Investors who are looking for a potential short-term tip may care to take a look at Northern Bear (63p). The company is due to announce its annual results to 31 March in the week commencing 15 July and if these are as re-assuring as expected there could be a spike in the share price.
Northern Bear is essentially a group of 11 businesses which provide specialist building services to a range of customers including local authorities, housing associations, NHS trusts, universities, construction companies and national house builders throughout Northern England and beyond. The company is based in Newcastle and has been created through a series of acquisitions over a number of years. Services provided by the group include building and roofing services, fire protection, commercial interiors design and fitting and forklift truck supply and maintenance. All the businesses in the group operate autonomously.
A trading update released in March revealed that since publication of the interim report in November 2018 the company had continued to trade well. Based on information for the ten months to January 2019, trading was ahead of management expectations and in line with prior year results. The final two months of the financial year are a key trading period but at that time the expectation was that operating profit (prior to the impact of non-cash amortisation and transaction costs) will be broadly in line with the prior year.
The shares are currently trading on a multiple of around 5x adjusted earnings, both on a historic and prospective basis, which is too low. This is a solid business which continues to generate impressive levels of cash. Although the cash position fluctuates, the level of debt is minimal even at peak times and the balance sheet is in good shape. The size of the company and the sector in which it operates are both factors which may deter potential investors but the intrinsic value cannot be ignored. BUY.
Recommendation supplied by Cityconfidential.