This convenience store supplier is about to deliver the goods again with its fourth acquisition

Kitwave’s solid progress is being supplemented by canny purchases that propel its expansion ambitions as it holds its own against less nimble, larger rivals

Shares in Kitwave are on a roll and if they can break above last autumn’s all-time high, then further gains could be on the cards, at least according to disciples of charts.

The fundamentals of the wholesaler’s business look strong. Select acquisitions supplement existing momentum and the valuation is far from demanding, so there could indeed be further gains to come. North Tyneside-based Kitwave supplies independent convenience stores, as well as cafés, restaurants, schools and care homes, across the UK from seven depots. It specialises in sweets, snacks, soft and alcoholic drinks, as well as chilled and frozen foods and can even provide same-day delivery for relatively small-ticket orders – an attractive proposition for store owners as they manage their cash flow, and one that means Kitwave can more than hold its own against larger rivals who are not quite so nimble.

The full-year results to November 2023, released in February of this year, read well, as they showed healthy advances in sales and profits, as well as good cash conversion and healthy free cash flow. This solid underlying progress is then supplemented by acquisitions and Kitwave is in the process of making its fourth purchase since its flotation on the London Stock Exchange back in May 2021. After MJ Baker and West Country in 2022, and Wilds of Oldham in 2023, Kitwave has now swooped for Total Foodservice Solutions in a £21m deal. The purchase expands Kitwave’s product range and its reach across the North of England in what remains a very fragmented market. Analysts are already gently upgrading profit forecasts in the view that the deal should be instantly earnings accretive, so the price paid seems a sensible one. Kitwave’s balance sheet bore relatively little debt before the acquisition, although it does carry some £33m in lease obligations, and Total Foodservice Solutions comes with £4m in cash on its balance sheet, to reduce the net purchase price to £17m. Further complementary acquisitions are possible, although the company’s record so far suggests it does not try to do too much, too quickly, preferring to digest one deal at a time.

For all that, the shares have done well since the initial public offering nearly four years ago, they still look decent value. Kitwave’s shares trade on barely 12 times forward earnings and also come with a dividend yield of more than 3pc, so shareholders are getting paid as they hold on patiently and let the company deliver the goods.

Update: Anglo American

Well, this is a nice surprise. Shares in Anglo American are already up by a sixth since our preliminary study of the mining giant in February and the combination of a lowly valuation, washed-out sentiment and self-help programmes from management could yet provide the basis for further gains – even before the possibility of further strength in commodity prices.

Even after the rally from four-year lows (and share price levels no higher than those seen in 2005), Anglo American’s market capitalisation of $32bn (£25.3bn) looks low compared to tangible net assets on its balance sheet (excluding $1.5bn of intangibles) of $30.1bn. That is a small premium to book value and reflects market disinterest in commodities relative to equities, and US equities and Ai-related stocks in particular. The latest bizarre episode here is the frenzy which surrounds Trump Media Technology Group, almost defying explanation.

Yet almost unnoticed, copper, gold, oil and silver prices are rising and the CRB Commodities index, which tracks the price of 19 raw materials across energy, agriculture, industrial metals and precious metals, is on the verge of setting a new five-year high. US government bonds are starting to pay attention, as the yield on the benchmark two- and 10-year Treasuries is creeping higher. This also follows how America’s consumer price, producer price and personal consumption expenditure indices all are showing a reacceleration in inflation. Equity markets are proving slower to cotton on, which could be a further opportunity to research mining stocks while they remain neglected.

Granted, some of Anglo American’s markets do face big challenges, notably diamonds thanks to the rise of labgrown rivals, and platinum group metals, where electric cars are a threat, albeit one where sales are starting to disappoint. The FTSE 100 firm is also a still-profitable producer of copper and iron ore, as well as steelmaking coal and that helps to fund a forecast dividend yield of more than 3pc.

Questor says: buy.

Ticker: AAL

Share price at close: £21.55

‘Shares have done well since the initial public offering nearly four years ago and they still look decent value’