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12 Sep 17

Tailings

We take another look at lithium, where there is a growing realisation that the forecast massive increase in demand is already upon us. This realisation has been matched by an awareness that there is no shortage of lithium in geological terms. However, there is still a considerable degree of ignorance about which types of lithium mineralisation are commercially valuable using current processes and technologies; this will require the development and proving of new processes. In this note, we look at what attributes are required for a lithium-bearing deposit to be attractive for development into a successful mine in the present technical and economic environment.

Companies: APF ACP ATYM ASO BKY CAML FDI GEMD HZM PAF PDL SAV SHG WTI WLF

18 Sep 17

- Photonics driving second growth wave

Towards the end of H117 one of the numerous development programmes for photonics applications that IQE has been working on moved to volume production. The programme, which we infer relates to 3D sensing in the iPhone X, potentially has a transformational impact on IQE’s performance. Until there is clarity on the rate of roll-out of the new phone however, our estimates, which are unchanged from the trading update in July, model a cautious ramp-up in IQE’s epitaxy sales. The share price is looking for performance substantially ahead of this, which our scenario analysis suggests is achievable. Importantly, even if demand for the iPhone X is muted, IQE is engaged in multiple photonics development programmes with the potential to generate transformational levels of growth.

Companies: IQE

13 Sep 17

Interim results

Epwin, the low maintenance building products manufacturer, has issued interim results for the six months to Jun-17. First half revenues and earnings were “in-line” with management expectations (slightly ahead of PG forecasts). We now have greater clarity on trading issues at its two largest customers (highlighted in the August update). As a consequence, we are amending our FY17 and FY18 forecasts to reflect the anticipated impact (PBT downgrade 8% FY17, 18% FY18). That said, the dividend remains well covered, leverage is low (0.8x Dec-17E) and the progressive dividend policy is being maintained. Therefore, the 9% dividend yield is likely to attract investor interest.

Companies: Epwin Group

05 Sep 17

N+1 Singer - IQE - Progress on all fronts (not just 3D sensing)

IQE’s interim results confirm a strong start to the year, as indicated at the trading update in July. Group revenue grew 12% to £70.4m, driven by a 17% increase in wafer sales. Photonics delivered strong growth (+48%), helped by the early phase of a significant ramp in VCSEL wafers, which we believe is related to the iPhone 8. Adj. EBIT fell 2% to £10.6m reflecting the expected reduction in licence revenue. We welcome the positive newsflow on VCSEL technology but are equally interested in the encouraging comments around GaN-on-Silicon for base stations and full service DFB lasers. Investor focus is on the large 3D Sensing opportunity, which we expect to drive significant near term upgrades, but we continue to believe that IQE’s technology will be adopted in a wide range of high volume use cases, providing continued strong newsflow throughout our forecast period. Our published bull case scenario includes only potential VCSEL related upgrades. As such we believe the shares remain attractive and retain our Key Buy recommendation.

Companies: IQE

14 Sep 17

W7 continues to drive profit growth

Warpaint’s interim results show that W7 has continued to grow sales in all regions and that the strategy for e-commerce and launch of new products has been implemented. As, when it was a private company, management remains focused on increasing margins/profits rather than sales. Thus, while we have slightly reduced our sales projections we have made no changes to our profit or dividend forecasts. With H2 2017 having started well and the infrastructure now in place to deliver global sales growth we keep our 300p TP and Buy rating.

Companies: Warpaint London

13 Sep 17

Interims in line; visibility on customer impact increasing

The Interim results had been well flagged in the pre-close trading update (16th August) but importantly today’s announcement provides detail with regards the issues with the two largest customers. Both situations are on-going but developments, particularly with entu, offer the opportunity to assess the likely impact in more detail. This leads to cuts in pre-tax profit of c.7%, c.19% and c.13% in FY17, FY18 and FY19, respectively. New forecasts are a best estimate of the potential impact and ZC feel this is a robust and realistic assessment of the situation. A better outcome might be forthcoming should entu trade well under new ownership and the impact from the new owner of SIG’s distribution network is less than expected. Valuation post today’s downgrade is 5.9x FY17 earnings increasing to 6.7x in FY18, the trough year for earnings. The shares yield 9.1% with free cash flow cover of 1.1x in the current year increasing to 1.5x in FY18

Companies: Epwin Group

18 Sep 17

HCM UPDATE - (EMR.L, HVN.L, HYDG.L,KLN.L, NAK.L, PTY.L)

Empresaria Group plc (EMR.L, 134p/£65.7m) Appointment of COO | Harvey Nash Group plc (HVN.L, 87.125p/£64m) Acquisition of Crimson Limited | Hydrogen Group plc (HYDG.L, 31.5p/£10.4m) Interim results to 30 June 2017 | The Kellan Group plc (KLN.L, 0.65p/£2.2m) Purchase of Secured Fixed Rate Loan Notes | Nakama Group plc (NAK.L, 1.675p/£2.0m) Resignation of CEO | Parity Group plc (PTY.L, 10.25p/£10.5m) Interim Results | SThree plc (STHR.L, 337p/£437m) Q3 Trading Update

Companies: EMR HVN HYDG KLN NAK PTY STHR

19 Sep 17

Ticking every box (except valuation)

Interims are in line with July’s trading update, with sales up 17% LFL and adj PBT margins robust at 15.0%, +90bps vs. 1H16. Despite this strong performance and our long-term confidence in the business, we move from Buy to Hold in view of the stock’s exceptionally strong run.

Companies: Keywords Studios

18 Sep 17

N+1 Singer - Amino Technologies - German contract win

Amino has announced that it has been chosen by Deutsche Glasfaser, the largest provider of FTTH networks in Germany, to support the second phase rollout of its next-generation TV platform. This win comes hot on the heels of last week’s announcement that Amino is providing Finland-based operator DNA with mobile and set-top box service delivery for its multiscreen TV. These wins give us confidence that the good momentum shown in H1’17 has continued into the traditionally stronger second half. Notwithstanding recent FX moves, we believe the group is well placed to meet our full year expectations and, trading on an undemanding Nov’17 EV/EBITDA of 9.5x, believe the shares remain attractive.

Companies: Amino Technologies

12 Sep 17

Initiating coverage

Harvey Nash is an international recruiter specialising in the technology sector. The group has a strong portfolio of powerful brands and operations spanning more than 40 countries. In its AGM statement in June, it announced a transformation plan aimed at streamlining the business, with £700k in savings already identified for FY18. The Group has a solid balance sheet and has utilised this morning by acquiring UK based Crimson IT, which is expected to increase PBT by >£2.0m on an annualised basis (potential for >£3.0m). The business is cash generative and offers an above average dividend yield of 5.2%, which we feel is secure given the Group’s low gearing and a cover building to 3.0x by 2019E. Harvey Nash trades at a substantial discount to other UK listed recruiters; an FY18 EV/EBITDA of 4.5x and a PER of 7.6x equates to a 45% and 37% discount versus its UK listed peer group.

Companies: Harvey Nash Group

19 Sep 17

N+1 Singer - Swallowfield - Strong progress in FY17 and positive outlook

Full year results confirm substantial progress being made in both Manufacturing and the enlarged Owned Brand business, where Brand Archtekts is delivering strong growth and profitability. In line with forecast, ‘underlying’ PBT increased by 193% and FD EPS by 82%. A positive outlook statement and confidence in future growth underpins a final dividend increase of 52%. A slightly better margin performance in FY17, and evidence Swallowfield’s increasingly differentiated products and formulation capability are resonating with existing & new clients, will provide reassurance. We make no changes to forecasts which point to 370p intrinsic value.

Companies: Swallowfield

11 Sep 17

Proactis Holdings Plc (LON:PHD) – Capital Network: Entering the Big League

Proactis Holdings Plc (LON:PHD) is a provider of software for Spend Control and eProcurement, systems which are used by most large organisations to manage the way they transact with their supplier base. In recent years Proactis Holdings Plc (LON:PHD) has been gaining market share, within a growing market, delivering a 35% CAGR in revenues, and 62% in EPS. The trading update (Aug 22nd) confirms that progress remains positive. Meanwhile the shareprice has gained 10.4% in the last 6 months, and 664% over the last 4 years. So, is there further headroom for growth from here? In this report we argue that the acquisition of Perfect Commerce (announced July 7th) is a transformative move which takes Proactis Holdings Plc (LON:PHD) to a new level – comprehensive solution set, truly global footprint, and sufficient scale to make Proactis relevant for the ‘Tier 1’ client base. In the coming years we believe the company can sustain or even exceed its previous level of progress.

Companies: Proactis

13 Sep 17

Tuning up

Following a strong first half driven in part by known product launches, this equally strong second half appears to show a more fundamental improvement resulting from sustained sales growth and improving mix together with margin and cash management in Focusrite’s international markets. These factors underpin our conviction that the company has sustainable independent strength.

Companies: Focusrite

18 Sep 17

Mediocre H1 top line but strong cash generation

Next’s H1 17 earnings to end July combined continued top-line erosion (-2.3%), a promise of resilient cash flow generation by January 2018 at £875m leaving plenty of dividend room (£225m current +£257m special) but a sharp drop in H1 pre tax earnings nevertheless at -9.5% (see table).

Companies: NEXT

19 Sep 17

N+1 Singer - Sinclair Pharma - H1’s in line; growth expected to accelerate in H2

Interim results are in line with expectations, with a first significant contribution from US sales of Silhouette Instalift™. Top line growth of +6% YoY in constant currency is expected to accelerate in H2, and the Group continues to target EBITDA profitability for the full year. We reiterate Buy.

Companies: Sinclair Pharma

19 Sep 17

- Strong organic growth puts LTG ahead of target

Learning Technologies Group (LTG) announced a strong set of H1 results, incorporating c 18% underlying organic growth. LEO, Rustici, Preloaded and gomo have been performing exceptionally well and the numbers were slightly ahead of management plans. Consequently, we have upgraded our forecasts, with profits getting an additional boost from the incorporation of LTG accounting policies at NetDimensions. Given the attractive growth drivers, the P/E of c 24x our FY18e EPS is not demanding and our DCF analysis indicates upside potential of 31% to 87%.

Companies: Learning Technologies Group

19 Sep 17

No more FUNctional polymers

Solvay announced the divestment of Functional Polymers’ last fully-owned and operated business, Polyamide, for an enterprise value of €1.6bn. The closing of the deal is expected in Q3 18 after the approval of the anti-trust authorities. Management updated FY guidance, now expecting underlying EBITDA to grow 6-8% (previously: high single-digit) and FCF from discontinued operations is seen to be above €800m.

Companies: Solvay

19 Sep 17

Other steel producers think in tons, Voestalpine in profits

This is what makes this Austrian steel producer and processor so different from its peers, in our opinion. Management again made it very clear that it has no intention to increase carbon steel production but that it will spend sizeable amounts (>1% of annual revenue) to develop new products and processes that will help clients to reduce the weight of their products. This has made the company a very successful and profitable player in its industry and management is confident that it can continue on this track. Peers such as ThyssenKrupp (1.0%) and Salzgitter (1.1%) spend less, although the former has technology-driven businesses like lifts in its portfolio. The automobile industry’s trend to increase the share of electric vehicles considerably in the next few years is not expected to lead to lower demand for Voestalpine’s products. These cars are likely to require other components, but the value of these components might in fact be higher than currently as these new products have to be even more sophisticated and lighter. As total car production (i.e. vehicles with combustion engines and hybrid as well as full-electric vehicles) of vehicles up to 3.5 tons is expected to reach the 100m mark by the end of this decade, from around 80m in 2016, demand for components will also rise.

Companies: voestalpine

19 Sep 17

- Strong trading - nudging up EBITDA

Stride is gaining market share with strong organic growth in real money gaming (RMG). In its FY17 pre-close trading update, the company expects to meet the upper end of consensus and we have increased our FY17 and FY18 EBITDA forecasts by c 2.5%. The 8Ball earnout is now complete, with the Tarco earnout period ending in December. Stride has invested heavily in technology and operational leverage should kick in as acquired customers migrate to the higher-margin proprietary platform. The stock trades at 7.0x CY18e EV/EBITDA, a meaningful discount to peers.

Companies: Stride Gaming

19 Sep 17

Porvair PBT ahead of expectations, shares up 10%

Today's brief trading update summarises the Group's nine months to 31 August.

Companies: Porvair

19 Sep 17

Bango interims show Revenue up 114%

The mobile payments Group is up 6% with the release of their interims.

Companies: Bango

19 Sep 17

Swallowfield reports Operating Profit growth of 180%

The cosmetics manufacturer's shares are up 13% off the back of the strong FY17 results.

Companies: Swallowfield

19 Sep 17

Speedy Hire's Full Year profit set to be ahead of Management's expectations

H1 17 revenues are up and FY17 profit on track to beat the Board's previous expectations.

Companies: Speedy Hire

19 Sep 17

N+1 Singer - Yu Group - Strong interim results – expectations increased

Yu Group’s interim results highlight continued very strong growth in revenues (up 308% yoy), an expected decline in gross margin due to customer mix, a high rate of operating cash-flow conversion (93%), an interim dividend up 33% to 1.0p and increased expectations for the balance of this year and next. We like this business for its combination of growth with low capital intensity, which appears to be confirmed in this report. The shares look good value to us on a consensus prospective free cash-flow yield in excess of 5%.

Companies: Yu

19 Sep 17

N+1 Singer - Northgate - In line AGM statement, but higher H2 weighting now expected

A trading update from Northgate this morning is in line with expectations. PBT is however expected to be weighted towards H2 (historically c.55%/45% H1/H2 weight) as various cost savings and benefits from the implementation of the strategy start to impact. We reduced our forecasts at the June full year results, stating that we do not expect a turnaround in the current year. However, we are forecasting growth in FY’19 (primarily driven by Spain). An investor event is scheduled for 4th October where management is expected to articulate its strategy for the Group. We will take a view on the longer term prospects of the Group after that event. The shares are trading at a significant discount to peers on all common valuation metrics and only at a slight premium to tangible book value. With a strong Spanish business and potential for recovery in the UK we believe the shares are undervalued. We retain our Buy recommendation and 497p target price (derived from a sum of the parts valuation – UK & Ireland at NAV and Spain at 14x P/E).

Companies: Northgate

19 Sep 17

N+1 Singer - Morning Song 19-09-2017

Anpario (ANP LN) Impressive growth highlights strategic initiatives bearing fruit | Augean (AUG LN) H1 results in line with expectations | Brady (BRY LN) Contract win | First Derivatives (FDP LN) Investment in Machine Learning | Northgate (NTG LN) In line AGM statement, but higher H2 weighting now expected | Sinclair Pharma (SPH LN) H1’s in line; growth expected to accelerate in H2 | Speedy Hire (SDY LN) H1 update slightly ahead of expectations driven by further cost savings | Swallowfield (SWL LN) Strong progress in FY17 and positive outlook | Yu Group (YU LN) Strong interim results – expectations increased

Companies: AUG NTG SPH SDY SWL FDP BRY ANP YU/

19 Sep 17

N+1 Singer - Brady - Contract win

Brady has secured a new contract with Gaelectric Trading and Market Services Limited (GTAMS), one of Ireland's leading energy trading and market services providers, for its I-SEM Cloud solution. This deal highlights the increasing traction the company is getting with this offering. We make no changes to our forecasts recommendation or target price and continue to view the current valuation as highly attractive given the potential for accelerating revenue growth, significant margin enhancement and improvement in quality of earnings.

Companies: Brady

19 Sep 17

N+1 Singer - Sinclair Pharma - H1’s in line; growth expected to accelerate in H2

Companies: Sinclair Pharma

19 Sep 17

N+1 Singer - Anpario - Impressive growth highlights strategic initiatives bearing fruit

Anpario’s interim results highlight a period of strong growth putting the group on track to beat our full year sales estimate. The strategic initiatives the group implemented in 2016 are bearing fruit with Asia, the Americas and the Middle East all reporting significant growth. The group has introduced an interim dividend, reflecting its confidence of growth continuing in the future. H2 has reportedly started well and we remain at Buy.

Companies: Anpario

19 Sep 17

N+1 Singer - Speedy Hire - H1 update slightly ahead of expectations driven by further cost savings

Speedy Hire’s trading update for the first half of the year is slightly ahead of expectations. Group revenues, excluding disposals, are up a solid 7.5% year on year, though this was primarily driven by good growth in services revenue which is typically lower margin than core hire. The Group has continued to drive operating efficiencies through the business and further action has been taken to manage the cost base, with the number of operating divisions and distribution centres reduced. This will result in overhead savings of at least £3m p.a. We expect to upgrade our current year PBT forecast by around 5% or £1m to £21.6m. With further opportunities for market share gains as the turnaround continues at Speedy Hire, we see potential for further upgrades as the year progresses. We retain our Buy recommendation and 63p target price.

Companies: Speedy Hire