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15 Nov 18

IQE - Short-term VCSEL slowdown hits profits

IQE has announced an immediate slowdown in shipments of VCSEL wafers, which materially affects FY18 revenues and profitability, and has issued revised guidance. Although we have cut our EPS estimates by 43% and 24% for FY18 and FY19 respectively, we note this is a short-term problem that does not impact the prospects for photonics growth in the medium term. Our revised estimates give an indicative value of 73p/share.

Companies: IQE

14 Nov 18

Strong FY 2018 performance

AB Dynamics has reported FY 2018 revenue and Adjusted PBT in line with our estimates, which were revised in October when the Group announced that it would significantly exceed market expectations. Both numbers are at record levels. The Group has delivered strong performances across a number of global geographies in the ADAS (Advanced Driver Assistance System) targets and steering robot businesses, and won its first simulator order (for delivery in FY19). As ADAS complexity is increasing, further customer demand is anticipated. The announcement also notes the tailwind of a ‘healthy’ order book at the start of FY2019. Given this strong outlook, and the prospect of another year of ‘solid progress’, AB Dynamics is to make further investment in supporting the significant growth opportunity, constraining near-term operating margin. We have upgraded our FY19 and FY20 estimates materially, while assuming an increased level of investment and upgrading EBITDA at a lower rate.

Companies: AB Dynamics

20 Nov 18

LIBERUM: Plus500* - Positive trading update. Already at our 2019 forecast profit run rate.

The company has announced that it expects to beat current expectations, which were for $52m of EBIT in Q4. We also see the quiet appointment of the former IR of IG Group to an investor relations role at Plus500.

Companies: Plus500

21 Nov 18

LIBERUM: Frontier Developments* - Buy ahead of the holiday season

In this report we revisit the valuation of Frontier in the context of the recent share price underperformance and the expected strong trading across the holiday season, which should de-risk FY19 forecasts. The shares are back close to a sector multiple and our gaming franchise cash flow analysis suggests there is now very little in the price for Frontier’s future game releases.

Companies: Frontier Developments

15 Nov 18

GVC Holdings - Parliamentary U-turn

Following the resignation of Sports Minister Tracey Crouch, the UK government has bowed to pressure to bring forward the reduction in FOBT stake limits, from October 2019 to April 2019. The planned increase in remote gaming duty (from 15% to 21%) will also commence in April. We reduce our FY19 EBITDA by a further £95m and net debt/EBITDA now peaks at 3.0x in FY19. Our FY20 estimates are broadly unchanged.

Companies: GVC

15 Nov 18

Gaining Market Share but Costs Rising

Dart Group has released strong interim FY19 results, citing a particularly strong season for Leisure Travel, which contrasts well with weaker commentary from peers in recent weeks. Cost pressures are rising which will impact margins but we see attractions in the Group’s strategy, attractive package holiday offering and approach to customer service. Maintain buy.

Companies: Dart Group

19 Nov 18

Acquisition – material EPS accretion

Tristel has acquired Ecomed (distributor for Benelux and France) for a maximum consideration of €6.8m (£6.0m), of which €5m is paid up front with the balance contingent on achieving a minimum of €0.8m of EBITDA in calendar year 2018 and revenue growth in excess of 15%. This is in line with the company’s strategy to have a direct sales presence in markets where possible. The maximum consideration represents c.2.1x and 6.8x prospective EV/Sales and EV/EBITDA respectively, and is expected to be accretive to EPS by 5% in FY 2019 (includes the cost of acquisition and integration) and 10 in FY 2020. We increase our target price by 7% to 300p, implying FY 2020 P/E of 24.0x and supported by 2-year CAGR EPS growth of 17%.

Companies: Tristel

13 Nov 18

LIBERUM: Codemasters* - Driving in line

Maiden interim results reflect the successful launch of F1 2018 and the increasing share of digital revenues. The investment case is based around three established franchises, with large fan bases and the potential to double revenues.

Companies: Codemasters

23 Oct 18

Quarterly Research Outlook

The June IPO of Knights Group Holdings, a Top-100 regional law firm, marked the fifth entrant to the burgeoning UK-listed legal sector. Following recent expansion of our coverage across all five listed legal firms, complemented by coverage of three broader support services peers with exposure to the sector, we revisit and build upon our views on this rapidly evolving sector.

Companies: ARS GTLY GENL KEYS KGH MNO RBGP TWD 7DIG ABBY AMS AMER ANX ARS ATYM AVON BLVN PIER CGS CAML CALL CSRT TIDE DTG DEMG ELM EMR FPM FPO FST GTLY GENL GRI GEEC HDY HMI HAYD HEAD HILS HTG HUR IBPO IOG INDI JHD JOG KEYS KGH LAM MACF MNO MKLW NAH OXIG PCA PKG CAKE PDG RBW RMM REDD RSW RNO RKH RBGP ROR SUS SCPA SHG SOLG TWD TRAK TRI VNET VTC ZTF

06 Nov 18

North Sea Rockstar

RockRose has quickly managed to establish itself as a significant North Sea player, with an acquired portfolio of assets which were non-core to the sellers but material for a company of RockRose’s size. We initiate coverage with a BUY recommendation and a TP of 1460p, representing significant potential upside of 156% from the current share price, a gap we believe will close quickly once investors realise RockRose is trading at a sharp discount to fundamental value.

Companies: Rockrose Energy

16 Nov 18

Now For the Bad News

We feel that M&S is entering a period of forecast attrition as it tries to reposition against a background of continuing weak demand. This is likely to be exacerbated by execution issues in our view. We believe that these are resulting from Too Much Disruption and Not Enough Control. We have reduced our current year estimate below £500m and expect PBT to decline again in 2019/20. Indeed we believe that investors should be valuing M&S against a base profit towards the end of its reorganisation in the range £300-400m. The dividend is becoming increasingly vulnerable.

Companies: Marks And Spencer Group

19 Nov 18

Cenkos: Kromek Group Plc - New OEM contract

A new baggage screening contract with an existing OEM customer further reinforces revenue visibility for 2019E. Kromek is maintaining its trajectory towards cash flow breakeven next year. This reflects the increasing maturity of its marketplace which is at odds with the share price, trading at the bottom of its range for the year. Buy.

Companies: Kromek Group

14 Nov 18

Avon Rubber - Continuing to deliver

Avon Rubber’s FY18 report demonstrates the success of the new business strategy, delivering growth across both divisions. The product portfolio has been updated and the company is winning contracts in new geographies. The company has also taken action to address its business structure and production footprint. We see continued opportunity for organic growth supported by selective bolt-on acquisitions.

Companies: Avon Rubber

19 Nov 18

Share & share alike

Following the gyrationsin October, we have continued to see further volatility this month. While some of the factors that unnerved investors have receded, Brexit concerns dominate, with the eventual outcome still unclear. At home, the reporting season has proved variable with both notable ‘risers and fallers’. The flow of announcements continues, although things may quieten down, ahead of the festive season. Undoubtedly the progress of the Brexit deal is key. In Share News & Views we comment upon AdEPT, Burford Capital, Carrs, Codemasters, Cropper*, DCC, Marshall Motor, Norcros and Wincanton.

Companies: AOR APC BONH BMS CTG CRPR DMTR ESC EUSP FDM FA/ LSAI NKTN PCF SNX TCN W7L

21 Nov 18

LIBERUM: Non-Standard Finance* - 3 great businesses, 1 wrong price

Non-Standard Finance lends to a select subset of the many in this country whose poor credit score or thin credit history makes access to credit very difficult. It is emerging from recent regulatory and accounting changes as a high growth business, with high risk-adjusted margins, but trades at a very low multiple with a big yield.

Companies: Non-Standard Finance

22 Nov 18

Euromoney Institutional Investor - Pricing power

Euromoney has delivered good FY18 results, with a particularly strong result from the Pricing, Data & Market Intelligence segment. This validates management’s strategy of focusing on specialist, global markets where pricing is opaque and the group can embed itself as an integral part of client work flow. Disposals, along with the inherently strong cash conversion, have provided Euromoney with a significant cash resource of just under £100m. Short term there may be market headwinds, but the group has a proven, resilient business model and the share price should be well underpinned.

Companies: Euromoney Institutional Investor

22 Nov 18

H1 FY18/19 – story of robust product offerings and a supportive operating environment

The company’s H1 FY18/19 results were ahead of our estimates. The robust performance of B2B got the much necessary support from B2C. Region-wise – North America grew in double-digits, whereas Brazil and the UK reported a mid single-digit growth. In the upcoming quarters, we expect North America to remain strong, Brazil to improve and Brexit-related winds playing a crucial role in shaping the UK’s performance. We have revised our estimates upwards. No change in the stock recommendation.

Companies: Experian

22 Nov 18

Q3 results: France continues to disappoint

Poor performance in France is not a surprise but the magnitude of the lfl slump surely is. Although management is planning to exit three countries to focus on core geographies (the UK and France), investors are unlikely to have faith in the stock unless a tangible solution for Castorama is visible on the ground. This poor show also casts clouds over the success of the ‘One Kingfisher’ plan, as aggressive price investments/ promotional needs in France might erode the margin improvement guided by management.

Companies: Kingfisher

22 Nov 18

Morning Note – 22 November 2018

Companies: EOG RCN PPC

22 Nov 18

Focus on the acceleration to SaaS

The 2017/18 organic revenue and operating margin were broadly in line with expectations including the contribution of the Sage Payroll solutions for sale in the US. Sage Group, headed by new CEO Steve Hare, ex-CFO, is resolutely focused on accelerating the transformation to SaaS (2018/19 organic recurring revenue growth of +8-9% vs +6.7% in 2017/18). This strategy requires substantial investments (£60m estimated in 2018/19) which should weigh on the organic operating margin (23-25% of revenue estimated in 2018/19).

Companies: The Sage Group

22 Nov 18

LIBERUM: CLS Holdings* - Good operational progress

CLS made good operational progress through Q3 with vacancy falling from 5.7% to 4.3% and new leases agreed 4% ahead of December ERV. The portfolio continued to be actively repositioned with £20m of assets sold ahead of December book value.

Companies: CLS

22 Nov 18

LIBERUM: Equiniti* - Trading update confirms the virtues of the model

The resilience of the group’s Registration business alongside the momentum in Intelligent Solutions places it in a strong position to deliver attractive revenue growth despite the turbulence in the macro environment. As a result, the company has indicated that FY18 EBITDA is expected to be towards the upper end of consensus expectations.

Companies: Equiniti Group

22 Nov 18

Assura - Half Year Results 2018

22 Nov 18

President Energy - First development well smashes expectations

The operational delivery keeps coming as President smashes expectations with its first Puesto Flores development well. Early indications suggest that the second well is set to follow suit too. The economics of these wells are exceptional, and if replicated across the entire three well programme should drive estimate upgrades and see President surpassing its year-end production guidance. President is building up a head of steam as its operations expand, with numerous organic and inorganic growth opportunities set to drive growth and value in 2019 and beyond.

Companies: President Energy

22 Nov 18

Beowulf Mining plc - CEO interview

22 Nov 18

C4X Discovery Results Overview

22 Nov 18

Charles Stanley (CAY) Interim results November 2018

22 Nov 18

(Almost) Daily Market News Update

Japan’s National inflation gauge remained muted and came in at 1.4% year-on-year as expected. Inflation ex food was 1.0% but with declining oil prices in November, the risks going forward are skewed to the downside, which might force the Bank of Japan to revise its policy outlook.

Macros: Commodities - EnergyCommodities - Metals & MiningEconomic DataIndices and MarketsForeign ExchangeCommodities - EnergyCommodities - Metals & MiningEconomic DataIndices and MarketsForeign ExchangeCommodities - EnergyCommodities - Metals & MiningEconomic DataIndices and MarketsForeign ExchangeCommodities - EnergyCommodities - Metals & MiningEconomic DataIndices and MarketsForeign Exchange

22 Nov 18

Progressing in line with expectations

AorTech’s interim results show the strategy, focused on developing two growth platforms using Elast-Eon, is progressing well. Management has signed agreements with two partners to bring new medical textiles to market and to take a new polymeric heart valve towards commercialisation. There was still £2.6m of net cash at end September following the £2.6m fundraising in June 2018. There are no changes to any of our forecasts other than changing the reporting currency to sterling at $1.30/£. We retain our 400p TP and Buy rating.

Companies: Aortech International

22 Nov 18

GMP FirstEnergy ― UK Energy morning research package

President Energy (PPC LN) (not covered): Argentina update | Cabot Energy (CAB LN)1 ; Speculative Buy, £0.10: Resources estimates in Italy | Equinor (EQNR NO) (not covered): Gas find in Norway | African Petroleum (APCL NO) (not covered): Relinquishes licences SL-03-17 and SL-4A-17 in Sierra Leone.

Companies: PPC CAB APCL