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05 Nov 19

Cenkos: 88 Energy Ltd-- Charlie-1 Update and Quarterly Report

Last week, 88 Energy provided an update on the Charlie-1 appraisal well in which the Company announced the execution of a rig contract with Nordic Callista Services, for Rig-3, the same rig 88 Energy used to drill the Winx-1 exploration well in March 2019. Permitting is proceeding as planned, with drilling scheduled to commence in February 2020. The Charlie-1 appraisal well will be fully funded (up to a cap of US$23m) by Premier Oil as part of the recent farmout agreement, and will target seven stacked horizons with gross mean prospective resources of 1.6bn bbls (480mmbbls net to 88E). The farmout to Premier Oil is expected to complete by the end of November. We update our model and our target price to 4.8p and reiterate our BUY recommendation.

Companies: 88 Energy

06 Nov 19

LIBERUM: Frontier Developments* - Planet Zoo: a roaring success

Frontier launched their 4th game franchise Planet Zoo yesterday. The impressively high scores and positive comments from both game reviewers and players not only helps to underpin the commercial outlook for the game, but again underline Management's track record of delivering high quality games, with long-term revenue potential.

Companies: Frontier Developments

06 Nov 19

Cenkos: Seeing Machines Ltd -- Business update shows strong fleet progress

Seeing Machines has provided a business updated ahead of its Capital Markets Day in London today. It has announced a renewed and strengthened supply chain agreement with Xilinx, the confirmation of a 21% hardware cost reduction with its contract manufacturer for the Guardian Gen 2 product, and good momentum in the Fleet division with new distributors, insurers and expansion into new fields of use.

Companies: Seeing Machines

12 Nov 19

Cenkos: Seeing Machines Ltd -- EC safety regulations for DMS adopted

The European Council announced on Friday 8 November that it has adopted a regulation on the general safety of motor vehicles and the protection of vehicle occupants and vulnerable road users. This follows an agreement with the European Parliament in March 2019 and is part of the "Europe on the Move" package, launched by the European Commission in May 2018. These new regulations are to help transition towards a mobility system which is safe, clean and automated. Of relevance to Seeing Machines is the Regulation for the adoption of safety features that include advanced driver distraction warning systems and driver drowsiness and attention warning systems. These regulations will apply from May-2022 to all cars, vans, trucks and buses (including SUVs) and amend several existing safety regulations for EU-type approval.

Companies: Seeing Machines

11 Nov 19

LIBERUM: AFH Financial Group* - Organically growing and improved FCF

AFH continues to grow at an impressive rate compared to peers in a tough market environment. It has delivered 8% organic net flows and new business written is up 46% yoy.

Companies: AFH Financial Group

11 Nov 19

LIBERUM: Sirius Minerals* - Cost savings at the crux of the new plan

Sirius’ announcement this morning has confirmed it will split the financing of the shafts and the remainder of the project, with the $600m shaft component targeted before April. We outlined the rationale for this strategy in September and ran through some of the maths, but today’s release implies scope for less dilution than expected, if it can be executed.

Companies: Sirius Minerals

08 Nov 19

Games Workshop Group - Strong five-month trading update

Games Workshop (GAW) has published a trading statement for the first five months of FY20, highlighting an acceleration in revenue growth to c 12% (versus our previous forecast for the year of c 4%), strong margin growth and encouraging signs with respect to its ability to leverage its intellectual property through royalty income. Our PBT estimates increase by c 9% for FY20 and FY21, and our DCF-based valuation increases by 10% to 5,176p.

Companies: Games Workshop Group

05 Nov 19

Cenkos: Filta Group Holdings Plc -- Trading Update

Trading in FY19E has remained positive with encouraging growth in the Fryer Management segment continuing in North America and mainland Europe. UK operations have also grown revenues with increases in order intake and in regular maintenance work, resulting in Group revenues for FY19E being broadly in line with expectations. However, owing to delays in implementing operational efficiencies and cost reductions, the expected profits growth is taking longer to materialise.

Companies: Filta Group

04 Nov 19

THE MONTHLY November 2019

The trade-off in the risk/reward for gold and gold mining equities is improving, as central banks push the current iteration of the post-World War II Bretton Woods financial order towards its limits.

Companies: AVO AJB AGY ARBB BUR CLIG DNL DPP FLTA GTLY GDR MCL MUR NSF PCA PIN SRE PHP RE/ RECI RMDL STX SCE TON SHED VTA W7L

31 Oct 19

Velocys

Every time a plane takes off it causes CO2 to be released into the atmosphere. Imagine if instead it caused CO2 to be removed. While Velocys does not offer that now, it does have the component parts in place and is making strong progress in developing key reference projects. It has strong partners for its waste to aviation fuel project in the UK and thanks to a recent deal with Occidental can offer carbon capture and storage from its biomass to fuels project in Mississippi. With traction building in the form of a deal with Toyo in Japan, Velocys is putting a sometimes difficult history behind it in our view.

05 Nov 19

LIBERUM: SigmaRoc* - Blue chip investment

SigmaRoc has acquired Carrières du Hainaut (CdH) for €81m EV, funded by debt and a £33m share placing. This has enhanced EPS by c.20%.

Companies: Sigmaroc

06 Nov 19

Official release of 4th Franchise – Planet Zoo

Frontier Development confirmed the successful release of Planet Zoo on PC yesterday as planned. The game debuted at number one on the global bestseller Steam chart following its 12pm (GMT) release. The release marks the group’s 4th franchise and is expected to help offset the expected decline in sales from JWE as it moves into its second year of sales. We’ve forecasted Planet Zoo sales to account for 33.9% of total sales in FY20. Whilst this accounts for less than the 42.1% we forecast for JWE sales in FY20, the group is expected to benefit from an uptick in gross margin from 60.9% to 65.4% in FY20, as a result of Planet Zoo being own-IP.

Companies: Frontier Developments

18 Jul 19

FY results; acquisitions to fully benefit FY 2020

Full-year results to 30 April 2019 were in line at the revenue line but 5% (£0.1m) better than expected at the adjusted pre-tax profit level. Underpinned by c.5.5% organic growth, the 20% and 26% increases in revenue and adjusted EBITDA were driven by full-year contributions from ATC and QSI, acquired in FY 2018, as well as five acquisitions in FY 2019. Notable was the 35% increase in free cashflow. Additional investments into Sentek, Atik, Graticules and Astles and the integration of ATC with Thermal Exchange in FY 2020 should benefit the businesses in FY 2021. We upgrade our FY 2020 adjusted EPS by 7% as well as introduce FY 2021 forecasts, which indicate 13% EPS growth. The company indicates that it expects to add at least one new business in FY 2020, which will be incremental to these forecasts. We are raising our target price by 9% to 60p, reflecting the improved gross margins and stronger underlying cashflow.

Companies: Scientific Digital Imaging

05 Nov 19

FY19 trading update

Filta Group (Filta) provides cleaning services to commercial kitchens in North America, the UK and, mainland Europe. The company reported that EBITDA for 2H19 would be similar to 1H19 and thus below our expectations. The cost-saving benefits of the Watbio acquisition are still taking longer than expected. Revenue continues to be on track and some extra investment has been made in UK sales staff to maximise the revenue opportunities. We cut our EBITDA expectations for 2019 from £4.2m to £3.3m. Our 2020 expectations are unaltered.

Companies: Filta Group

06 Nov 19

Model updates, release of FY21E forecasts

We update our model and forecasts following RBG Holdings’ interim results and the acquisition of Convex. Discretionary sale of participation rights in DBAs introduces a hedge against downside risk on forecasts, whilst upside risk exists in the group’s litigation funding and exposure to potential DBA/CFA wins – something we attempt to quantify. On new forecasts we set a price target of 145p (from 120p), and retain our Buy recommendation.

Companies: Rosenblatt Group

12 Nov 19

Trading update: strong performance in Defence

Meggitt has issued a trading update in which all divisions performed according to guidance except for Defence which did even better. On the back of this development, Meggitt upped its FY19 revenue growth guidance, while, at the same time, expecting a potential drag on the margins.

Companies: Meggitt

12 Nov 19

Executive interview - OTC Markets Group

12 Nov 19

Good news after good news, Dialog's muscle in its game

Just a week after releasing strong results, Dialog came back to the market to release another good piece of news. The company has upped its long-term profitability guidance, which we believe will generate upward pressure on the consensus.

Companies: Dialog Semiconductor

12 Nov 19

Q4: recovery to accelerate in Q2 20

Infineon’s Q4 publication was strong. The company achieved a decent profitability level and good cash generation. The sequential outlook was a bit disappointing, but the FY20 guidance implies an even stronger recovery to start in March 2020. On top of this, the equity story of the company, driven by both Power and Digitalisation in Automotive and Industrial applications, remains intact with strong secular growth trends.

Companies: Infineon Technologies

12 Nov 19

The Brunner Investment Trust - A portfolio ‘for all seasons’

The Brunner Investment Trust (BUT) is managed by Lucy Macdonald at Allianz Global investors (AllianzGI). Important developments for the trust in recent years include a move to a single global rather than discrete UK and overseas portfolios; a more global benchmark; better investment performance; an improved capital structure; and a more diversified share register. The manager believes that versus its peers, BUT’s relative headwinds (due to having less exposure to the most highly valued tech stocks and more to the UK) are dissipating. She says that having both an income and capital growth objective in a more volatile, lower-return environment ‘is probably not a bad thing’. Macdonald argues that BUT offers a more balanced style at a time when growth looks very expensive versus value; she describes the trust as a portfolio ‘for all seasons’.

Companies: Brunner Investment Trust

12 Nov 19

9m19: the virtue of the Abertis acquisition and we would welcome a revoking of the Autostrade concession

Our view is that revoking the Autostrade concession could only take place at a fair price for Atlantia as Italy belongs to the European Union. At AlphaValue, we would welcome a revoking (at a fair price) as it would accelerate the geographical diversification of Atlantia away from Italy. Despite this and in view of the earnings release, we expect little change to our forecasts and, hence, no change in our Buy recommendation.

Companies: Atlantia

12 Nov 19

Iofina PLC's Tom Becker updates on Organic Vines investment and IO#8 construction

12 Nov 19

New business plan points to a 10% total annual return

The new business plan stands at the high end of consensus expectations. The top-line growth will come at a high cost in terms of operating expenses, translating into relatively similar bottom-line progression. It remains that, if successful, the shareholders will be granted a 10% total return, above the 8% they usually require for an equity investment.

Companies: Mediobanca Group

12 Nov 19

Open Orphan partnership with Ipsen Group 'already delivering substantial revenues'

12 Nov 19

The trumpets of Jericho sound to raise the stock

Iliad has released a correct Q3 which reflects an improvement trend in France. But the amazing and odd news of the day is a €1.4bn public share buy-back offer at €120 per share, corresponding to 20% of the market cap of the group. This operation will be financed in parallel by a share issue at the same price at which Xavier Niel could invest up to… €1.4bn.

Companies: Iliad

12 Nov 19

Bragg Gaming Group - Executive interview

CEO Dominic Mansour provides an introduction to <a href="https://www.edisongroup.com/company/bragg-gaming-group/2906/"><strong>Bragg Gaming</strong></a> – a fast-growing European online B2B casino operator. Revenue increased by 30% during Q319 and Bragg is now entering the US market through partnerships with Kambi and Seneca.

12 Nov 19

Guidance confirmed

The decrease in total advertising revenue slowed in 9 months 19 (-3% vs -5% in H1 19), reflecting a positive trend in Q3 19 (+1%) and corresponding to the high range of guidance (-1/+1%). Online revenue grew significantly (+23% in 9 months 19 vs +18% in H1 19). As expected, ITV Studios benefited from high deliveries of programmes, in particular from ITV America. The 2019 guidance is confirmed and a dividend of at least 8.0p/share was reiterated.

Companies: ITV

12 Nov 19

Circle Property - Active investment in regional offices

Circle has issued a trading update ahead of interim results (9 December 2019) detailing continuing leasing progress with existing and recently acquired regional office assets. Active asset management has driven annual accounting returns of more than 20% in each of the three full years since IPO in February 2016. With the outlook for regional offices remaining positive, and with material further asset management opportunities, management expresses confidence for the full year outlook.

Companies: Circle Property

12 Nov 19

The New Criterion: the benefits and risks of credit-focused listed investment trusts

The New Criterion has evolved from "The Criterion" column which was a weekly run by the NewsCorp owned "The Australian" Newspaper (Business Section) for over a decade until recently when it decided that its audience did not really gravitate to the coverage in the Small/ Micro Caps space despite the strong following from its readership. IIR since then essentially took over the column and its ethos, whereby, analysis is put to companies where these companies have no nexus to the core research offering other than discussing those stocks that deserve perhaps more of a journalistic approach rather than the typical financial research thesis or precise. For example analyst frequently disregard the "sentiment" and the qualitative factors in the market that are "fashionable" and drive the price of all stocks in the sector that has a emotional wave of value - this is often later included in the equity research thesis, however these attributes can be observed and commented on from a non-equity analysis perspective in terms of attributing other factors that drive a valuation for a company which has little or no nexus to the fundamentals of that same stock. However these qualitative attributes cannot be ignored by a Broker and must be taken into account when dealing in stock. So at IIR we attempt to marry the thesis observed by both arms of research one is based on the reasonable expectations of an Financial Analyst as we know and the other is the liberal arts approach which looks at matters like for example the CEO's tone every quarter when making his announcements - change in tone should be a warning and a trigger for further review - of course some analyst cover both disciplines and more very competently in the industry - and as such make great Sell Side Analysts. At IIR we do not deal or promote any stocks so we one step removed from what a Sell Side Analyst does which closer to the market than research. Our research simply assists the broker to form a view to prepare a statement of advice for his or her client. Under no circumstances have there been any inducements or like made by the company mentioned to either IIR or the author. The views here are independent and have no nexus to IIR’s core research offering. The views here are not recommendations and should not be considered as general advice in terms of stock recommendations in the ordinary sense. These are stocks that interest our research team on other qualitative metrics rather than the usual accepted methods of equities research screening tools.

12 Nov 19

SelfWealth SMSF Leaders ETF (ASX: SELF)

Full Report Can be Accessed on www.independentresearch.com.au The SelfWealth SMSF Leaders ETF (ASX: SELF or ‘the ETF’) is designed in turn to replicate the SelfWealth SMSF Leaders ETF Index (the ‘Index’). The Index provider is SelfWealth Limited (ASX: SWF), a provider of a flat-fee brokerage service and a community-driven insights tool that pools information from around 80,000 Australian investor portfolios. The Index aims to represent the performance of a portfolio of ASX-listed ordinary shares assembled by applying a rules-based selection criteria to SelfWealth’s database of SMSF portfolios. The methodological basis for the portfolio construction of the Index utilises a combination of time weighted performance, equal weighting diversification, valuation and a Solactive A200 Index filter (a replication of the S&P/ASX 200 Index), with all stocks outside the ASX 200 excluded. The construction methodology is based on the Top 10% of the circa 80,000 SMSF portfolios (equating to around 8,000 SMSF portfolios) through a commercial agreement with BGL Corporate Solutions Pty Ltd (BGL), Australia’s largest SMSF Administration and ASIC compliance software provider. It is expected the ETF portfolio will typically comprise 30-60 Solactive A200 Index securities (minimum and maximum of 25- 75), and which will be rebalanced on a quarterly basis. Importantly, in what is a very strong endorsement of the underlying construction methodology and appeal of the product, the ETF has received an A$100m seeding from ETFS Capital (originally ETFS Securities, founded by Graham Tuckwell). In independently undertaken and verified back-tested performance the Index has generated 326 basis points of outperformance per annum over the S&P/ ASX 200 Total Returns Index over a seven-year period. IIR notes that given the rules based methodology the historic back testing should have a very high degree of accuracy. INVESTOR SUITABILITY SWF’s marketing pitch for the ETF is effectively a product that is ‘powered by SMSFs, for SMSFs’. IIR believe this is appropriate for a number of important reasons. First, portfolio turnover can be expected to be reasonably high, as evident by the historic back testing. A material number of constituent stocks can be expected to be in the portfolio for less than 12-months, and therefore not eligible for the CGT discount. As such, the ETF is highly likely to be materially more efficient for low marginal tax rate investors (SMSFs and retirees) on an after tax basis. Second, IIR suspects that a disproportionate number of the portfolios, being based on SMSFs, are for investors approaching and/or in the retirement stage of their investment lifecycle. It is not unreasonable to assume that the Index will exhibit a behavioural bias to more established growth and income oriented stocks versus the higher risk (typically ASX100-200 constituents) as indeed has been borne out through the back testing. With respect to dividends, over the back tested period the Index generated almost the precisely the same degree of income as the S&P/ASX 200 Index despite the zero exposure to A-REITs and underweight exposure to the Financials sector. In effect, the Index has delivered materially superior capital growth without compromising yield. RECOMMENDATION IIR ascribes a “RECOMMENDED” rating to the SelfWealth SMSF Leaders ETF. The ETF is a globally unique product and service offering, in effect made possible by the unique attributes of the Australian superannuation market (and BGL’s dominant market position). The seed investment by Graham Tuckwell’s ETFS Capital provides immediate FUM scale for the ETF and reassuring third-party confirmation of the strength of the underlying methodology. We believe the fundamental basis of the Top 10% component of the underlying IP as an investment strategy is sound. Successful SMSF investors are typically smart, highly selfinterested, risk averse, and long-term investors, all of which provides a sound underpinning for any investment strategy. Reassuringly, attribution analysis reveals the vast majority of outperformance was derived from selecting the right stocks rather than sector selection. This suggests a basis for persistence of outperformance moving forward - i.e. there is an empirical validity to the methodology.