Interactive Investor

Insider: triple boost for this AIM share

10th January 2022 08:47

Graeme Evans from interactive investor

After falling back from a peak in September, there are a number of reasons why this popular stock is on the rise again. There’s hope at a fallen FTSE 100 company too.

Director share buying has kept SigmaRoc (LSE:SRC) in the spotlight following the quarrying firm's deal-making start to 2022 and inclusion on a list of 39 growth stocks to watch.

Shares in AIM-listed SigmaRoc are already up 18% this year, including Friday's 5% rise to 98.5p after it emerged chief executive Max Vermorken and two other directors had upped their stakes.

They made their purchases hours after the company disclosed the £35.5 million acquisition of Johnston Quarry Group, an Oxfordshire-based building materials supplier whose Cotswolds Ironstone and Bath Stone products are found in high end housing developments.

The deal is immediately earnings enhancing and prompted joint house brokers Liberum and Peel Hunt to lift their price estimates by 5p and 10p respectively to 130p and 145p.

The latter firm also included SigmaRoc on its list of favoured growth stocks for 2021, alongside the likes of JD Sports Fashion (LSE:JD.), ASOS (LSE:ASC), Dunelm Group (LSE:DNLM) and Marshalls (LSE:MSLH). Peel Hunt's backing reflects the “transformational’ impact of its August acquisition of Nordkalk, a Scandinavian and North European-based limestone and lime-related products business.

The purchase for about £402 million boosted SigmaRoc's exposure to industries including construction, pulp and paper, chemicals and agriculture. It almost doubled the company's headcount to 1,760, with a portfolio spanning 37 quarries and one billion tonnes of reserves and resources.

Nordkalk, which was founded in in Finland in 1898, created a sixth platform to the SigmaRoc business in addition to existing ones in precast products, South Wales quarries, Benelux operations, Dimension Stone and the original Channel Islands-based Ronez.

Ronez was the first acquisition made by SigmaRoc after it was established in 2016 out of listed software business Messaging International. Under the leadership of founders Vermorken and executive chairman David Barrett, SigmaRoc has made several acquisitions and pursued a decentralised model that allows each business to continue independent operations.

SigmaRoc raised £260 million for the Nordkalk deal through a July placing and retail offer at 85p before shares rallied as high as 114p in September. But progress tailed off until a positive trading update on 16 December enabled the stock to finish 33% higher across 2021.

The company trades on 13 times forecast 2022 earnings, a valuation Liberum said looked attractive based on the potential to grow by 19% a year if cash flows are successfully deployed.

Liberum added: “In their buy and build phases, CRH, Aggregate Industries and Breedon all achieved around 20% total shareholder return per annum, demonstrating the value creation potential in heavy building material roll-outs.”

The City firm also noted SigmaRoc's track record of improving acquired assets and said that the Johnston deal showed it was now able to self-finance sizeable acquisitions.

Vermorken bought shares worth £22,000 on Tuesday at a price of 87.8p, while on the same day chief technical officer and co-founder Charles Trigg spent £7,000 at 88p. Emmanuel Maes, who oversees European operations, spent £81,000 at prices of 90p across two days last week.

Optimism in evidence at ex-FTSE 100 firm 

Hopes for a better year at Johnson Matthey (LSE:JMAT) have prompted the company's chairman and two other directors to spend almost £200,000 on the former FTSE 100-listed stock.

Patrick Thomas, who has led the board of the clean air business since July 2018, bought 5,000 shares at a price of 2,044p in a purchase worth £102,000 on Thursday.

His investment follows a turbulent final weeks of 2021 after the company pulled the plug on years of development work in electric battery materials.

The move led to a £314 million hit in November's half-year results and was accompanied by long-standing chief executive Robert MacLeod's decision to stand down in 2022.

Shares tumbled from 2,763p to below 2,000p at one point in December, leaving the founding member of the FTSE 100 index outside the top flight for the first time since 2002.

Liam Condon is due to start as chief executive on 1 March following his recruitment from the crop science division of Bayer, where Thomas once worked. A series of disposals means he joins with Johnson Matthey more focused than ever on the green economy and growth areas such as hydrogen technologies and the decarbonisation of the chemicals value chain.

The optimism of Thomas at the start of 2022 is shared by other board members after non-executive director Doug Webb spent £51,800 on shares. The former finance director of Meggitt, London Stock Exchange and Qinetiq made the purchase at 2,073p on Tuesday.

Chris Mottershead, who had a 30-year career at BP (LSE:BP.) and has been on the JM board since 2015, bought shares worth £31,250 in a purchase made before Christmas at a price of 1,970p.   

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