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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

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

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

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

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

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

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

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

18 Sep 19

Solid H1 results, promising outlook

‘The Group has delivered a solid H1 performance and is trading in line with full year market expectations’. Accordingly, we leave our FY 19/20 forecasts unchanged. Reassuringly, Strix reconfirms at this stage its intention to pay total dividends of 7.7p per share for FY 19, +10% YoY. This should underline the income attractions of this stock to investors

Companies: Strix Group

20 Sep 19

StatPro Group - Recommended cash offer at 230p

StatPro has received a recommended all-cash offer at 230p per share (a 54.9% premium to the closing price) from Confluence Technologies, a private equity-backed (TA Associates) US-based provider of solutions to the global asset management industry. The offer is recommended by the board and supported by shareholders representing 65.2% of the shares. At the interims, management confirmed its focus on driving sales, having established the building blocks for growth (consolidation of the Revolution platform, new divisional structure) over the last few years.

Companies: Statpro Group

20 Sep 19

Bitesize briefing - Margins of Australian spodumene concentrate producers

20 Sep 19

Warpaint London

Warpaint London's strategy is to provide customers with access to an extensive range of high-quality and affordable cosmetics. Its focus has been to develop its flagship brand, W7, while capitalising on the growth potential of e-commerce and international expansion. The UK retail environment remains challenging; while Warpaint continues to grow well in the more successful retailers, growth is being hampered by a significant tail of customers ceasing to trade. As ever, results are heavily skewed towards H2: the order book is currently looking solid, but the UK consumer outlook is subdued, and the next few weeks are likely to shape the financial performance for the whole year.

20 Sep 19

Securities Trust of Scotland - Focused on quality, income and capital growth

Securities Trust of Scotland (STS) aims to deliver both income and capital growth to shareholders over the long term. Since June 2016, STS has employed an investment mandate that is not constrained by index considerations. The manager, Mark Whitehead, follows a rigorous bottom-up approach to construct a relatively concentrated portfolio of 35–55 high quality, large-cap companies with sustainable earnings and dividend growth. Since the change in the trust’s benchmark on 1 June 2016, STS has delivered an annualised NAV total return of 14.3% to end-August 2019. The board adopts a progressive dividend policy and refreshed the trust’s marketing strategy last year, including the appointment of director, Sarah Harvey, who is a marketing specialist.

Companies: Securities Trust Of Scotland

20 Sep 19

Selvita - Corporate split going to plan

The corporate split is progressing well. The Polish Financial Supervisory Authority has approved the Selvita CRO Prospectus as part of listing on the Warsaw Stock Exchange and the shareholders' meeting approved the split. The current entity will continue as Ryvu Therapeutics, a newly introduced brand, and will fully focus on innovative drug discovery and development. The process should complete in October 2019. We believe both businesses have sufficient momentum to continue as standalone companies. Our updated valuation stands at PLN1.46bn or PLN91.5/sh.

Companies: SELVITA

20 Sep 19

StatPro Group - Suspension of estimates

For the purposes of the Takeover Code, Edison Investment Research is deemed to be connected with SCISYS plc. 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: Statpro Group

20 Sep 19

Cenkos: Fulcrum Utility Services Ltd - Long awaited FY19A results

Companies: Fulcrum Utility Services

20 Sep 19

Strix - New Factory in China

20 Sep 19

LIBERUM: Harworth* - Plenty of upside to deliver over time

Harworth has had a positive first half, with good progress made on land sales and replenishing the pipeline. NNNAV growth of 12.6% y/y is ahead of the long-term total return target.

Companies: Harworth Group

20 Sep 19

Morning Note – 20 September 2019

eve Sleep (EVE): Corp Cessation of early-stage merger talks with Simba

Companies: Eve Sleep

20 Sep 19

Transformation programme underway, modest profits but clear vision

H1 results from PTY this morning include the first months of the company’s transformation programme, which was initiated by new CEO Matthew Bayfield in February. Removal of a net £1.2m costs is a big win for the company at this stage in its development, while cost reductions have also paid for vital strategic investment. The new strategic model provides for a range of complementary activies (consulting, learning, development and strategic recruitment) focused on the world of data and supported by a single sales / marketing force. PTY retains a meaningful brand and is known as a leading expert in its field. Broader and deeper than originally anticipated, the restructuring of the business has thrown up opportunites while having the anticpated short-term impact on the business which is reflected in our forecasts; and the first signs of success are apparent with the focus on higher margin activities driven by a new team.

Companies: Parity Group

20 Sep 19

GMP FirstEnergy ― UK Energy morning research package

Amerisur Resources (AMER LN) (not covered): Reserves update in Colombia | Petrofac sells remaining 51% of Mexican operations | Ascent Resources (AST LN) (not covered): Completion of placing | Hurricane Energy (HUR LN) (not covered): 1H19 results

Companies: AMER AST HUR

20 Sep 19

AGM statement shows strong growth

The Company has released a brief trading statement ahead of today’s AGM demonstrating the momentum in the business. The clear scale up in both cases invested into and cases settled bodes well for current year cash collection and future growth. Reiterate Buy rating and 590p price target

Companies: Manolete Partners