Venture: Small-Cap Industrial
Issue 15;
Staying afloat.
James Fisher (FSJ)
Why invest in James Fisher?
“After a difficult few years, we are seeking to deliver sustainable value for our shareholders by implementing a strategy focused on simplifying and focusing the Group, delivering growth, improved margins and enhanced ROCE, while making a positive impact.”
James Fisher is a specialist shipping company with a 175-year history. It began as a ship owner and operator and today is a leading global provider of trusted engineering solutions. They specialise in harsh nautical environments, delivering specialised solutions across the defence, energy and maritime transport sectors, ranging from offshore wind farm commissioning to submarine and hyperbaric rescue and support.
As with many of my recent recommendations, FSJ had a rough pandemic, but it’s behind us, and that is the opportunity. The sales eased back as the world locked down, but the valuation collapsed by much more despite FSJ being an owner of valuable assets. Yet another good company trading below its 2008 valuation on an EV-to-sales basis.
James Fisher Is Undervalued
In late 2022, the company underwent a simplification programme and sold its Subtech Dive Support Vessel to Seamec for $24 million. Peel Hunt highlighted this as positive because it was valued on the books at $15.7 million. This sent a positive message to creditors, and net debt was reported below forecast. I believe the balance sheet is strong enough.
The last set of half-year results was upbeat, with sales up 17% and an increase in profits, but there is a long way to go to return to full operational recovery. The best-performing division is offshore energy and wind.
The dividend was cut to zero in 2020 but is expected to pay a 6.5p dividend in September (2% yield). It’s more symbolic, but with a 33.6p paid in 2019, there’s a bullish target when conditions improve.
The four analysts (three buy, one hold) covering the stock have a target price of 712p against the current price of 335p (113% upside). That said, Numis were the latest to review FSJ on 15 December and have a 1,000p price target, which is encouraging. Let’s hope the upgrades have begun.
Finally, the situation in the Middle East, with the Houthis diverting shipping, has put the spotlight back on the sector. While not directly relevant to FSJ, it’s helpful to remember how valuable the shipping industry and the oceans are to the economy.
Risk
This is a small-cap stock with a £168 million market cap. Liquidity is poor, with £200k traded on an average day. I deem FSJ to be medium to high risk on an operational basis, but high risk for investors as it has poor liquidity.
Venture Update
Please let me know your thoughts by emailing me at charlie.morris@bytetree.com or tweeting me @AtlasPulse.
Many thanks,
Charlie Morris
Editor, Venture
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