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18 Sep 19

LIBERUM: Sirius Minerals* - Running numbers on potential financing solutions

Yesterday Sirius has announced the cancellation of its Stage 2 financing plans and the implementation of a strategic review after it failed to issue the $500m high yield bond required to unlock the full financing package. What matters for shareholder returns from here is the structure of any future financing solution and its likelihood of success.

Companies: Sirius Minerals

20 Sep 19

Stripe valued at $35bn, Datadog pops 39% on debut, Rivian big Amazon order

Stripe Inc said on Thursday it is raising $250 million in its latest funding round, which values the payments start-up at $35 billion, a dramatic 56% surge from a previous valuation at the start of the year. The latest valuation puts Stripe in the same league as home rental giant Airbnb Inc, which is also planning go public in 2020. Stripe has received strong positive feedback from our private FinTech contacts. Meanwhile, the IPO pipeline for 2020 is already heating up.

Companies: CALL TRAK BGO BOKU ECK EQLS LOOP NET QTX SEE TECH TCM TRCS

18 Sep 19

LIBERUM: Judges Scientific* - Strong H1 and positive start to H2

Judges has delivered strong H1 with adj. PBT +27.4% to £8.4m, 4% ahead of our forecast. Cash generation was strong (£7.2m H1 net cash, 17.5% FCF % to sales) and H1 DPS is up 25%.

Companies: Judges Scientific

17 Sep 19

A wheel of fortune

These are exciting times for Bango as it matures and expands. After many years building merchant and carrier connections and volumes, the payment processing platform has reached profitability and will rapidly scale revenue on a fixed cost base. The data business is a natural evolution, driving greater payment volumes in a steadily accelerating virtuous circle; adding more data sources will spin it ever faster. Well-managed by an experienced team and uniquely positioned in a high growth industry, we launch coverage with the Interims in a seminal year: Bango is now fully funded and its revenues continue to grow rapidly, targeting breakeven this year and promising significant cash profits from next. We feel the market has yet to fully appreciate the exciting prospects for Bango and set a 225p target price.

Companies: Bango

17 Sep 19

Strong progress, 24.2% growth in revenue

Kape Technologies has reported first half revenue a touch ahead of the guidance given in July’s trading update with Adjusted EBITDA in line with the suggested $5.8 million. The results show strong progress in growing SaaS revenues with the number of subscription users increasing by 24% to over 1 million and the retention rate improving again to a very healthy level. The first half also saw further investment in customer acquisition paying off with ZenMate and Intego – now both fully integrated into the Group - benefitting. New product launches and high-profile successes by Intego’s macOS security analyst team helped augment Kape’s market positioning. We note that this business model continues to enhance Kape’s ongoing revenue visibility and that Kape is growing market share. We make no change to our numbers as the Board expresses confidence in meeting stretching market growth estimates.

Companies: Kape Technologies

17 Sep 19

LIBERUM: Staffline* - Weak H1 and EPS reduced but past the worst

Interim results worse than expectations with an 88% reduction in FD EPS yoy. We reduce our FY 2019 FD EPS estimate from 37.9p to 24.8p.

Companies: Staffline Group

16 Sep 19

Tech IPOs outperform, Uber’s great freight hope, New Huawei technology

Tech IPOs year to date have performed well. 8/13 venture-backed tech IPOs this year, including Slack's direct listing, are in profitable territory. If you'd put $1 million into each of them at the IPO price, your $13 million initial investment would be worth $21.7 million - a 67% gain compared to +20% performance in the S&P 500 YTD. As we’ve discussed earlier this month, investors’ appetite for technologies leveraging secular trends appears undiminished

Companies: TRAK CPX SEE QTX

17 Sep 19

Data Privacy driving strong top-line growth

Kape have delivered a strong set of H1’19 results as flagged in the July trading update. Revenues increased by 24% y/y, driving adjusted EBITDA up +21%. Cash flow from operations was broadly flat (+$0.2m) as the Group continues to invest in customer acquisition. Operational KPI’s are particularly strong; 147k net subscriptions were added in the core Data Privacy segment, whilst retention rates were an impressive 82% (H2’18: 74%). The Group’s transition to a complete SaaS model continues, with subscription revenue now accounting for 72% of total sales and recurring revenue up >300% to $21.2m. We are encouraged by strong operational performance which serves to increase our conviction in FY’19E forecasts. The current share price looks compelling, with our SOTP intrinsic valuation at 117p/share.

Companies: Kape Technologies

18 Sep 19

Interim results: On course to meet estimates, Controls margin strong

Revenue increased 2.5% to £43.9m (HY18: £42.9m), 1.0% on constant currency basis, with gross margin 10bps ahead yoy at 38.0%. Good cost control combined with lower finance charge leads to a 4.6% yoy increase in pre-tax profit to £11.5m (HY18: 11.0m). Today’s interim results indicate that the Controls business has a had a strong start to the year on the back of positive mix and the price increases put through on legacy product at the end of FY18. Aqua Optima is flat yoy due to timing of contracts, ZC expect a stronger H2 as material private label contracts come on stream and the majority of additional revenue from HaloSource lands in H2. Net debt at period end stood at c. £33.4m and is on course to meet ZC FY19 forecast of c. £32.0m, sub 1.0x EBITDA. Interim dividend increased 13% to 2.6p and is in line with the Board’s commitment to pay 7.7p in FY19, a 10% yoy increase. No change to ZC forecasts, albeit today’s results increase confidence in achieving FY19 forecasts. The shares trade on 11.8x FY19 earnings falling to 10.9x in FY20.

Companies: Strix Group

19 Sep 19

LIBERUM: Staffline Group* - Weak H1 but strategic options exist

Staffline had a horrible H1, and it shows in the numbers. H1 FD EPS was down 88% and net debt was up from £63m at the year-end to £89m.

Companies: Staffline Group

20 Sep 19

Cenkos: Fulcrum Utility Services Ltd - Long awaited FY19A results

Fulcrum's FY19A results (and FY18A comp) are the first prepared under IFRS15, which has masked underlying results in-line with earlier forecasts. IFRS15's impact has reduced revenues by £8m to £49m (yet still up +20% YoY), while Adj EBITDA remains relatively unscathed (-£1.0m) at £10m (+17% YoY). The positive underlying results include strong growth in the utility asset portfolio and order book. However, the group has not been immune to recent weakness in the construction industry, which is delaying pipeline conversion and shifting business into FY21E from FY20E.

Companies: Fulcrum Utility Services

18 Sep 19

LIBERUM: AFH Financial* - Further acquisition 'on a similar attractive multiple'

AFH has bought Broadleaf Financial Services for a total max consideration of £3.2m and “on a similar attractive multiple” to previous acquisitions. This brings the total committed spend to £10.4m since the Convertible placing in July, and shows the company following through on their comments about having deals in due diligence.

Companies: AFH Financial Group

19 Sep 19

H1 2019 Interim Results

Central Asia Metals (CAML LN) reported strong interim results, maintaining the 6.5p interims dividend along with an increase in H1 2019 free cash flow of 10% to US$35.5m despite a 7%, 18% and 22% YoY decline in average copper, lead and zinc pricing in the period. Metal sales were in line with previously announced production with 6.5kt of copper, 13.7kt of lead and 9.7kt of zinc sold, up 7%, 0% and 5% YoY respectively. This resulted in a decrease in revenue of 12% YoY to US$84.7m in H1 2019. However, a 35% reduction in SG&A along with a 4% reduction in Kounrad unit costs to US$0.51/lb YoY as well as lower than expected cost inflation at Sasa of 7% YoY to US$0.47/lb meant that EBITDA declined by 12% to US$56.7m maintaining a 63% margin. Minimal FX impact then meant that net income of US$27.6m was just 3% lower YoY. The period of challenging market conditions therefore highlights clearly CAML’s investment case based on low cost and consistently cash generative assets.

Companies: Central Asia Metals

23 Sep 19

Cenkos: Seeing Machines Ltd - Fleet turnaround to drive strong growth in FY20

We believe Seeing Machines' FY19 results show the turnaround in the Fleet business and the FY20 revenue guidance of A$45-50m, equivalent to 40-56% revenue growth on FY19, demonstrates the renewed confidence of the company under new CEO, Paul McGlone. The guidance is underpinned by recurring revenues (expected to represent c40% of FY20E revenue) and a new bottom-up sales model which, we believe, is conservative and leaves upside from licensing activities in Aviation and Off-road niche markets. We believe the turnaround in Fleet will drive the company to profitability in under two years with the cash runway looking sufficient even before accounting for licensing deals or financing against recurring revenues. Seeing Machines now looks well positioned to deliver significant value from its technology leadership and we upgrade our target price to 12p.

Companies: Seeing Machines

17 Sep 19

Cenkos: Smart Metering Systems Plc - 2019 interim results

Interim results featured growth in indexed linked annually recurring revenue (ILARR), the main driver of value, to £85.9m, up of 14.1% to £85.9m. The weak performance of the shares in recent months has presented investors with an opportunity to invest at an underpinned valuation in our view, with the core value of SMS clearly residing in the scale of its growing meter and data portfolio and our FY19E forecast £92m ILARR. The current order book of 2m smart meters supports our forecast 4m installed by 2022, from which our DCF forecast implies a valuation of 911p, c108% ahead of the current level.

Companies: Smart Metering Systems

23 Sep 19

Morning Note – 23 September 2019

Companies: IOF ODX DEST EVG

23 Sep 19

Iofina - Record results a taster of what’s to come

A great first half for Iofina, which has restructured its balance sheet, materially reducing debt levels, and accelerated its growth plans following a successful equity raise. Construction of its next iodine plant, IO#8, is underway while the search is on for a location for IO#9 in 2020. Strong cost controls in a tightening iodine market have boosted profitability and helped to deliver record results. The shares have performed accordingly and are now trading at a 17% discount to our 35p price target, albeit this does not include anything for its CBD business. These results bear all the hallmarks of a management team executing well and delivering on multiple fronts towards its iodine growth strategy. If they can replicate this with their CBD ambitions, well…

Companies: Iofina

23 Sep 19

The world’s oldest tour operator is on the brink of bankruptcy

After several negotiation sessions with Chinese Fosun and TCG’s lending banks and noteholders to raise an additional facility of £200m, on top of the previously announced rescue plan, failed to result in an agreement, Thomas Cook has applied for compulsory liquidation this morning. At this stage, we believe there is no further interest in following the company.

Companies: Thomas Cook Group

23 Sep 19

Cenkos: Seeing Machines Ltd - Fleet turnaround to drive strong growth in FY20

Companies: Seeing Machines

23 Sep 19

Cenkos: Brady Plc - Restructuring

Brady is on track for an FY19E performance in line with expectations redrawn last month. This implies a flat H2E revenue outlook. We envisage a material restructuring exercise which should transform trading going forward. The price is not discounting a return to profitable trading in our view.

Companies: Brady

23 Sep 19

Low & Bonar - Suspension of estimates

For the purposes of the Takeover Code, Edison Investment Research is deemed to be connected with Low & Bonar. Under Rule 20.1 Edison must not include any profit forecast, quantified financial benefits statement, asset valuation or estimate of other figures key to the offer, except to the extent that such forecasts, statements, valuations or estimates have been published prior to the offer period (as defined in the Takeover Code) by an offeror or the offeree company (as appropriate) in accordance with the requirements of the Code. Consequently we have removed our estimates until the Offer Period ends.

Companies: Low & Bonar

23 Sep 19

Greatland Gold - Exploration Update - Black Hills Drill Results

23 Sep 19

Fine-tuning for Protective Films' challenging dynamic in H1 (Chargeurs)

Fine-tuning for Protective Films' challenging dynamic in H1 EPS CHANGE CHANGE IN EPS2019 : € 0.87 vs 1.21 -27.7% 2020 : € 1.28 vs 1.68 -23.9% Our EPS estimates decreased on the back of a downward adjustment in our turnover and operating profit forecasts for the Protective Films division. This is to account for the lower demand in Germany and China in H1, which also weighed on profitability as these markets exhibit particularly high margins in this activity. While we expect a steady recovery over the course of H2 and the start of 2020, this negative blip in demand has a had an effect on overall profitability given the important contribution of the Protective Films division to the group's earnings. CHANGE IN DCF€ 38.5 vs 41.0 -6.25% Our DCF valuation is impacted by our lower earnings forecasts for 2019-20, due to the challenging market dynamics for the Protective Films division, as explained in our EPS change comment. This, however, has a marginal impact on our target price which is dominated by a NAV/SOTP-based valuation which is hardly swayed by quarterly revenues.

Companies: Chargeurs

23 Sep 19

Interims – extended cash runway into 2021

Interim results reflected the increase in R&D expenses given that enrolment into its Phase IIb trial started in April. A statutory pre-tax loss of £2.4m (vs.£2.6m) was reported (adjusted loss of £2.3m vs. £2.0m), driven by £1.7m (+31%) of R&D. Period-end cash was £9.1m (vs. £12.1m at 31 December 2018). The company reported that the slower-than-expected clinical trial site set up would push completion of recruitment of its 200-subject Phase IIb study into early 2020, with final results now expected later in H1 2020. This is not atypical of many clinical trials and does not detract from the potential value of XF-73, given that it could potentially be the first approved antimicrobial for the prevention of S. aureus infections in high risk surgery patients. However, grant income and prudent cash management is expected to extend the cash runway into H1 2021, at which point it will have a valuable Phase III-ready package with FDA Fast Track designation and a Phase II-ready package for XF-73 dermal formulation for the treatment of infections associated with diabetic foot ulcers. Target price unchanged at 250p.

Companies: Destiny Pharma

23 Sep 19

Omega Diagnostics - Full-year results – VISITECT visibility

Full-year results to 31 March were in line with the April trading update, with revenues, adjusted pre-tax loss and year-end net debt of £9.8m, £0.3m and £0.8m, respectively. A return to profitability in the second half, buoyed by a strong Food Intolerance performance and cost savings, provides a solid base from which to grow. More relevant is the update on the VISITECT CD4 Advanced Disease test, having recently received EPRD clearance and the prospect of first orders from UNITAID in FY 2020. WHO prequalification, which should lead to larger NGO-led orders, is expected in FY2021, although not included in forecasts. With the balance sheet strengthened today also, through the placing of 17m shares at 10p, we introduce forecasts for FY2020 and 2021, given the clearer route to market for VISITECT. We also introduce a target price of 25p, which assumes c.0.5m VISITECT tests in 2021, implying further upside given the potential demand of c.6m tests.

Companies: Omega Diagnostics Group

23 Sep 19

Building momentum

Instem has announced solid H1 2019A results in our view. All three business areas performed well during the period, with the group once again reporting strength across the board. The Provantis and Notocord suites recorded impressive growth, as did SEND services. We make minor revisions to estimates following the announcement, reflecting the adoption of IFRS16, the ongoing transition to SaaS delivery and revised cost expectations.

Companies: Instem

23 Sep 19

Revenue up 5%. Full year expectations unchanged. Rizikon Assurance orders pipeline now at £3m

The cyber security technology commercialisation Company has today published interim results for the half year to June 2019. As well trailed, in a recent trading statement revenue were up slightly year on year (+5%) to £571k. With Crossword confident of delivering full year expectations, we expect to see a materially stronger H2 performance, with our forecasts implying H2 revenue to approximately double from that posted for HY June 2019. With that in mind we take comfort that the review by Crossword’s CEO Tom Ilube points to strength in the order book for both Consulting and Rizikon Assurance.

Companies: Crossword Cybersecurity

23 Sep 19

Cosmetics brands could make-up for lost growth

Warpaint’s exposure to UK headwinds was amplified by an over-reliance on small high street retailers. This and the demise of other customers is the main reason for downgrades over the last year. Management has drawn on its experience though and responded with a clear strategy to restore growth. Wider brand distribution to bigger retailers, especially in the UK, will be a key driver. We factor little in from the initiatives at this stage, but the TSR is still 55% at our 76p fair value estimate. This could rise to 160p in 2 years on good execution.

Companies: Warpaint London

23 Sep 19

Strong strategic progress

Double digit first half revenue growth was driven by SEND services revenues doubling, Informatics sales up nearly 50% and a record number of new Provantis clients signed up in the period. This strong demand across the board and an increasing willingness to adopt hosted SaaS solutions bodes well for the outlook and leads to modest outer year upgrades, albeit with a small impact on PBT this year. In our view, the valuation remains undemanding given the significant growth opportunities ahead and the increasing quality of earnings. Our estimate of fair value is 425p.

Companies: Instem

23 Sep 19

GMP FirstEnergy ― UK Energy morning research package

VAALCO Energy (EGY US) 1 : BUY, US$3.00: Initiating coverage: Building on African success | i3 Energy (I3E LN)1 ; Speculative Buy, £1.40: Drilling update | Independent Oil & Gas (IOG LN); BUY, £0.55: Bond settlement | Kosmos Energy (KOS US/LN) (not covered): Drilling update in Senegal

Companies: EGY I3E IOG KOS