital, analyst Joe Brent, rates the shares as a Buy, with a ‘Sum Of The Parts’ Target Price of 130p.
His estimates for the year to end March 2024 are for £480m sales against £492m previously, while pre-tax profits are expected to come in at £34.3m (£32.5m), generating an unchanged 8.4p of earnings but covering an increased dividend of 3.6p (3.4p) per share.
He goes for current year revenues to rise to £551m, with £37.0m profits, 9.1p of earnings and 3.9p per share of dividend.
Analyst Alastair Stewart at Progressive Research is looking for the just finished year to show revenues of £479.5m, with adjusted pre-tax profits of £35.7m and earnings of 8.7p, together with a 3.5p dividend per share.
However, he has estimates of current year sales of £561.0m, giving £37.8m in profits, worth 9.3p in earnings and a 3.7p per share dividend.
My View
We shall see what comes to pass tomorrow morning when the group announces its Trading Update for the year to the end of last month.
The piece of research really stirred the market into a significant response, recording the highest turnover of the shares in the last year.
Having followed the group since it floated on the old Unlisted Securities Market, way back in 1988, I continue to view the group’s shares as being totally undervalued.
Now at 56.40p they could well offer investors an easy 25% upside to just over 70p and still look very cheap – even to a possible bidder.