Small caps with plenty of bite

So like raindrops on roses and whiskers on kittens, here are a few of your columnist’s favourite things among the numbers served up by the industrial small fry.

If there’s a prize for “most improved”, taxi operator A2B (ASX:A2B) deserves the pennant for morphing the previous year’s $27 million loss into a $27 million profit and restoring dividends in the process.

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Operating under the banners of 13Cabs and Silver Service and Cabcharge payments, A2B’s taxi fleet expanded by 972 cars to 7803, a 14 per cent increase.

Most importantly, fares collected surged by $247 million to $854 million, a 40 per cent surge. But there’s more to the A2B story than having more jolly obliging cabbies on the road, partly because of recovering migration.

The company has just sold two inner city Sydney properties for $97 million and has its cheaper Melbourne digs up for sale, which means investors can expect a $73 million capital return – via franked dividends – by the end of the year.

All in all, A2B’s prospects don’t look too ‘rank’ at all.

APM Human Services (ASX:APM) is surfing demand for services such as disability and aged care support and vocational training. And if that sounds too aligned to the under-review NDIS scheme, APM operates in 11 countries.

APM’s net earnings grew 72 per cent to $158 million, on a 43 per cent revenue surge to $1.896 billion – the sound of music for investor ears.

Morgan Stanley pencils in a further 15 per cent revenue increase this year and a 7 per cent earnings per share increase, which implies the stock is trading on an ungenerous PE multiple of eight times and a plump 7 per cent dividend yield.

We’ve followed the fortunes of SatPhone Shop owner Beam Communications (ASX:BCC) for some years, but the signal has been weak when it comes to sustainable growth.

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Beam turned a previous $177,000 net loss into a $2.1 million profit, on a 67 per cent revenue surge to $40 million.

A leader in shared office space well before anyone had heard of collaborative hubs, Servcorp (ASX:SRV) defies the office sector’s shaky outlook with high cash generation and a cash kitty worth 40 per cent of its market capitalisation.

On Shaw Stockbroking’s numbers, Servcorp trades on a current-year earnings of around five times when the cash is excluded.

This compares favourably with UK rival IWG Plc, which trades on a 40 times-plus multiple. The heavily geared WeWork of the US is loss making.

Still on property, Gold Coast theme park operator Ardent Leisure (ASX:ALG) is emerging from the shadow of the pandemic lockdowns and the 2016 Thunder River Rapids fatal accident.

Ardent’s reported full year profit of $664 million was due to the sale of the company’s Main Event chain in the US.

Behind this blockbuster figure, the theme park division had its first (modestly) profit in more than five years. Canaccord assesses the value of the theme parks at 44c-65c per share, while the company is likely to distribute $100 million of cash worth 20c per share.

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The stock trades around 56c a share.

Finally, haulage group Lindsay Australia (ASX:LAU) is truckin’ along nicely, helped by the bargain assets acquired from the collapsed Scott’s Refrigerated Logistics.

Lindsay doubled its earnings to $36.5 million.

Broker Wilsons expects $43.7 million this year, which means the stock trades on a multiple of eight times and a six per cent yield.

We may not have Julie Andrews’ vocal range but we will sing along to that.

This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

Find more Tim Boreham wisdom at stockhead.com.au

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Originally published as Tim Boreham: Small caps with plenty of bite