AIM star surges amid raft of broker upgrades

Our equities expert rounds up the best of the market action around small-cap stocks.

Small-cap stocks kept many investors looking on the bright side of a dour London session today as updates or broker upgrades helped to deliver several chunky share price gains.

One of the biggest came from popular AIM-listed stock Portmeirion Group (LSE:PMP), which surged 12% as the Stoke-on-Trent based maker of Spode, Royal Worcester and Pimpernel pottery reported record half-year revenues and a return to profit with a £1.5 million surplus.

The strong performance, which has been driven by the success of its online strategy, should mean the company is able to resume dividend payments alongside full-year results.

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Shares were trading at 693p by early afternoon, which represents a rise of 38% so far this year and takes the company back near where it was trading prior to the pandemic.

A double-digit percentage share price rise was also achieved by Equals Group (LSE:EQLS) after the small business-focused fintech payments specialist said half-year underlying earnings more than doubled to £1.6 million.

Current trading continues to be very strong, with the third quarter already a record for a three-month period with 14 business days still to go.

Equals continues to benefit from its timely shift away from consumer and travel money, as well as investments in technology made in previous years.

Shares rose 5.7p to 62.7p but broker Canaccord Genuity has a target of 98p after upping its earnings forecasts.

Investors are also excited by the prospects at Kape Technologies (LSE:KAPE) after the AIM-listed company doubled its subscriber base with the acquisition of ExpressVPN, a leading virtual private network service provider with more than 40% of its users in the United States.

House broker Shore Capital went as far as to call the US$936 million (£676 million) cash and shares deal as sensational and said it marked another “tour de force” moment for the company and shareholders after previous takeovers of PIA and Webselenese.

Shore said: “ExpressVPN represents a quantum leap in the strategy to create a world-leader in digital privacy and security, with excellent strategic, operational and financial rationale.”

Shares jumped 13% to 400p, giving the company a market valuation of close to £800 million.

Another stock going through the gears after favourable broker comment was Tandem Group (LSE:TND), which sells bikes under third-party licences as well as own labels including Dawes and Falcon.

Analysts at Cenkos believe the stock is significantly undervalued amid the potential of increasing demand for e-mobility products, including battered powered bikes and lithium scooters.

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They said: “The improved range of batteries and their declining price is expanding the available market for the products, which offer consumers a more environmentally friendly way to travel than many alternatives.”

The company trades on 6.8 times 2022 earnings, which Cenkos believes is a significant discount to UK-listed peers whose services overlap those of Tandem. The broker's price target of 868p represents a 64% upside to last night's price, sending shares up 9% or 50p to 580p today.

One of the biggest share price gains of the session in AIM came from Zytronic (LSE:ZYT), the Newcastle-upon-Tyne specialist in touch screen technology.

Shares surged 23% to 181p after a brief trading update showed sales more than 30% ahead of the loss-making first half, meaning a faster-than-expected return to profitability in the year to the end of September.