How would you like to buy a ‘penny share’ for just 1.6p that could make 1.6p per share in earnings next year?
What is more this company’s brokers are looking for the shares to more than quadruple in price.
Currently capitalised at only £5.2m the Westminster Group (LON:WSG) offers investors big profit potential.
The Banbury-based group is a specialist security and services group that operates worldwide through an extensive international network of agents and offices across the globe, situated in France, Germany, Saudi Arabia, Ghana and Sierra Leone.
Its Business
The group is involved in the design, supply and ongoing support of advanced technology security solutions. Its aim is to keep people safe, secure assets and maximise prosperity in high growth and emerging markets around the world.
Its range of products is extensive and covers all forms of personal and site safety, anti-terrorism, risk reduction, defence and homeland security products and systems.
Those products can be delivered to the group’s clients anywhere in the world.
It takes in a wide range of surveillance, detection, tracking and interception technologies and the provision of long-term managed services contracts.
They include screening and x-ray, detection, fire, vehicle and pedestrian management, surveillance, health and safety, inspection and search, and even explosive ordnance disposal and improvised explosive device disposal.
Ongoing Contracts
The group provides its clients the management and running of complete security services and solutions, for such locations as airports, ports and other such facilities, together with the provision of manpower, consultancy and training services.
The majority of its customer base, by value, comprises governments and government agencies, non-governmental organisations, critical infrastructure, and blue-chip commercial organisations.
Operating through two main divisions
It operates through two divisions, which include Managed Services and Technology.
Its Managed Services division is focused on long-term recurring revenue managed services contracts. Examples are the management and running of complete security solutions in airports, ports and other such facilities, as well as the provision of manpower, consultancy and training services.
Its Technology division is focused on providing technology led security solutions, offering a range of surveillance, detection, tracking, screening and interception technologies to governments and organisations across the world.
In the year to end December 2021 on a sales per business basis, Managed Services made up 72.1% of the group’s sales, while Technology accounted for 27.9%.
On a sales per region basis, Africa represented 60.9% of the group total, while the UK and Europe made up 30.6%, while the Middle East was just 1.7%.
Impressive customer list
The company has customers in some 50 countries across six continents, including national governments, sports stadia, educational facilities, conference and exhibition centres, shopping malls, financial institutions, the hospitality sector and medical centres.
The group has leading customer names like BP, Mitie Group, the Royal Navy, HM Prison Service, the British High Commission in Ghana, Aberdeen Harbour, Menzies Aviation, AirBridgeCargo, BAT, the UN, Bhutan’s Anti-Corruption Commission, the Northern Ireland Prison Service, the International Atomic Energy Agency – they are just a few of those on the list.
Recent Contract Wins
In the last few weeks, the Group’s Technology Division has been awarded a couple of contracts to provide a Mass Entry Screening solution.
The most recent was one to a significant theatre and exhibition complex in Northern England as part of its preparation for the UK’s forthcoming ‘Protect Duty’ legislation.
Shortly due to come into force within the UK, it will set out standards to protect patrons and the general public from terrorist attacks when in crowded spaces by putting in place appropriate security measures.
This could include settings such as sports stadiums; festivals and music venues; hotels; pubs; clubs; bars and casinos; high streets; retail stores; shopping centres and markets; schools and universities; medical centres and hospitals; places of worship; government offices; job centres; transport hubs; parks; beaches; public squares and other places where gatherings of people occur.
The Home Office estimates that 650,000 UK businesses could be affected.
Westminster’s Mass Screening solutions address this issue, allowing for the screening of large numbers of people entering an event or venue without slowing the natural flow, improving both security and visitor experience.
A Certain Professionalism
The group is a solutions provider not a manufacturer and therefore it is product agnostic. That means that its clients receive products and services that meet their exact needs.
Group CEO, Peter Fowler’ has stated that
“Our vision is to build a global business with strong brand recognition, delivering advanced security solutionsand long-term managed services to high growth and emerging markets around the world, with a particular focus on long-term recurring revenue business enhancing shareholder value.”
Equity Holders
There are some 330m shares in issue. Peter Fowler, CEO, owns 6.601,794 shares, some 2.00% of the equity.
The larger professional shareholders include Henderson Global Investors (4.69%), CRUX Asset Management (3.49%), HSBC Holdings (2.99%), Harwood Capital (2.57%) and SpreadEx (1.67%).
Analyst Opinion – 1.6p per share earnings next year
Colin Smith, at the group’s corporate brokers Arden Partners, has a Buy out on the group’s shares. His Target Price is 7p a share.
For the current year to end December he looks for the group to report doubled sales at £14.3m (£7.1m), while its adjusted pre-tax profit of £1.1m would be a convincing turnaround from the previous year’s loss of £1.9m.
That would lift earnings to 0.3p per share against the 0.6p loss last year.
But the exciting part comes now!
For the 2023 year, Smith has an estimate of £23.7m sales and a massive £5.3m profit, worth 1.6p in earnings per share.
What is more, Arden Partners are going for a 2023 end-year cash balance of £4.5m, which is close to today’s total market capitalisation, thereby almost throwing its operations in for nothing.
Conclusion – an absolute steal
That profit estimate for next year is equivalent to the Group’s current market capitalisation.
To me it feels like the market is missing this one completely.
It may well have been spooked by previous operating losses but on the back of Arden’s estimates the shares look like an absolute steal at just 1.6p.
