With a £95m market cap and share price near 21p, Speedy Hire (LSE:SDY) is firmly in penny stock territory today. It’s down 47% in two years and 70% since mid-2021.

However, one broker reckons it has the potential to mount a spectacular recovery. So, is this an under-the-radar penny share that’s worth me taking a punt on?

Value on offer

As a reminder, Speedy Hire rents out construction and industrial tools and machinery. It also has a joint venture in Kazakhstan, where it hires out equipment to the oil and gas industry.

Looking at the company and stock today, I see a few reasons to be bullish. The first is that despite challenging market conditions across the UK construction industry, revenue remained stable in the 12 months to 31 March (FY26), at £416m.

Plus, the new financial year (FY27) was off to a decent start, with revenue rising 2% year on year in the first two months. Adjusted EBITDA (earnings before interest, tax, depreciation, and amortisation) was up 13%, aided by disciplined cost control.

Another thing to like here is that the firm has completed the ‘Enable’ phase of its Velocity growth strategy. This is a five-year plan to transform Speedy Hire from a traditional tool hire business into a more scalable service provider (with a focus on large-scale and regulated infrastructure markets).

Note that last year, the company signed multi-year contracts with ProService and Thames Water.

Over the last three years, we have invested c.£20m in transforming the business, focused on strengthening the operating platform, modernising our systems, improving efficiency and leveraging data to drive enhanced customer service visibility, operational control and readiness for capitalising on growth opportunities.
CEO Dan Evans

There’s also income on offer, with Speedy Hire offering a forward dividend yield of 5.3%. That’s pretty rare for a penny stock.

Finally, we have a really cheap-looking valuation. Based on the forecast for this year, the forward price-to-earnings ratio is just 6.6. That’s low in terms of both the wider market and industry norms.

Therefore, I can see why Canaccord Genuity recently gave the stock a 63p price target. That’s around 201% higher than the current level!

What’s the catch?

On the other hand, I see a few obvious risks. The first is the challenging backdrop, with rising inflation and geopolitical volatility potentially leading to further project delays. Unfortunately, this situation is out of the company’s hands.

Second, profitability has been all over the place in recent years. Last year, margins were impacted by wage inflation and increased financing costs. The adjusted pre-tax loss came in at £9.8m.

Therefore, while the firm intends to grow the dividend by at least 5% in both FY27 and FY28, this isn’t ultimately guaranteed. Also, the firm has quite a bit of debt (net debt was £159bn at the end of last year).

If Speedy Hire can sustainably drive earnings growth higher, the stock looks very undervalued today. I think it could easily double or more from here.

But with the ongoing challenges in the UK construction market, it’s too risky for my own portfolio. I see more attractive small-cap opportunities elsewhere.

Should you invest £5,000 in Speedy Hire Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Speedy Hire Plc made the list?

Ben McPoland has no position in any of the companies mentioned.

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Over five years, the stock’s down 70%!

Recently, I’ve been scouring the small-cap landscape for potential bargains as a lot of these shares have sold off. Is Speedy Hire now a potential buy for my portfolio this month? Let’s discuss.

Weak market conditions

Speedy Hire calls itself the “UK’s leading tools and equipment hire services company, operating across the construction, infrastructure and industrial markets“. While I’d have assumed that title belongs to Sunbelt Rentals, Speedy Hire has a huge presence in the small tool segment.

The catalyst for today’s sell-off was a trading update from the equipment hire firm. For the year to 31 March, it expects EBITDA to be around £90m. Unfortunately, that will be below the £97.1m it reported the year before.

The company blamed worsening trading conditions through the fourth quarter due to the uncertainty caused by the UK Budget in November and lately the Middle East war. This led to “certain customer-led delays, affecting hire and service revenues, which are now expected to impact positively in the near term“.

In better news, Speedy highlighted a commercial agreement with Proservice Building Services Marketplace (ProService, formerly HSS Hire) during the year. This will “provide Speedy Hire customers with greater choice and an enhanced service, while providing ProService customers the ability to indirectly access our national network, larger equipment fleet and faster delivery capability”. 

Management says this win-win deal will generate £50–£55m of annualised revenue, once up and running. So that’s something to look forward to.

Meanwhile, its ambitious five-year transformation strategy (‘Velocity’) to capitalise on public infrastructure projects is still in place. By 2028, it’s targeting £650m in revenue, up from around £440m last year (before today’s update). The EBITDA margin target for then is 28%.

Should I take a punt?

The question now is, are these targets achievable in light of the deteriorating trading conditions? I’m not sure.

The construction sector is being battered by rising inflation and interest rate uncertainty. UK economic growth remains anaemic, and we still have inflation from the Iran war to work its way through the system.

I note brokers are downgrading their profit forecasts, with Panmure Liberum now anticipating a small underlying pre-tax loss for the year to 31 March.

As a result, I don’t think the dividend can be relied upon (the interim payout was cut back in November). The company’s dividend track record has been very hit-and-miss.

Another worry I have here is that net debt is expected to total around £159m for the year. Considering Speedy Hire’s market cap is only £89m, and it might now be swinging to a loss, that debt puts me off.

Then again, Speedy Hire is an asset-heavy company, with £227.7m in plant hire equipment (diggers, tools, generators, etc). And the price-to-tangible book value now is around 0.85, which looks low.

As such, deep-value investors might want to dig into this 19p stock. But with the outlook for the construction industry still weak, I don’t feel it’s a good fit for my portfolio.

Weighing things up, I see better small-caps out there today.

The post This penny share just crashed 13% to 19p! Time to buy? appeared first on The Twelfth Magpie.

The stock market looks like it should end the year strongly. And interest rates appear increasingly likely to fall. That could mean a swing in favour of growth investing. Here are two I think investors should consider right now.

#1: Speedy Hire

With November’s first-half results update, Speedy Hire (LSE: SDY) CEO Dan Evans said: “Despite subdued markets, we are gaining market share and winning significant long-term contracts, leaving us far better positioned to take advantage as and when market conditions improve.”

The company did record a first-half loss before tax of £15.1m. And we’re still on for a full-year loss. But we saw underlying operating cash flow of £44.6m, which the board says should substantially help deleveraging in the next 12-24 months.

The “as and when market conditions improve” bit is the main sticking point. And I think the shares could remain weak at least until the full year is up. Or maybe even until we see the first concrete signs of getting back to profit.

Revenue boost

But Speedy Hire has a tie-up with ProService (previously HSS Hire) which the boss says should “generate £50m-£55m of annualised revenue and significant earnings accretion in its first full year after integration.”

There’s a forecast price-to-earnings (P/E) ratio of 7.3 for 2027, when analysts expect to see those profits returning. By the standards of potential multi-year growth stocks, that looks low to me.

The interim dividend was cut “in line with the previously guided rebasing of dividend payments,” announced in October. It should mean a total dividend of 1p per share. But that would still yield a decent 3.7% on today’s price.

#2: Keller

Ground engineering specialist Keller (LSE: KLR) is valued on a low forward P/E of 8.2. And it would drop as low as 7.6 on 2027 forecasts.

It all hinges on predicted steady growth in earnings per share between now and then. But in a November trading update, CEO James Wroath said the company “remains on track to deliver a full-year performance in line with market expectations.” So we should be on to hit an analyst consensus for underlying operating profit of £214m.

Management seems to think the shares are undervalued too. At least, that’s what the latest £25m share repurchase programme says to me — following from on a previous £25m buyback completed in the first half of the year.

Strong cash

On the liquidity front, the board is targeting a net debt/EBITDA range of between 0.5x and 1.5x. Anything above 2x and I might start getting a bit worried. But that sounds solid to me.

Profit margins in the business aren’t the biggest. And an average analyst target price of 1,890p is only 16% above the price at the time of writing — so not all that stretching a growth target. But even with the shares up 150% over five years, I still rate Keller as a growth stock to consider.

Oh, and there’s a dividend on the cards from this one too. The 3.2% yield would make a nice extra.

The post 2 potential champion UK growth stocks to consider buying in December appeared first on The Twelfth Magpie.

Among those is Speedy Hire (LSE:SDY) and Reach (LSE:RCH), both offering a tempting 11% dividend yield today. The question is, can this level of payout be maintained? Or are these UK shares luring investors into a trap?

Equipement rental

Starting with Speedy Hire, the business is a UK- and Ireland-based supplier of tools and equipment used predominantly in the construction sector. Rather than buying expensive equipment themselves, contractors and SMEs can get the tools they need on a temporary basis at a fraction of the cost without having to worry about maintenance.

This strategy is how companies like Ashtead Group became industry titans. And while Speedy Hire doesn’t come close to matching Ashtead’s international scale, the business is still aiming to replicate its rival’s success with its own ‘Velocity’ strategy.

Management’s positioning the business to capitalise on upcoming and ongoing public infrastructure projects within Britain, including the build-out of rail networks, nuclear power plants, and other energy projects. At the same time, it’s seeking to boost its operational efficiency, a tactic that’s already starting to bear fruit.

Combining this with recent insider buying activity and the group maintaining dividends, it certainly looks like Speedy Hire’s delivering on its 11% yield promise. However, it’s essential to highlight the risks surrounding this business.

Even with infrastructure projects on the horizon, the wider construction market remains subdued. And delays are becoming increasing more frequent due to economic uncertainty. This has caused top-line growth to stall and free cash flow generation to suffer.

The company believes market conditions will eventually improve, hence why dividends have continued to flow. But if the recovery takes longer than expected, then management may be forced to reserve cash and cut shareholder payouts.

Income from a media giant

As a leading national and regional news publisher, Reach is a very different business compared to Speedy Hire. But it’s also encountering its own fair share of operational challenges right now.

As more people consume media content for free online, the firm’s expansive print-based revenues alongside printed advertising income continue to suffer. Leadership isn’t blind to these shifting trends and has subsequently been expanding its digital footprint to offset the lost income. Nevertheless, overall revenues are still sliding in the wrong direction.

Efficiency efforts have resulted in a widening of operating profit margins, allowing earnings to remain resilient. And with the group’s international expansion into US markets, new catalysts for organic and acquisitive growth may emerge. That’s why dividends have continued to flow.

But the US digital media market has its own set of headwinds to overcome, most notably intense, well-established competition. And if marketing spend from customers enters into a cyclical downturn from weaker US consumer spending, Reach’s growth strategy could backfire, compromising dividends.

The bottom line

Both of these UK shares show promising income potential for shareholders. But of the two, I’m more drawn to Speedy Hire, which appears to be in a stronger position. As such, for investors hunting high-yield gems, this business may be worth a closer look.

The post Enormous dividends are expected from these 2 UK shares! appeared first on The Twelfth Magpie.

At a market capitalisation of £150m, it sits just outside of penny stock territory. However, with its shares trading at around 33p, it still presents an appeal to micro-cap investors while also offering a tasty 7.9% dividend yield.

The business is a provider of construction tools & equipment available for builders and contractors to hire for their projects. Hiring equipment instead of buying it has become increasingly popular over the last decade as it lowers costs and eliminates the headaches of maintenance.

It’s a tailwind that companies like Ashtead have capitalised on. In fact, Ashtead’s subsequently gone on to become the best-performing investment on the entire London Stock Exchange in the last 25 years, delivering a 6,150% total return! And it seems Speedy Hire’s trying to follow in its footsteps.

The great expansion

Higher interest rates have been quite disastrous for the construction industry lately. With many projects funded by debt, a lot of builders and businesses have been hitting pause on new commitments until a more friendly lending environment emerges. And the impact of this on Speed Hire’s latest financials is perfectly clear.

Revenue in the 12 months leading to March stagnated, falling by 4.3% to £421.5m, with underlying profits sliding 6.8% to £96.8m from £103.9m.

However, now that interest rates are starting to fall, activity within the construction industry’s steadily picking back up. Since March, the S&P Global UK Construction PMI – an index that tracks performance in the British construction sector – has been rising. And as of September, it sits at 57.2 (anything above 50 indicates industry expansion).

And that’s also emerged in Speedy Hire’s contract pipeline. £40m of new annualised revenue from new multi-year contracts have already been secured, with management announcing it has “secured further renewals and extensions” since March.

In other words, the near-penny stock’s seemingly successfully capitalising on the recovery tailwinds of the construction sector. Yet the shares, on a forward basis, still trade at a price-to-earnings ratio of 8.9 – one of the cheapest in the sector.

Risk versus reward

A discounted valuation’s definitely an interesting proposal, especially if management’s successful in returning to growth. Apart from sparking upward share price momentum, it paves the way to further dividend growth. However, there’s no denying some significant cyclical risk is attached to this business.

The stock has been a terrible performer over the last three years. And it’s a pattern that’s likely to repeat in the next cyclical downturn.

Furthermore, the rising popularity of equipment rental over ownership is a trend that other businesses are also trying to capitalise on. Speedy Hire currently controls an estimated 6% of the UK market share, coming in second place to Ashtead’s 10%. But HSS Hire and Vp Plc are hot on their tails with 5% each, not to mention the countless other private businesses chasing the same contracts.

Despite these risks, today’s valuation presents an intriguing offer, in my mind. So for investors comfortable with a bit of risk, this stock may warrant a closer look.

The post 1 dividend-paying near-penny stock set for potentially huge growth! appeared first on The Twelfth Magpie.

Equipment for construction projects

Speedy Hire is a construction equipment and tools hire business. In the construction sector, it is often more cost-effective to hire such tools and equipment, rather than take on the huge outlay of purchasing and maintaining equipment. Speedy operates across the UK and Ireland with over 200 depots and over 30,000 assets available.

It is worth remembering that a penny share is one that trades for less than 100p. So what’s happening with Speedy shares currently? As I write, they’re trading for 36p. At this time last year, they were trading for 46p, which is a 21% drop over a 12-month period.

A great penny share opportunity

I like Speedy Hire shares for a few reasons. To start with, the construction sector is usually one of the least affected during times of economic difficulty. This is for two reasons. Firstly, governments are looking towards the building of core infrastructure to stimulate the economy. Next, construction projects are well-planned and the pipeline of work is often decided years in advance of any work happening.

Speedy is in a good position to benefit from all of this and its extensive network of depots and vast array of assets should help future earnings and deliver shareholder returns.

Speaking of returns, Speedy’s current dividend yield stands at 7% currently. This is well above average for a penny share. In fact, this is nearly double the FTSE 100 average yield! I am aware that dividends are never guaranteed. In addition to this, the shares look good value for money on a price-to-earnings ratio of close to six.

Finally, Speedy Hire has shown great growth through its performance in recent years. I can see that revenue and gross profit have increased for the past three years in a row. However, I do understand that past performance is not a guarantee of the future.

My verdict

Despite my bullish stance on Speedy shares, there are a couple of factors that could impact its performance and returns. Firstly, rising inflation, one of the contributors of the economic woes currently, could mean that costs are higher, which could eat into profit margins and returns. If Speedy were to hike its prices, this could hurt the rental and hire of its products.

Another thing I need to be wary of is that Speedy must continuously invest heavily into its assets in order to keep up with construction methodologies. Any asset-heavy business has to do this. This investment could impact any returns I hope to make.

To conclude, Speedy looks like a great penny share option for my holdings. Trading at discount levels, offering an above-average yield, and backed up by great recent performance history, there is lots for me to like.

The post Here’s 1 recession-proof penny share I’d buy for growth and returns appeared first on The Twelfth Magpie.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Agronomics 

What it does: Agronomics invests in a range of companies in the field of cellular agriculture.

By Ben McPoland. Agronomics (LSE: ANIC) manages a portfolio of start-ups focused on cellular agriculture. This is the production of animal-based products from cell cultures rather than directly from animals.

In practice, that means milking microbes instead of udders and growing meat and fish rather than rearing animals and overfishing oceans. It’s no secret that husbandry uses extraordinary amounts of water and contributes to greenhouse gas emissions.

Additionally, soaring food prices mean that nations need greater food security. And meat grown from cell cultures doesn’t need huge amounts of grain or fertilisers from, say, Ukraine.

This technology is not science fiction. The first lab-grown chicken product was approved for human consumption in the US last year. This chicken is biologically indistinguishable from meat taken from a slaughtered bird. So taste isn’t an issue and more products are coming.

Of course, consumers may reject this food despite it being more nutritional and (eventually) cheaper. However, consulting firm McKinsey estimates this market could reach $25bn by 2030.

At 12p per share and a market cap of £120m, I think Agronomics looks attractive.

Ben McPoland owns shares in Agronomics.

H&T 

What it does: H&T is the UK’s largest pawnbroker. It offers short-term cash loans backed by items of value such as gold jewellery or watches. 

By Harshil Patel : Pawnbroking is a hot sector right now. And with over 265 stores, small-cap stock H&T (LSE:HAT) is the biggest player. More stores are expected this year too. 

This growth strategy is backed by soaring profits. Gross profit in 2022 rose by 33% to £102m. The impact of inflation on consumer finances boosted demand for short-term loans. At the same time, many competing loan products were withdrawn from the market. 

That puts H&T in somewhat of a sweet spot.  

In addition to pawnbroking, it also scraps unwanted gold, sells jewellery and provides holiday money. All these areas are experiencing a growth spurt.  

Gold prices have jumped since H&T’s last trading update. And travel money should get a boost as the holiday market bounces back.  

Bear in mind that if inflation slides, demand for its loans could fall back to historical norms. 

That said, with price-to-earnings ratio of just seven, and dividend yield of 5%, this share looks like a solid prospect to me.  

Harshil Patel does not own shares in H&T. 

Speedy Hire

What it does: Speedy Hire provides equipment and plant hire services to the UK and Ireland’s construction, infrastructure, and industrial markets.

 By Gordon Best. Investors in 2023 may struggle to find areas less impacted by the possibility of a recession. One thing that can be relied upon historically is expenditure in infrastructure and construction, as governments seek to stimulate the economy.

One potential beneficiary is Speedy Hire (LSE:SDY), which supplies construction equipment. Revenue has been steadily increasing over the past five years, with the company profitable since 2021.

Speedy Hire’s growth prospects also look positive. When we compare the price-to-earnings ratio of 6.3 times to the industry average of 59.8 times, there could be a great opportunity for investors.

Investments in the construction sector can be less volatile, since work pipelines are likely to be well understood, and the company has a relatively low debt-to-equity ratio, indicating it is not highly leveraged. 

Dividends have been rather unpredictable, but in a growing, stable sector of the market, this small-cap stock has potential.

Gordon Best does not own shares in Speedy Hire.

The post Best British small-cap stocks to buy in May appeared first on The Twelfth Magpie.

Construction equipment

As an introduction, Speedy Hire is a construction tools and equipment rental and hire business. With over 200 depots across the UK and Ireland, it has over 300,000 itemised assets available for trade and DIY customers.

So what’s happening with Speedy shares currently? As I write, they’re trading for 37p, putting them in penny stock territory. At this time last year, the stock was trading for 59p. This equates to a 37% drop over a 12-month period. Many FTSE stocks have fallen in recent months due to macroeconomic headwinds, coupled with the tragic events in Ukraine.

The bull case

Let’s look at some of the positives of Speedy shares. To start with, I can see that they are trading at dirt-cheap levels on a price-to-earnings ratio of just nine.

In addition to this, Speedy shares would boost my passive income stream through dividend payments. The current dividend yield stands at 5.9%. To provide some context, the FTSE 100 and FTSE 250 average yields stand at 3%-4% and 1.9%, respectively. I am conscious that dividends are never guaranteed, however.

Next, Speedy has a decent track record of performance. I do understand that past performance is not a guarantee of the future. However, looking back, I can see it has recorded consistent revenue and profit for the past four years. It’s recent full-year results were very close to pre-pandemic levels. This is encouraging as the pandemic caused disruption for many firms.

Finally, I believe Speedy operates in a burgeoning sector right now. Construction projects and spending is increasing. For example, the UK government is looking to spend more on essential infrastructure. Furthermore, there is a shortfall of new homes in the UK, meaning demand is outstripping supply. Many house builders are working hard to plug this gap. Although I do not profess to be a construction expert, my research tells me that it is more cost-effective to hire tools, rather than buy them. This should help boost Speedy’s performance, and level of return.

A penny stock with risks & my verdict

All stocks have potential downsides and risks, and Speedy is no different. First off, the current economic volatility could play a part in slowing down infrastructure projects. This could hinder demand for its products, as well as hurt performance and returns. Next, due to inflation, the cost of materials has risen. This means that Speedy may need to hike prices to remain profitable. This could also hurt demand and customer numbers.

Overall I like the look of Speedy, as a business, and as a stock to boost my holdings. It has a good profile and presence. The shares look good value for money and would boost my passive income stream. I believe current headwinds could cause shorter term issues. However, I invest for the long term, so would expect to see growth and consistent returns eventually. I will be buying the shares.

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Construction equipment rental

Speedy Hire is a construction tools and equipment rental business. With over 200 depots across the UK and Ireland, it has over 300,000 itemised assets available for hire.

So what is the current state of play with the Speedy Hire share price? As a reminder, a penny stock is one that trades for less than £1. Speedy shares are trading for 49p, as I write. At this time last year, the shares were trading for 75p, which is a 34% drop over a 12-month period.

I believe Speedy shares have come under pressure in recent times due to macroeconomic headwinds and the stock market correction. This correction was caused by the geopolitical issues arising in Ukraine currently.

A penny stock with risks

The biggest threat towards Speedy’s performance and growth, and in turn investor returns, is that of soaring inflation and the rising cost of raw materials. Speedy will see its costs rise, which means increasing its prices. Some businesses have defensive capabilities whereby a price increase would not deter its customers and they would still experience consistent sales. Speedy doesn’t have this characteristic, in my opinion. It could lose customers to competitors that are able to offer better value for money.

Another issue is that Speedy is an asset-heavy business. It must continuously invest in new and updated equipment that comes out and a significant capital outlay is needed to do this. This outlay could affect any shareholder returns.

Why I like Speedy Hire shares

As mentioned earlier, Speedy could benefit from the construction industry recovering towards pre-pandemic levels. When the pandemic struck, the construction industry was severely affected. Current demand for housing and commercial property is soaring. In fact, demand for homes in the UK is currently outstripping supply.

As well as market conditions, Speedy’s business model is also beneficial to its own progress, in my opinion. There is a general consensus in the construction community that renting, and not buying tools, is more cost effective. Speedy specialises in renting out its equipment.

Speedy shares pay a dividend with a yield close to 4%. This is high for a penny stock, which is enticing. It also recently commenced a share buyback scheme that will reward investors too.

Let’s take a look at the fundamentals then. Prior to the pandemic, Speedy was able to grow performance in respect of revenue and gross profit. I do understand that past performance is not a guarantee of the future, however.

Coming up to date, Speedy’s full-year update for the year ending 31 March, released in April, made for positive reading. Revenue is set to increase by 5% compared to 2020 and investment of £70m has also helped secure a lucrative partnership with DIY giant B&Q. Speedy now has a presence in 38 B&Q stores, which will help boost its profile and performance.

Speedy Hire is a penny stock I would add to my holdings. I believe it could benefit from market conditions, despite macroeconomic challenges. The shares could be on the cusp of heading upwards in my opinion and I would buy them now before any price increase.

The post Here is 1 penny stock primed to benefit from the construction boom! appeared first on The Twelfth Magpie.

Dirt-cheap penny stocks

Vertu Motors (LSE: VTU) is a share I sold out of towards the end of last year after a strong share price run. The shares though are still cheap, trading on a P/E of 13.

Continuing shortages of chips leading to fewer new cars and higher second-hand car prices have been very positive for Vertu’s shareholders in recent times. That fortuitous set of circumstances won’t last forever though. But if the new car market remains constrained for much of this year, the company could do well.

What’s not clear right now is how much of the share price gains will fall away as and when market conditions normalise. That’s the biggest risk I see when it comes to investing in Vertu – or indeed any – of the car dealers right now.

I think Vertu is a very good penny stock and is potentially a bargain, but I won’t be re-adding it to my portfolio, simply because of the market uncertainty.

South African miner Sylvania Platinum (LSE: SLP) is a share I hold. It’s also cheap. The shares trade on a P/E of only three. That’s staggeringly low, even compared to many other miners.

That’s a reflection of 2021 being a tough year for the company. Prices of the metals it processes – particularly rhodium – fell substantially in the second half of the year. At the same time costs rose. That’s a double whammy that really hit the shares. As I’ve cautioned before, mining is an inherently difficult and cyclical business. And operating in South Africa, which has seen civil unrest, won’t have helped the share price either. 

Overall though, the shares are dirt-cheap and I’ll be keeping them in my portfolio for the foreseeable future. If the price of rhodium, in particular, rises this year the shares could recover strongly.

Building back better

Another cheap penny stock I’ve come across is Speedy Hire (LSE: SDY). Its price-to-book ratio is 1.47, which is incredibly low. As an aside, it was a key metric for Warren Buffett’s mentor, Benjamin Graham, and is important for many value investors. 

The tools and equipment rental specialist recorded a 29.9% year-on-year improvement in EBITDA for the six months ended 30 September, to £49.1m, while its adjusted operating profit was £9.9m higher at £16.2m.

The company said artificial intelligence has meant it’s been better able to utilise its assets, which in an asset-heavy business is important. The more it rents out, the better it’s going to do financially and in turn for shareholders.

The concern with such a business is the need for continuous investment in equipment. Many investors prefer asset-light businesses that can scale more easily. Speedy Hire is also very exposed to the construction market. Any slowdown in building in the UK, in particular, would hurt the company and the share price. I’ll keep an eye on Speedy Hire but have no plans to add the penny stock as a new investment.

Vertu Motors, Sylvania Platinum and Speedy Hire all look cheap on slightly different metrics. The standout one that appears very undervalued to me though is Sylvania Platinum. That’s why I hold the shares and will likely add more. 

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