I feel UK renewable energy companies can benefit tremendously given recent trends. Here are three shares I’m looking at in this space that could explode in 2022.

EVs take off

If I had to pick one industry that grew enormously in 2021, it has to be electric vehicles (EVs). Car giants are increasing their EV offerings and global markets are opening up infrastructure possibilities that could enable the long-needed switch. And this is where firms like Nexus Infrastructure (LSE: NEX) stand to benefit.

The company’s primary focus is civil engineering and outfitting new homes with utilities. But it also specialises in installing EV charging ports in homes. Last year, the government passed legislation that made EV ports mandatory in all new homes in the country from 2022. This is great news for Nexus because it already works with established builders like Persimmon and Taylor Wimpey. EV ports can be an auxiliary service the company provides, which already gives it a large market share in an emerging space.

It should be noted that a lockdown remains possible given the Omicron spread. And Nexus’s primary business, civil engineering, could be affected given rising construction material shortages and inflation. This could eat into revenue and cause its share price to fall. And Nexus shares already look slightly expensive at 222p, at a forward price-to-earnings ratio of 34 times. But I’m watching this renewable energy stock closely to try and find the optimal entry point for 2022 and beyond.

Future power?

Eqtec (LSE:EQT) is a waste-to-energy company that has patented gasification tech to solve two separate environmental issues. The company uses waste to produce gas fuel to power industries. But this innovative tech is a risky pick that has high potential. And a lot of its future revenue rides on massive adoption.

Its share price has remained dormant for nearly a decade now, falling below 10p in 2015 and never recovering. But a new three-year deal with Toyota Motors and two new power plants could breathe life into this renewable energy stock. The company could build recent developments and work towards wider adoption, which is why it is on my watchlist. However, this remains a speculative pick for my portfolio. 

The next company on my list is ITM Power (LSE:ITM). The hydrogen electrolysis machines the company makes separate hydrogen from water and use clean hydrogen as fuel. This process has zero carbon by-products, which is vital. Hydrogen as a fuel source is still in its infancy, in terms of adoption. This makes me optimistic about ITM’s future potential.

Despite impressive tech, the energy firm was plagued by a massive debt pile in 2021, which led to a poor showing last year. The loss-making company expects a 31% increase in projected revenue which could plug the £250m debt hole. And right now, the company is at a crucial point in the market and could take off in 2022, which is why it is on my watchlist.

Nexus Infrastructure reports strong results

In its recent full-year results for the year ending 30 September 2021, the company showed an increase in revenue from last year. Also, it recorded a net profit, after falling into a loss last year. And it has resumed its dividends. It also appears optimistic for the next year on account of expected growth across its segments. 

The company has three business segments. The biggest in terms of revenue generation is its civil engineering business. It provides a range of services like drainage systems and high-rise construction for segments like housebuilding. Next is the segment providing a range of utility services. These include installation of gas, electricity, water, fibre network, and electric vehicle (EV) charging infrastructure. And finally there is its energy transition business, which provides infrastructure for public charging of EVs. It also provides smart energy infrastructure.

Future positive

I think the fact that it caters to EVs is a big positive for the future, as the country and indeed the world transitions towards clean energy sources. Even though it is still quite a small part of its total revenue, the energy transition business has seen a big increase in the past year. And I reckon that could be a sign of things to come, considering that there is expected to be a significant increase in EV ownership during this decade.

However, for the near future, I think the possibility of another financial wobble exists. In 2020 and until earlier this year, the housebuilding sector got a boost because of the stamp duty holiday. However, its rollback means that the housing market might not boom quite like it has in recent times. In fact, the latest print on the UK economy shows that construction activity actually declined in October compared to the previous month. Considering that two of Nexus Infrastructure’s biggest segments address the residential housing, I would not rule out a slowdown there. 

This is especially so since we might just be headed for another lockdown, which would have negative repercussions for the economy. If the housing market does not quite receive the same boost as it did last year, than Nexus Infrastructure could be impacted as well. 

What I’d do about the UK stock

Keeping this in mind, I would keep the stock on my investing watchlist for 2022 for now. I want to see how the Omicron variant situation develops and also how the company’s next update looks. If the situation improves fast, I could buy this UK stock because it could make a great investment. Until then, I will focus on safer stocks. 

On the crest of a wave

I consider Crest Nicholson’s (LSE: CRST) a sub-£5 UK share too cheap for me to miss. At 342p per share, the housebuilder trades on a forward P/E ratio of just 9 times. This is too cheap given the bright outlook for the housing market in 2022, in my opinion. Indeed, City analysts think Crest Nicholson’s earnings will rise an extra 22% this financial year (to October 2022).

What’s more, today, the business also boasts a meaty 4.5% dividend yield for this fiscal period. This is more than double the current FTSE 250 average yield of 2%.

I already own shares in a couple of British housebuilders. So I was lifted by fresh research by property listings powerhouse Rightmove released this week. It said that it expects the market to revert to “more ‘normal’ conditions” in 2022 following the “frenetic” last 18 months.

Still, it added that average home prices should rise 5% year-on-year next year “as strong buyer demand and a historically low level of available property continue to push up prices.”

A top long-term buy

Reflecting these bright conditions, Crest Nicholson’s November trading statement revealed that sales rates have remained “robust” across all its regions. The builder is seeking to take advantage of the favourable trading environment by setting up three new regional divisions by 2026 too. It hopes this will set it on course to build 4,200 new homes a year by then, almost double what it is currently producing.

But this cheap UK share isn’t without risk. Costs are increasing as raw material and labour prices rocket through the roof. This looks set to continue hitting profits in 2022 too. It’s also possible that Bank of England interest rate rises could take a big bite out of homebuyer demand. That said, it’s my opinion that the rewards on offer from Crest Nicholson far outweigh the dangers.

Another cheap UK share I’d buy

Of course, I don’t have to buy the builders to capitalise on the house price boom. I can buy the companies that allow the likes of Crest Nicholson to sell their products. Firms like Nexus Infrastructure (LSE: NEX), for example, which trades at 228p per share. This particular business creates and installs the systems that get utilities connected up on new housing developments.

This isn’t the only reason I’d buy Nexus though. The company also installs electric vehicle (EV) charging points in homes and on the street. This should allow it to benefit from the huge sums being allocated to building EV infrastructure in Britain. Last month, the government announced legislation making it a legal obligation to install charging points in all new homes from next year.

Demand for Nexus’s services could shrink if Covid-19 cases keep rising and the construction industry shuts down again. But, as things stand, I think this cheap UK share is worth serious attention.

But why restrict my search to London’s biggest blue-chips? Here are two brilliant small-caps to consider stocking up on before that upcoming investor deadline.

Hit the bricks

Given the size of the country’s homes shortage, it’s likely that Forterra (LSE: FORT) will remain a mighty dividend payer for many years to come.

It’s important not to underestimate the extent to which Britain’s builders need to charge up build rates to meet soaring demand and, as one of the country’s foremost brickmakers, Forterra is well placed to capitalise on this requirement.

Latest stats from the Ministry of Housing, Communities and Local Government illustrated the scale of the supply/demand imbalance in the UK homes market and the work by the housebuilding sector to soothe it. Apparently, there were some 44,740 newbuild residential starts (seasonally adjusted) between October and December, up 12% from the previous three-month period, a figure that reflected the strength of the market even in unpredictable political and economic times such as these.

Big dividends, top value

Fresh commentary from the Brick Development Association confirmed the strength of current housebuilding activity too, the body commenting in recent weeks that “despite the current political uncertainty we are seeing no sign of the demand for new houses slowing down.” What’s more, it was confident enough to predict that “given the continued focus on the housing shortage across all political parties, we believe that housebuilding will remain strong.”

Against this backcloth, City analysts are expecting earnings at Forterra to keep growing by mid-single-digit percentages over the next couple of years. Good rather than spectacular, but the same cannot be said of the company’s dividend yields for this period.

Thanks to predicted dividends of 11p and 11.6p per share for 2019 and 2020, respectively, yields for these yields clock in at an inflation-smashing 4% and 4.2%. There’s clearly a lot for income chasers to get stuck into, and particularly so for value chasers because of Forterra’s dirt-cheap forward P/E ratio of 10.3 times.

Another big yielder

That beautiful blend of low prices and big dividends also makes Nexus Infrastructure (LSE: NEXS) a great stock to put into your ISA this year.

Like Forterra this business — which is a provider of critical infrastructure, from concrete frames and drainage hardware to utilities connections — is well-placed to benefit from this rise in homebuilding rates in the future.

It’s why the number crunchers are predicting sustained profits growth over the next couple of years at least, leaving Nexus dealing on a prospective earnings multiple of 10.5 times. It’s also why dividends are predicted to keep rising, too, with payouts of 7.3p and 8.6p per share estimated for fiscal 2019 and 2020, respectively.

These figures yield 3.5% and 4.1% and make the construction colossus another share to seriously consider buying for an ISA.

Despite the political and economic malaise of the past two years, house-building in the UK has remained robust because of the simple fact that there aren’t enough homes to go around. An ever-increasing population means that over the long term, more and more houses will need to be built.

And this bodes well for Nexus, whose range of a broad variety of critical engineering services and products already provide it with great earnings visibility.

Latest trading details released last month underlined its resilience in even these most trying of times for the domestic economy. It advised that pre-tax profit still sprinted 25% higher in the 12 months to September, to £9.2m. A robust order book of £290m as of the close of the period, up 43% year-on-year, suggests that the bottom line should continue to swell.

Another growth opportunity

This isn’t the only reason to be optimistic over Nexus’s revenues outlook, though. Latest data from the Society of Motor Manufacturers and Traders today shows sales of plug-in hybrid and pure electric vehicles continued to leap in 2018, up 24.9% and 13.8%, respectively.

Britain needs to spend a fortune on upgrading existing architecture to meet the surging demand for these next generation cars. Through its eSmart Networks division — which was launched in 2017 and supplies charging infrastructure, battery storage and distribution network services — Nexus is therefore well-placed to capitalise on this growing market.

City analysts expect the firm to continue growing earnings by double-digit percentages in the medium term at least, and an 11% advance is forecasts for fiscal 2019. This means that Nexus can be picked up on a dirt-cheap forward P/E ratio of 9.2 times, inside the accepted bargain territory of 10 times, or below.

And it means the number crunchers also predict further excellent dividend growth. The engineer lifted the full-year dividend to 6.6p last year and is anticipated to hike it to 7.3p in this period, resulting in a chunky 3.8% yield.

Euro smash

Another little-known income star worth considering today is Summit Germany (LSE: SMTG), particularly for those concerned about the impact of Brexit now, and in the years to come.

While recent data shows that the Central European nation’s economy is also suffering a little turbulence at present, there also remains plenty of opportunity for real estate investment trust Summit to make a packet. In its most recent trading update, the AIM firm commented on “a lack of supply in the German commercial market,” an imbalance that means “rental demand is resilient and rent levels are increasing.”

City analysts are predicting another 3% earnings improvement at the business in 2019 and then pay another total dividend of 4 euro cents per share, meaning a meaty 3.6% yield. Throw a forward P/E ratio of 13.9 times into the equation, and I reckon that Summit Germany, like Nexus Infrastructure, is a great all-rounder to buy today.

TriConnex, which works in the energy, water and fibre networks field, has seen a 44% rise in its order book. But it’s experiencing unexpected delays in turning those orders into works in progress. Projects are taking longer to get under way on-site, apparently due to extra layers of red tape being imposed in the early pre-construction stages.

Though that might sound worrying in the short term, the result is only likely to be a flat year for the infrastructure engineer, with revenues and operating profit for the full year now expected to come in only around 2017’s levels. That’s below previous expectations.

But the order book is still predicted to grow further by the end of this year, “based on the current pipeline opportunities,” and with the division’s contracts generally covering four to five-year periods, the longer-term outlook still looks pretty healthy to me.

The firm’s other division, Tamdown, which focuses on things like highways and drainage systems, is still on track to meet previous expectations.

Nexus boasts a total order book of £234.1m, for a 30% year-on-year increase, and is predicting revenue and operating profit for the first half ahead of the same period in 2017.

While EPS forecasts are likely to dip a little now, from the current consensus of a 14% gain, I think we’re still looking at a bargain valuation. By the end of the 2019 year, the forward P/E multiple is likely to be around 10, and that looks attractive to me.

Big dividend

What better to accompany a growth prospect like Nexus than a top dividend payer? The one I have in mind at the moment is Intu Properties (LSE: INTU), a real estate investment trust (REIT) investing in shopping centres. It’s offering forecast yields of around 7% for this year and next.

There are two things I like generally about REITs. One is that they provide a great way for investors to get some of their cash into the commercial real estate market without having to be wealthy enough to buy a whole shopping centre or a factory. And even those who can afford to do so should face considerably less risk as part of a big and diversified portfolio.

The other thing I like is that investment trust rules allow the company to smooth out its dividend payments over the long term, which can be a boon in this kind of business where earnings can be lumpy over the short term.

On that score, I see one of Intu’s strengths as being its record of steadily progressive dividends. Rises have only been modest, but with consistently decent yields, I see that as fine.

Priced at 197p as I write, Intu shares are on a forward P/E of around 13.6, and that’s expected to drop slightly by 2019. That’s a middling valuation, but what really grabs me is the trust’s assets.

At the end of December 2017, Intu boasted a net asset value per share of 411p. After Friday’s price fall, the shares are trading at less than half that, which is a big discount.

Barring a catastrophe around the corner, which I can’t see, Intu looks like a bargain to me.

The fruits of the company’s endeavours are divided between two divisions: TriConnex, which creates and connects energy, water and fibre networks for the residential and commercial sectors; and Tamdown, whose services include building highways and drainage systems for the same sectors.

The fact that Nexus provides such essential building works offers a clear layer of earnings visibility. Indeed, even in the current patchy climate for the domestic construction industry it continues to add new business. The firm announced this month that its order book stood at £225m as of the close of February, an 11% improvement from levels seen just three months earlier.

But this is not the only reason to be confident over future profits generation thanks to its robust position within the country’s building sector. Nexus customers include nine of the country’s 10 biggest housebuilders, and with erection rates set to keep rising thanks to the UK’s yawning supply shortage, the company can look forward to sustained revenues expansion from this one segment.

Nexus is expected to throw out a 14% year-on-year earnings improvement during the year to September 2018, and to follow this up with a 17% rise in the following period.

This leaves the AIM-quoted business dealing on a forward P/E ratio of 11.7 times, and a corresponding PEG reading of 0.8. Dirt cheap on paper, this is eye-poppingly low for a stock with as excellent a long-term profits view as Nexus.

Defence dynamo

Cohort (LSE: CHRT) is another business that those seeking dependable profits growth in the years ahead should pay close attention to.

The defence sector is a traditional safe haven for those seeking profits growth over a sustained period. Contract timings may sometimes be lumpy and result in a little earnings turbulence now and again. But over a long-term time horizon, broader armaments demand moves relentlessly higher, reflecting mankind’s desire to wage war as well as to protect itself from external threats. And this in turn supports steady sales growth for the sector’s major players.

And while the UK defence sector may have experienced no little pressure more recently, Cohort has managed to overcome the worst of these problems by concentrating on key focus areas like submarine building and cyber security, on which the government continues to spend vast amounts.

Cohort itself boasts a long record of unbroken annual earnings expansion and City analysts expect this record to continue with rises of 4% and 6% in the years to April 2018 and 2019 respectively.

This leaves the business dealing on an ultra-low forward P/E multiple of 11.8 times. Given its terrific record of relentless earnings growth, not to mention the possibility of fresh M&A action now that its EID and MCL units have been fully welcomed into the fold, I reckon this makes the business look particularly cheap.

The travel giant is still making roaring progress at home and over the sea and this was highlighted in December’s cheery update in which it advised that it had “continued to see a good trading performance across all of our divisions during October and November,” and that it was “encouraged by strong early Christmas trading in both our UK and Spanish coach businesses, with advanced sales higher than last year.”

Not content to rest on its laurels, National Express continues to build its presence in foreign climes to lasso this strong demand. Last month it boosted its position in the US by buying a school bus and coach operator in Cincinnati, while closer to home it also purchased a Madrid-based bus operator.

On the move

National Express’s brilliant progress in its fastest-growing territories may grab the headlines (the firm saw revenue growth in the States rev to 13.7% during July-September). But the company’s resilience at home, in difficult market conditions, also deserves plenty of accolades.

So City analysts are expecting further sustained earnings growth, of 6% in 2017 and 9% next year. And as a consequence the coach and bus operator is also expected to keep dividends moving higher.

Last year’s 12.28p per share reward is anticipated to rise to 13.5p in the present period, resulting in a 3.6% yield. And the 14.8p per share dividend forecast for 2018 nudges the yield to 3.9%.

And these projections are also pretty well protected, as dividend coverage stands at 2.1 times through to the close of next year.

National Express has seen its share price surge in recent months, although it still changes hands on a dirt-cheap forward P/E ratio of 13 times. I reckon the FTSE 250 firm is a great pick for both growth and income chasers right now.

Build a fortune

Nexus Infrastructure (LSE: NEXS) is another London share expected to dole out chunky dividends in the near-term and later.

Supported by a predicted 18% earnings improvement, the company — which supplies essential infrastructure services to the domestic housebuilding and commercial sectors — is expected to pay a 7.6p per share dividend in the year to September 2018.

This would mark a significant upgrade from the 5.8p payment expected for the last fiscal year, and yields a mighty 3.6%.

And just like National Express, Nexus can also be picked up for next-to-nothing right now, the AIM firm sporting a prospective P/E multiple of 9.8 times and a corresponding PEG readout of 0.5.

Now I’m not going to suggest that all is rosy in the British construction segment as Brexit fears rattle building activity. But I am confident that Nexus’s core operations surrounding the bright housebuilding segment should provide scope for solid earnings growth.

Besides this, a bulky £202.7m order book as of September (up 25% year-on-year) should soothe any fears surrounding future revenues.

I reckon Nexus is another great ‘all-rounder’ that could receive fresh share price fuel when full-year results are released on January 9.

The business, which provides essential infrastructure services to the British housebuilding and commercial sectors, announced that it expects results for the 12 months ending September to meet its prior estimates. This is clearly not something to set pulses racing, although news that demand for Nexus’s services continues to swell probably should.

The AIM-quoted firm said that its order book for the last fiscal year clocked out at £202.7m, up 25% year-on-year, providing the company with terrific revenues visibility for the new period.

Chief executive Mike Morris certainly struck an upbeat tone, commenting: “We are pleased to report that the full-year results will be in line with our expectations and the significant improvement in the order book provides us with confidence for our future growth plans.”

Build beautiful returns

Many cautious investors may be reluctant to invest, however, owing to the question marks hanging over the UK construction sector. Indeed, latest PMI numbers showed the segment contracting in size in September, slipping to 48.1 from 51.1 the prior month.

And this concern is reflected in some part by Nexus’s ultra low valuations — it deals on a forward P/E ratio of 8.9 times for fiscal 2018, well below the widely-accepted bargain yardstick of 10 times. It also trots up with a sub-1 PEG reading of 0.5.

Having said that, the range of specialist and essential services that Nexus provides, from constructing drainage systems and  building highways to creating reinforced concrete frames,  should remain in strong demand even in the current difficult climate. Besides, the company’s weighty exposure to the still-expanding housebuilding sector should provide earnings with an extra layer of protection.

Accordingly, City brokers are expecting earnings to charge 18% higher in the current fiscal period, and this is predicted to translate into brilliant divided growth too. An anticipated 5.8p per share reward for the last year is expected to rise to 7.6p in the present period, creating a chunky 3.9% yield.

Get on the right page

Investors on the lookout for splendid profits and dividend rises should also give Pagegroup (LSE: PAGE) serious attention, in my opinion.

While the impact of a slowing UK economy may be denting business at home (UK gross profit slumped 7.6% during the last quarter), the recruitment giant can rely on its foreign territories — regions from which it sources four-fifths of total profits — to keep delivering the goods.

Indeed, gross profits taken from the Americas stomped 20.1% higher in quarter three, while at its EMEA and Asia Pacific units, these jumped 18.7% and 14.6% respectively from the same 2016 period.

So, like Nexus Infrastructure, the number crunchers are also expecting earnings to trek higher over at Pagegroup right now and beyond. A 14% bottom-line improvement is predicted in 2017, and an extra 8% rise is forecast for next year.

A subsequent forward P/E rating of 17.6 times may not be much to write home about, but dividend yields for this year and next really are. These clock in at 4.1% and 4.2% for 2017 and 2018, respectively, because of expected corresponding payments of 19.1p and 19.7p per share.