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01 Jul 20

THE MONTHLY July 2020

A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.

Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA

07 Jul 20

Well positioned with excellent growth prospects

Kape’s recent Capital Markets Day (CMD) was an extremely useful update on the many benefits of integrating complementary acquired businesses (including the collaboration between engineering teams) and the opportunities for upselling that new product development brings. Over the last six months, Kape has proceeded with the integration of PIA, expanding the growth of new users through the application of the Group’s user acquisition knowhow and technology. It has also made further enhancements to its product offering which, inter alia, will improve user engagement and retention. This note looks to bring out the main points from the CMD and highlights the significant progress that has been made this year.

Companies: Kape Technologies

07 Jul 20

Cenkos: Seeing Machines Ltd -- USA to mandate DMS from 2024

The ‘Moving Forward Act', the strongest automotive safety bill in decades, has now been passed in the House of Representatives. The bill is focused on advancing safety technologies proven to reduce crash and harm and to make sure strong safety standards are in place to save lives. The bill, which now needs to be passed in the Senate, will mandate automatic braking, lane-keeping, blind-spot detection, event data recorders as well as DMS in all cars and trucks sold in the US from 2024. This aligns with the European General Safety Regulation, which passed into law in November 2019. However, in the EU, the European Association of Automobile Manufacturers (ACEA) has requested a 2‐year delay for the introduction of the 2022 Euro-NCAP protocols due to the projected lengthy time that will be needed to recover from the effects of COVID-19. Euro NCAP has agreed, and a delay is now expected to the 2022 and 2024 rating. The new dates will give automakers and Tier 1 suppliers more time to incorporate the necessary changes given the events of recent months with a number of manufacturers announcing 12 month delays to new models.

Companies: Seeing Machines

30 Jun 20

D4T4 Solutions - A transitional period sets up secure growth in FY 2022

The FY 2020 results are in line with our expectations and reflect the impact of the previously announced switch from large perpetual licences to recurring annual term licences during the year. Despite the COVID strictures, with its large global partnerships, D4t4 continues to close numerous lucrative data gathering and data management contracts with major blue-chips around the world. It is successfully converting a high proportion of its new sales to recurring revenue contracts, but this will sacrifice growth and earnings in FY 2020 and FY 2021. Nevertheless, with growing recurring revenue base, an exciting pipeline and a very strong balance sheet, D4t4 is very well positioned for continued long-term growth and security.

Companies: D4T4 Solutions

08 Jul 20

WHI Equity Research: Jubilee Metals (JLP)

Robust, cash-generative production from mining waste Jubilee operates several chrome-Platinum Group Metal (PGM) operations in South Africa and is constructing a zinc-lead (vanadium) plant at Kabwe in Zambia after already commissioning the copper and cobalt circuits (the ‘Sable' refinery). The company has a growth pipeline identified and significant opportunities to find new projects in Africa (or globally); more specifically, Jubilee announced that it is looking to increase its copper (cobalt) production in Zambia aggressively to make full use of the Sable Refinery. Jubilee also owns the Tjate PGM project in South Africa, which is currently on hold. The company model is to treat its own waste materials and to supplement these with third party ores and wastes where possible. This year has been nothing if not eventful for Jubilee, but further progress and material catalysts are expected over the course of 2020. Jubilee has a high-margin business with cash on hand, and we see plenty of opportunities for Jubilee to capitalise on its robust business model through the global Covid-19 crisis and beyond. We initiate with a fair value of 11.2p/sh

Companies: Jubilee Platinum

03 Jul 20

Manolete Partners

Accelerating activity in to FY21

Companies: Manolete Partners

07 Jul 20

Finally, a change of strategy?

With a new CEO, Amanda Blanc, Aviva’s shareholders could dream of a possible change in the group’s strategy, with a more focused insurance business. The new Chief has an opportunity to take painful decisions in a year where no one will require a high operating performance.

Companies: Aviva Plc

03 Jul 20

Avon Rubber - Cream rises to the top

The announcement that Avon Rubber is to sell milkrite | InterPuls, its dairy division, to DeLaval Holding for £180m gross proceeds is strategically logical and financially compelling. The fit of dairy and defence has always looked slightly anomalous and the terms of the deal show that the opportunity to augment dairy through value-accretive deals is difficult given the scale of the business and opportunities. Management must now recycle the cash balances that will be created into Avon Protection, where there are a greater number of potential investments.

Companies: Avon Rubber

07 Jul 20

Open Orphan*

Laboratory Services Contracts Signed

Companies: Open Orphan

02 Jul 20

GB Group - Managing cash now to support long-term strategy

GB Group reported strong performance in FY20 and started taking measures to preserve cash in Q420. Trading in Q121 has been mixed and while management is unwilling to provide guidance for FY21, it has confidence that in the longer term it is well positioned to benefit from the acceleration in digital transformation that should drive demand for its identity data intelligence services. We have upgraded our EPS forecasts by 5% in FY21 and 3% in FY22.

Companies: GB Group

02 Jul 20

Strategically important acquisition in Germany

Gamma is acquiring around 80% of HFO Holding AG (HFO), one of the leading SIP Trunk providers in Germany, for an initial consideration of €20.4m in cash with an option to purchase the remaining shares over the next three years. In line with its stated strategy, Gamma can invest and use its commercial strength and expertise to accelerate HFO’s growth and replicate the Group’s success in the UK by developing a market leading position in Germany. Noting net debt of €2.9m when the deal closed, the implied historical EV/EBITDA multiple of about 10x compares with Gamma’s equivalent of 18.7x. We estimate that the deal will be 4% earnings enhancing in the first full year of ownership and our estimate upgrades reflect that. The European markets for cloud telephony in which Gamma is now represented will ultimately overtake the UK in size, providing Gamma with significant future growth potential. We view this acquisition as another significant step in Gamma’s strategic aim to expand into Europe via exposure to another lucrative market opportunity.

Companies: Gamma Communications

02 Jul 20

£55m placing as brick demand bounces back

Brick and concrete products manufacturer Forterra has raised c. £55m gross in an equity placing in order to maintain its strong balance sheet and support the Group's continued investment programme. It was accompanied by, in our view, a reassuring trading statement which we believe is backed by yesterday’s brick industry data and comments from housebuilders, which suggest that demand has been recovering from its lockdown lows, before the PM’s promises to “build, build, build” housing and infrastructure.

Companies: Forterra

08 Jul 20

Hurricane Energy

Operational update

Companies: Hurricane Energy

06 Jul 20

Macfarlane Group*

Resilient Trading Update

Companies: Macfarlane Group

08 Jul 20

When the tough get going

Successful businesses ‘never let a crisis go to waste’. Indeed since an otherwise strong Q1’20 was interrupted by COVID-19, Mpac has further streamlined operations, accelerated R&D and launched new remote equipment diagnostic/acceptance testing, virtual reality & other ‘Industry 4.0’ services.

Companies: Mpac

08 Jul 20

Amryt Pharma's Joe Wiley delighted as company begins trading on NASDAQ

08 Jul 20

Scotgold Resources' team back underground as its eyes start of production

08 Jul 20

WHI Equity Research: Jubilee Metals (JLP)

Companies: Jubilee Platinum

08 Jul 20

ValiRx - Strategy Update

08 Jul 20

Aquis Exchange PLC ready to shake up small company fundraising says Alasdair Haynes

08 Jul 20

Not yet!

Following our headline ’Settled!?’ on 25/06/2020, our new headline looks a bit revanchist as we had expected that Bayer ‘just’ wanted to manage expectations by pointing to the fact the mechanism has to be approved by the judge. The judge’s doubts on the planned mechanism for the glyphosate-related cases might sweep current management away. Or the company gets a different name.

Companies: Bayer

08 Jul 20

Iconic Labs PLC's CEO expects firm to be profitable within three months after JOE media deal

08 Jul 20

Botanical Holdings assessing a range of medical cannabis and CBD acquisitions

08 Jul 20

HgCapital Trust - Resilience from tech and services focus

HgCapital Trust’s (HGT) 12-month NAV TR to end-March 2020 was a solid 13.8% despite the COVID-19 market downturn in March 2020 (ytd NAV performance since end-December 2019 was a 6.2% decline). The coverage ratio reached a historically low level (13% vs three-year average of 53%) after HGT notably increased its investment activity and commitments in Q120. However, a significant part of these new commitments will not be drawn in the near term. The board continues to review its future funding arrangements and may also opt out of a new investment without penalty across all funds. HGT’s portfolio focus is on the resilient software and technology sector and the manager expects a limited direct earnings impact on its portfolio from the COVID-19 pandemic.

Companies: Hgcapital Trust

08 Jul 20

Thor Mining's Mick Billing details positive vanadium samples from Colorado

08 Jul 20

What We've Been Up To During Lockdown

08 Jul 20

Economic & Political Roundup

A collation of recent insights on markets and economies taken from the comments made by chairmen and investment managers of investment companies – have a read and make your own minds up. Please remember that nothing in this note is designed to encourage you to buy or sell any of the companies mentioned.

Macros: Economic DataEconomic DataEconomic DataEconomic DataEconomic DataEconomic DataEconomic DataEconomic DataEconomic Data

08 Jul 20

SP Angel . Morning View

Kobold Metals – to use data analytics to map the earth’s crust to find cobalt in northern Quebec | Panther Metals (PALM LN) – Early exploration results from Annaburroo | Scotgold Resources* (SGZ LN), BUY – 119p – Cononish project development update

Companies: Panther Metals Scotgold Resources

08 Jul 20

SP Angel Healthcare Conditions

Vor Biopharma raises $110m Series B round (from yesterday) | RenalytixAI (RENX.L): Agreement with US preferred provider network

Companies: Renalytix AI

08 Jul 20

Oil & Gas Daily Flow

Hurricane Energy (HUR LN): Water cut continues to increase at Lancaster | Nu-Oil and Gas (NUOG LN): NUOG in discussion with a further two RTO candidates

Companies: Hurricane Energy Nu-Oil And Gas