Investing in shares may lose you all or some of your money. Past performance is no indication of future performance. Some of the shares recommended here may be small company shares, which can be relatively illiquid and hard to trade and this makes such shares more risky than other investments.
Kitwave has clearly broken into its stride in terms of acquisitions. Last month it announced the second one for FY22 when it acquired WestCountry Food for £29m cash.
WestCountry is a leading wholesaler of local, regional and imported fresh produce to the foodservice sector based in three depots in the South West of England. In the year to 1 January 2022, the business had made £3.9m pretax profit on sales of £29.7m.
WestCountry comes with £7.8m cash and a freehold worth £1.2m, adjusting for which, the exit multiple is 4.4x annual run rate EBITDA. The deal is therefore eps enhancing from day one.
Canaccord has increased its FY23 and FY24 eps forecasts by 13% and 15% to 25.9p and 26.8p, respectively. The broker has set a 390p price target. On current estimates, the shares trade on just 6.9 next year’s earnings and with a forecast dividend of 10.9p, the yield is 5.9%. Buy.
With small companies there is an above average degree of risk compared to buying blue chips. Please be aware that we have not assessed the suitability of any of these investments for you. The newsletter simply states a personal view and diarises the editor’s investment decisions. Please speak to your stockbroker or other qualified individual to ascertain whether any of these companies mentioned would form useful additions to your own portfolios. Past performance is no indication of future success.
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