Subscribers looking for an AIM share tip should take a peek at Scapa Group (121p). Despite issuing an encouraging trading update for the six-month period to 30 September, the share price languishes well below its high for the year of over 290p. Although it is far too optimistic to expect the shares to rebound to that level in the near future, we do believe that a positive statement with the interim results, which are to be announced on 17 November, could see a rally to over 160p. If achieved this would represent a gain of over 32% in just a couple of weeks.
Scapa Group is a diversified healthcare and industrial company. In healthcare, the company supplies advanced woundcare products such as wound dressings and bandages, skin treatments and creams and health and beauty aids. In the industrial business, the group supplies adhesive systems and tapes for a range of industries, and these are supplied on a global basis. The group has a strong reputation in this field, and this is the larger of the two divisions, accounting for around 55% of revenues.
The group acted early on the outset of the pandemic, raising £31.6m in a share placing at 105p back in May. This provided the group with additional funds to withstand any downturn during the crisis whilst also providing the finance to capitalise on any potential opportunities that may arise. The trading statement issued last month has confirmed that the group is trading ahead of its COVID plan with revenues in the six months to 30 September ahead of expectations. Net debt at the end of September had fallen to £21.8m (31 March 2020: £54.4m) helped by the share placing.
Clearly, the news that lockdown restrictions have been imposed once again in a number of countries will cause further uncertainty at the group, but further details on current trading will be given at the time of the interim results’ announcement on 17 November. Having said that, the share price has declined a long way and bearing in mind the fact that the group reported adjusted earnings per share of 18.9p in the year to 31 March 2019 (pre-COVID), there is clearly substantial scope for recovery. The shares are a worthy AIM share tip! BUY.
