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Could small caps Anglo Pacific Group plc, Vertu Motors plc & TT Electronics plc deliver 50% gains?

Shares in electronic component firm TT Electronics (LSE: TTG) surged 6% higher this morning, after the firm said that revenue rose by 4% during the four months to the end of April.

TT’s growth is being driven by the recent acquisition of Aero Stanrew and by favourable exchange rate movements compared to last year. Excluding Aero, the firm’s order book is flat on last year. But management believes the integration of Aero will help to drive further profit growth, boosting earnings.

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Chief executive Richard Tyson said this morning that he’s confident TT can deliver “sustainable profitable growth in the medium term”. Earnings per share are expected to rise by 10% this year and by 14% in 2017. This puts the shares on a 2016 forecast P/E of 14, which seems reasonable to me. The forecast 4% yield is attractive and earnings forecasts have been rising steadily since December.

I’d like to see some reduction in net debt before the dividend goes any higher, but I believe further gains are possible after today’s news.

Hidden upside to mining assets?

Mining royalty firm Anglo Pacific Group (LSE: APF) issued an interesting update this morning, highlighting what could prove to be hidden value in its portfolio.

Anglo owns a 1% royalty agreement on the Spanish and Portuguese assets of AIM-listed uranium miner Berkeley Energia. This royalty was held on Anglo’s books at its 2009 purchase price of $4.1m.

Earlier this week, Berkeley secured a new funding deal with another investor, who paid $5m for a 0.375% royalty interest in the same assets. This implies that Anglo’s 1% royalty could be worth $13.1m, more than three times its current book value. Anglo also owns a 16.6% stake in Berkeley that I estimate is currently worth about $13.4m.

In total, Anglo’s stake in Berkeley appears to be worth around $17.2m, or £11.9m. Assets such as these could help generate shareholder returns in the future.

In the meantime, Anglo Pacific stock offers a forecast dividend yield of 8%. As you might expect, this isn’t covered by earnings, but the firm has committed to maintaining a 6p per share payout during this difficult period.

Anglo Pacific’s profits are expected to double in 2017. With commodity prices stabilising, now might not be a bad time to take a closer look.

Driving profits higher

Today’s final results from car dealer Vertu Motors (LSE: VTU) were very good. I was surprised not to see the shares jump higher, given that they’ve fallen back by 24% from their January high of 78p.

Revenue rose by 16.8% to £2,423m last year, while adjusted earnings per share were 24.5% higher at 6.46p. That’s slightly above recent forecasts, and puts Vertu on a trailing P/E of just 9.2.

I’ve been cautious on car dealers because they’re traditionally quite cyclical businesses. But the move by many customers to personal lease plans could mean that replacement cycles and servicing demand will be more regular and predictable than in the past. That’s important because after-sales are a key source of profit for car dealers.

Vertu said this morning it expects earnings to continue rising in 2016. With a low valuation, plus £23.1m of net cash and a 2.3% forecast yield, I think further gains are quite likely.

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Roland Head has no position in any shares mentioned. The Motley Fool UK owns shares of Anglo Pacific. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.