HSS Hire is now AIM-listed, having moved from the Main Market in January. This may well attract a wider pool of investors and CIP Merchant Capital, another AIM-listed business, revealed a holding of 25m shares this week, representing 3.6% of the shares in issue. This is significant given how tightly the shares are held and there can now be very few shares in the hands of retail investors. Given this lack of liquidity, any serious buying interest is likely to push the price higher.
The company is a leading equipment hire business in the UK and Ireland. It has a diversified customer base, operating across multiple end markets. The company restructured its operating model to focus on its digital strategy and this has seen solid performance so far. Trading revenues in the final quarter of 2020 were down just 6% on 2019 levels, with December down 3%. There was also strong liquidity headroom of over £100m as at the financial year end. The move to AIM provides flexibility and it will be interesting to see how the story develops in the coming months and years.
Covid-19 has, as one would expect, caused significant disruption and a chunky fundraising was required towards the end of 2020. This was very well supported by existing shareholders and new shares were issued at 10p each. In the 26 weeks ended 27 June 2020 revenue was £125.8m versus £161.4m in the corresponding period in 2019. IFRS16 Leases was adopted in the period, which does complicate the figures to some extent but adjusted EBITDA was £28.7m versus £27.0m including an increase of £11.9m due to the adoption of IFRS16, which sees operating lease rental cost replaced by depreciation and interest. The basic and diluted loss per share was 7.57p versus a basic profit of 4.44p per share in the first half of 2019.
Given the tight grip which the top three shareholders have on the company we believe that there is potential for the share price to jump if there is an increase in demand from other investors. The catalyst for this could be improved results, which are surely in the pipeline, or some sort of corporate activity. There must be potential for a takeover bid to emerge at some point as that would, in effect, only need the approval of the top three shareholders to be successful. The shares were briefly above 30p in February 2020, so there is still a long way for them to recover. We rate HSS Hire as a BUY.
RECENT TIPS – The highs and the lows
For a flavour of our performance recently, we list below some of our recommendations that we have made in the last few weeks.
Ebiquity – 34.5p at close on 30 March (tipped at 25.8p on 25 March) – gain of 34%.
*Stunning short term gains following recent annual results
Lloyds Banking Group – 43.1p at close on 30 March (tipped at 33.91p on 21 January) – gain of 27%.
*Further consideration of recovery prospects as economy improves
eve Sleep – 4.9p at close on 30 March (tipped at 5.75p on 22 March) – a loss of 15%.
*Share price fall for no apparent reason unless tax-related sales at end of tax year – lower price is excellent buying opportunity
To read about some of our other recent top performing share tips, head to https://www.cityconfidential.co.uk/recent-top-share-tips