Chapel Down has capped off a successful year with confirmation of its share listing moving onto AIM. This as a logical step and in keeping with the growth investment thesis. We remain upbeat about this market leader as it capitalises on a generational shift to the growing popularity of English sparkling wine. We forecast PBT to more than double in the next 3 years, with significant scope for value creation thereafter through appropriate investment. We maintain a positive stance.

Chapel Down Group plc

• 07 Dec 23
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Springfield has signed a binding agreement for the sale of c.45 acres of land for £4.2m. Theland, which equates to 190 plots, is fully owned, such that the cash inflow will be £4.2m, £830k later this month and the remainder to be paid by the May year end. Importantly, the land was sold at a profit, though the quantum of this is not disclosed. The proceeds from the sale support the Group’s target to reduce debt. This is the second land sale this year, totalling £9.4m vs. our £26m forecast. With strong demand for its land, management remains confident of agreeing further land sales in the near term. Whilst the market backdrop remains challenging, with the shares trading on a May ’24 P/B rating of 0.6x, we believe value is evident. We remain at Buy, with our valuation underpinned by Springfield’s large land bank, which leaves it well placed for the market recovery when it materialises.

Springfield Properties PLC

• 04 Dec 23
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Since the appointment of Brown Advisory as manager in April 2021, BASC has outperformed the Russel 2000 by c .200bps per annum. We attribute this performance to the team’s consistent commitment to its strategy of owing a fairly concentrated (c.75 investees) but diversified portfolio of durable growth companies. We remind investors that the fund’s high active share (>90%) and avoidance of more cyclical companies can lead to short term divergence from the fund’s comparator index (the Russell 2000). Trading on a c.11% discount to NAV, the fund is trading marginally tighter than its peer (13.9% discount) and its 12 month average (14.5% discount). We continue to view BASC as an attractive diversifying US exposure.

Brown Advisory US Smaller Companies PLC GBP

• 01 Dec 23
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Microlise has reached an agreement to acquire Enterprise Software Systems (‘ESS’), a leading provider of transportation management system (‘TMS’) solutions. The acquisition remains conditional upon no objections being raised by the UK Competition and Markets Authority (‘CMA’) but if agreed, would see Microlise acquire a c.20% EBITDA margin business (FY’Aug23: 19.6%) with c.75% of revenue recurring, for c.£8.5m in cash (c.8.5x EBITDA multiple). We view the proposed acquisition of ESS as highly complementary to Microlise given ESS has a number of enterprise clients such as Culina Group and GXO, and completes the Group’s TMS offering after the acquisition of Vita Software earlier this year (focused on smaller and pallet/parcel customers). While we leave our forecasts unchanged pending completion, the addition of ESS would add high-margin recurring revenue and bolster Microlise’s cross/upselling to existing customers which presents a c.£100m ARR (vs £44.8m ARR as of H1’23) opportunity.

Microlise Group plc

• 30 Nov 23
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ZOO’s H1’24 reflects the impact of the first double strike (writers and actors) in 60+ years, however, the resolution of the writers’ and actors’ strikes in September and November 2023 points to the darkest hour being behind ZOO. Revenues declined 58% yoy while ZOO reported a $7.1m adj LBITDA (H1’23: EBITDA of $7.3m) as the Group entered the year with a cost base to support a c.$100m+ revenue business. Post-period end, ZOO has completed a cost cutting exercise that has removed 20% of UK/US headcount, and the Group is already entering encouraging discussions with customers about when productions are likely to resume. For now, H2’24 remains about cash preservation with management guiding to breakeven in Q4.

ZOO Digital Group plc

• 30 Nov 23
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Trading at a c.18% discount to NAV (an implied asset level discount rate of c.10.2%pa), Foresight Solar (FSFL) is undervalued relative to other renewable generators, its own trading history and other long-duration assets. In our opinion, the key risk is investors’ required risk premium (spread over gilts). In light of the fund’s self-help measures (paying down the RCF, rotating in to higher returning assets and buying shares) and sensitivity analysis we believe the market has, by pricing at an asset level discount rates of 10.2% (a spread over treasuries of c570bps), overcorrected. We believe this has created an opportunity to invest in an asset with inflation linked income streams (40-50% of total revenue, lasting for the next c. 12 years) that has been partially financed by fixed rate, mainly amortising, debt at a low average interest rate (mainly sub c.3.5%). As FSFL executes on its plans, we expect the market to reengage and the fund to re-rate. Until this occurs, investors are being paid well (7.8% yield, 1.5x plus covered, progressive, dividend) to wait.

Foresight Solar Fund Limited GBP

• 30 Nov 23
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