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21 Oct 20

SP Angel Healthcare Conditions- Novacyt (NCYT.L): Initiation of Research

Novacyt Initiation of Coverage: Through the rapid commercialisation of a COVID-19 test, Novacyt has transformed its financial position. Demand for the Group's COVID-19 test and other COVID-19 reagents are expected to make up the majority of revenue generated until FY22E, whereupon the Group is looking to drive long-term growth across its business via the development of high-margin clinical diagnostics and establish itself as a leader in infectious disease testing.

Companies: Novacyt SAS

22 Oct 20

SDI Group - Positive trading update drives FY 2021 upgrade

A positive trading update from SDI Group justifies upgrading FY 2021 sales and adjusted EPS forecasts by 10% and 15%, respectively, broadly to the levels we were forecasting before the COVID-19 pandemic struck in early 2020. Contract wins for MPB Industries (flowmeters for ventilators) and Atik Cameras (supplying cameras for PCR DNA amplifiers) are expected to be fulfilled within FY 2021 and consequently we leave FY 2022 forecasts unchanged. We are encouraged by the news that the other businesses within the group are seeing order patterns returning towards normality. We upgrade our target price to 110p, at which level the stock trades on multiples that compare favourably to both the market and peer comparators. Our forecasts exclude the potential for further acquisitions as the company continues to execute on its buy and build strategy.

Companies: SDI Group plc

29 Oct 20

Successful raise adds to firepower

Kape has today announced the successful, heavily oversubscribed raise of $115.5m from a mix of new and existing shareholders. The raise has been undertaken at a share price of 150p/share representing an 2% discount to prior close, and exceeds the initially targeted raise of $100m. $72m of the proceeds will be utilised to buy-out issued and eliminate deferred shares due to legacy founders of Private Internet Access (‘PIA’) which was acquired in Nov’19. The remaining $43.5m will be held for acquisition and R&D investment. We note that PIA’s executive team (CEO, CTO and COO) who joined Kape alongside the acquisition last year are all remaining in the business, with PIA’s founders only nominally involved post acquisition. The benefits to Kape are three-fold: 1) the raise increases liquidity within the shareholder register; 2) Kape is acquiring founder shares at 145p/share, an 3% discount to the price of the raise; and 3) the beneficial tax structure created at acquisition shifts to Kape shareholders (as opposed to PIA founders) creating a c.$50m cash benefit to Kape recognised linearly over 15 years. Updated forecasts for FY’21E generate FCF of $28.2m, representing a 7% yield.

Companies: Kape Technologies Plc

22 Oct 20

Impressive H1 sales and gross margin growth..

G4M’s H1 trading update confirms the continued strength of the top line sales growth already disclosed in its Q1 sales update. H1 sales have risen by an impressive 42% to £70.2m, complemented by gross margin expansion of 330bps to 28.5%, reflecting G4M’s focus on profitable sales growth. This translates to gross profit growth of £7.5m (+60%) compared with last year and will deliver interim financial results materially higher than last year. While sales momentum has continued into October, management remains mindful of the ongoing uncertainties around Covid-19 and Brexit heading into the peak trading period. With market estimates already raised on the Q1 update, this prudent caution tempers our full year PBT upgrade to 13%.

Companies: Gear4music (Holdings) PLC

21 Oct 20

Tremor - Strengthening momentum drives FY20 upgrades

Tremor has announced in today’s trading update that its platform has continued to gather further momentum since H1 20 results on 22 September, and it now expects FY20 revenue and EBITDA to be in the range of $340-360m for revenue and $30-36m for EBITDA. This leads us to upgrade our FY20 revenue forecasts by +6% to $350m from $330m, and upgrade our FY20 EBITDA by +32% to $33m from $25m at an incremental margin of 40%. This reflects that Tremor’s platform benefits from strong operational gearing that translates to EFCF, and we increase our FY20 net cash to $79m from $71m. This strengthening momentum for Tremor’s differentiated platform reflects that it is capitalising upon a rebound and shift in advertising spend through the success of the initiatives it launched in 2019 and the successful integration of Unruly, and we explain these factors in more depth from p9 of our 22 September report. Today’s announcement also marks the second upgrade to our Tremor forecasts since COVID-19 impacted the advertising market and Tremor in Q2, and this reflects that Tremor has adopted a prudent approach to its guidance. Applying a similar approach to our estimates, we conservatively do not change our FY21 forecasts, and this means that we continue to forecast FY21 organic revenue growth to $420m or +20% YoY, with organic EBITDA growth to $55m or +67% YoY. This conservative, strong FY21 organic growth means that Tremor looks substantially undervalued on 7x FY20 EV/EBITDA or 5x NTM, and a NTM EFCF yield of 6%; vs peers on 13-19x EV/EBITDA with NTM EBITDA growth of 18-47%, and EFCF yields of 1-2%.

Companies: Tremor International Ltd.

27 Oct 20

Revolution Bars Group - Proposed CVA

The group has announced a proposed Company Voluntary Arrangement (“CVA”) in order to reduce the size of its Revolution Bar estate and rental cost base and improve profitability over the longer term. There is no impact on the Revolucion de Cuba brand. The initiative is one of several that management have introduced to counter the impact on trading of COVID-19 and will have the dual benefit of trimming the estate of underperforming sites and delivering a cash flow benefit of c.£2m p.a. The group’s balance sheet remains strong.

Companies: Revolution Bars Group Plc

29 Oct 20

Cenkos: Marlowe Plc -- Transformational Acquisition & Share Placing

Marlowe has raised £30m in new equity to help finance the acquisition of Ellis Whittam (for £59m, all upfront). We update our forecasts to reflect this transaction, along with recent bolt-ons (FY22E EPS upgraded by 8% to 29.0p), and reaffirm our Buy recommendation.

Companies: Marlowe Plc

29 Oct 20

Augean - Resilient waste lines

While the pandemic continues to disrupt normal economic activity, the hazardous waste market has proved relatively resilient. Augean faces a shift in challenges in H220 as North Sea decommissioning activity declines and waste flows return towards more normal levels following H120 shutdowns. Encouragingly, cash flow remains strong and we anticipate a positive net cash balance at the year end.

Companies: Augean PLC

26 Oct 20

Robust H1 update, Strong momentum into H2

Despite challenges in the early part of the period, Yourgene has delivered a robust H1 performance and enters H2 with strong momentum on a number of fronts. Key strategic milestones were achieved in the period, including the launch of the flagship IONA Nx NIPT product on the Illumina platform in September and the acquisition of Coastal Genomics and associated fundraise in August. Both are supportive of FY estimates, as are the launch of Yourgene's Covid services and products such as DPYD, which are generating strong momentum. We make no change to our forecasts at this stage.

Companies: Yourgene Health Plc

22 Oct 20

GB Group - Resilient H1 trading drives upgrades

GB Group (GBG) expects to report underlying revenue growth of 10% y-o-y for H121, with a one-off contract in the US making a material contribution to revenues. Combined with strict cost control this resulted in adjusted operating profit growth of 26% y-o-y and a £32m h-o-h reduction in net debt. With management guidance for revenue well ahead of our and consensus forecasts for FY21, we have upgraded our revenue and EPS forecasts for FY21–23. Despite COVID-19 related pressure on new business in the short-term, we view GBG as well placed to benefit from the accelerated shift in the digitalisation of business processes.

Companies: GB Group PLC

27 Oct 20

FY'20 results inline; updated forecasts post IPO

FY’20 results are slightly ahead of our expectations, and cap an excellent period with strong news flow. KidneyIntelX has now launched at Mount Sinai and is cleared to report results in all 50 US states. We continue to believe KidneyIntelX could represent the future standard-ofcare for early detection of chronic kidney disease progression and kidney failure in patients with Type II Diabetes, affecting an estimated 11m. Focus is now on building out the platform with expanded indicated uses, win national reimbursement and drive testing adoption. One significant catalyst ahead is Medicare coverage, which come as early as H1 2021 under new proposed rules. Whether or not this rule is finalised, the company is moving forward towards broader insurance payor coverage. In this note, we have refreshed our forecasts and valuation reflecting the deployment of IPO proceeds.

Companies: Renalytix AI Plc

23 Oct 20

WHI Morning Comment: Avation (AVAP) - Full year results illustrate actions taken in such a challenging backdrop

Avation is a lessor of 46 commercial aircraft to a diversified airline client base. This morning, the group has released results for the 12-months to 30 June 2020, which illustrate the challenges faced by its customer base as a result of Covid-19, as well as the corrective actions taken by the Board that have resulted in profitability being maintained in the year as a whole. Loan repayment deferrals of c.$24.4m were obtained in the period, in comparison to $13.1m short-term rent deferrals being granted to airline customers and thus emphasising management's focus on liquidity during an unprecedented period for global airlines. Avation again reports that it is currently reviewing alternatives in relation to the 6.5% senior notes due in May 2021. Whilst at this point our forecasts remain under review, and near term challenges remain across the industry, we believe that demand for aircraft from lessors such as Avation will increase in time as a result of airlines being even more reliant upon aircraft leasing firms due to the retirement of older aircraft during 2020 in combination with much weaker balance sheets that are unable to support direct aircraft purchases.

Companies: Avation PLC

19 Oct 20

Bioventix - FY 2020 results

Bioventix reported a strong set of full-year results, that were 8% above expectations, assisted in part by a c.£0.2m (+3%) FX benefit, which helped offset the obvious drag on performance in Q4 due to the impact of COVID-19 on routine testing in hospitals. A 53p special dividend was proposed, resulting in a full-year dividend of 141p, up 18%. Due to the COVID-19-related disruption to testing, which only exacerbates the poor visibility to customer royalty streams, we are withdrawing forecasts until normality returns. That said, the business remains in very good shape, with evidence that: (i) high sensitivity troponin is gaining momentum; (ii) physical antibody sales growth remains robust (+34%); and (iii) progress in its development pipeline (particularly pollution monitoring programme) is being made. The business is expected to remain cash generative, and with c.£8.1m of cash at 30 June, the company is a strong position to weather this period of disruption before returning to growth.

Companies: Bioventix Plc

21 Oct 20

Strong Q1, +6% FY21 revenue upgrade

Positive update today, reporting that trading in FYJun21 has begun well. As a result – and also thanks to DOTD’s strong revenue visibility – revenue guidance is already being upgraded. Consequently, we lift FY21E sales by 6% to £53.0m, so now expecting +12% y/y growth. To put this into context, growth fell to +9% in 2H20. We find this rapid recovery to more typical growth levels highly encouraging. Guidance for profit and cash is reiterated, meaning we leave both profit and cash forecasts unchanged. Somewhat obviously, this requires us increasing our cost assumptions….and if these don’t fully materialise, provides upside risk. Cash continues to build, now £27.7m as at Q1 – we might expect this to be strategically deployed, to enhance what is impressively consistent organic growth.

Companies: dotDigital Group plc

26 Oct 20

Robust H1, momentum rebuilding

An H1 update to September reveals a robust performance notwithstanding a challenging macro backdrop - sales (ex. Coral) are just “slightly lower” y/y, indeed if also excluding an intentional move away from hardware-based Support, we estimate core revenue grew c.+7%. This was underpinned by continued strong growth in US SecPay: +80% y/y, now ~32%/group sales, while in the UK, we estimate sales fell by c.-11%. Here, Covid impacted transactional sales (rather than any permanent loss of business) such that a future recovery is likely in our view. Despite the lower sales and GP, it‘s impressive to note profitability is expected to be in line with 1H20 (AOP: £3.4m) following tight cost management. Looking ahead, there’s reason to be optimistic, as in US SecPay, large enterprise tenders that were paused in H1, may resume in H2. Meanwhile in the UK – and despite the headline sales figure – business activity is already reassuringly strong: total new business won grew 8% y/y in H1, this includes the major £4m/6yr contract with Capita and TfL announced in August. In addition, closing net cash of £12.9m (£2m FCF) continues to offer strategic options. We reiterate that this a high quality company, with a robust and cash generative UK business, while leadership position in a nascent and fast growing US market.

Companies: Eckoh plc

29 Oct 20

Q3: strong cash generation, dividend increase

Since the group is in the middle of a major reorganization, the strong cash generation will help generate interest in the strategy update scheduled for 2021. The CFO stood at $10.4bn, vs $2.5bn in Q2, thanks to the oil price rebound, positive working capital movements and Shell cashing in on trading derivatives. Net debt was down by $4bn, enabling the group to announce a 4% increase in the quarterly dividend to $16.65cts.

Companies: Royal Dutch Shell Plc Class A

29 Oct 20

Strong income lines and zero losses in Q3

SpareBank 1 Ringerike Hadeland (RING) published its Q3 numbers today and higher NII (including transferred loans) and non-interest income as well as net loan loss reversals resulted in a 24% EPS beat. We have included the Q3 numbers, lowered NII, but increased fees from transferred loans, in sum we up 2020/2021 EPS 8%/5% and reiterate our Buy recommendation and target price of NOK 250. The TP is equivalent to 1.0x 2020e BVPS and 11.5x 2021e EPS.

Companies: SpareBank 1 Ringerike Hadeland (RING:OSL)SpareBank 1 Ringerike Hadeland (0N01:LON)

29 Oct 20

mVISE - Resilience and product growth?

In Resilient in the downturn we highlighted how a strong showing from mVISE’s services business (+6% y-o-y) saw it deliver growth, margin uplift and cash flow in H1 despite the COVID-19 pandemic. However, this was partially offset by another shortfall in product sales, which were affected. Nevertheless, mVISE remains confident about its longer-term prospects here. This appears to be shared by the market; consensus sees sales growth accelerating to 15% in FY21 and the rating (c 18x FY21 EV/EBIT) stands at a premium to a pure-play service company.

Companies: mVISE AG

29 Oct 20

Q3 20: Pantry unloading and inventory headwinds hurt.

Novozymes reported a mixed set of Q3 20 figures as sales (-3%) missed the consensus estimates while EBIT came in well ahead, benefitting from strong operational leverage. The top-line decrease was driven by underlying weakness as well as pantry unloading effects. For FY20, management now expects top-line growth in the middle of its -2% to +2% range and an EBIT margin at 26-27%. We will be trimming our estimates to factor in this soft performance as well as growing uncertainty from a deterioration in the pandemic situation.

Companies: NZM2 NVZMF NZYM NZYMB NZYMB NZYMN NZYMB

29 Oct 20

Mensch & Maschine Software - Focus on profitability pays off

Although COVID-19 continues to make signing new business challenging, Mensch und Maschine (M+M) has managed to report a small increase in revenue over the first nine months of FY20 (9M20). Combined with careful cost control, this has translated to a 20% increase in EBIT over the same period. While the FY20 EPS guidance range has been lowered slightly, the company is confident it can resume its growth trajectory in FY21.

Companies: Mensch und Maschine Software SE

29 Oct 20

Q3: in line, now time for divestments

Results met the consensus, with upstream having a smaller rebound than peers, but a higher downstream. In upstream, the rebound was driven a the stronger oil price, partly offset by lower production and lower realized natural gas prices. The downstream delivered positive results, as OMV confirmed its ability to perform better than peers by leveraging its integration model (e.g. the ability to divert kerosene into petrochemical production).

Companies: OMV AG

29 Oct 20

Strong rebound in advertising revenue

The recovery of TV advertising was higher than expected in Q3 20 ((+8.2% vs -41.2% in Q2 20). TF1 benefited from an advertising catch-up in various sectors such as food, retail, personal care, e-commerce and automotive. The decrease in the cost of programmes (-21% on 9m 20) continued with no negative impact on audience share. There is no guidance for Q4 20 and 2021 due to low visibility related to unfolding of the COVID-19 pandemic in France.

Companies: Television Francaise 1 SA

29 Oct 20

Cenkos: TP Group Plc -- Completion of Disposal

TP Group (TPG) has announced that it has completed the disposal of its loss-making Manchester-based subsidiary (TPG Engineering Ltd) for a nominal sum of £1 to private equity firm Rcapital. This disposal will improve the group's margins, and allow it focus on its core markets. Given the uncertainty caused by the pandemic, we continue to withhold forecasts from the market, and our rating remains Under Review.

Companies: TP Group Plc

29 Oct 20

Chinese commercial vehicles supercharging Faurecia's recovery

Faurecia posted a -23.7% yoy 9M 20 sales contraction driven by Clarion Electronics (-40.1% yoy in Q3 20) and Clean Mobility (-8.2% yoy in Q3 20). Geographically, South America and Europe led the contraction (-42.9% yoy and -7.9% yoy, respectively, in Q3 20), with China softening the fall (+15.4% yoy in Q3 20). Despite this contraction, Faurecia experienced some recovery in 9M 20 vs. H1 20 (-23.7% yoy and -31.2% yoy, respectively) encouraging the company to raise its guidance.

Companies: Faurecia SA

29 Oct 20

Will the descent into hell ever stop?

Telefónica remains on track to deliver its 2020 outlook of flat EBITDA-capex yoy in organic terms but… at constant currency. The Forex headwind is however a storm in Brazil (-30% yoy). The stock is trading at a 55% discount to its February level. The dividend yield is nearly 15% reflecting the market’s major concern about its sustainability. Even if the group ends up lowering its dividend due to this Forex storm… we maintain our Buy opinion.

Companies: Telefonica SA

29 Oct 20

Q3 20: another disappointment

Overall, Q3 results were not exciting and the outlook was clearly disappointing. We see downward pressure on our estimates owing to the new guidance provided by the management. We will therefore trim our estimates.

Companies: Nokia Oyj

29 Oct 20

Managing through the crisis

Fresenius’ broad portfolio stabilised the top-line and earnings but the picture has been mixed not just among the divisions. Interestingly this has also proved true on an intra-divisional basis in that the trends have followed the pandemic. The Q3 figures showed some relief, especially in Helios Spain. The reported figures were a notch weaker than expected, but broadly met consensus.

Companies: FRE FRE FRE FREEUR FSNUF FREN FRE FRE1

29 Oct 20

Structural profitability issue exacerbated by rate cuts

The third-quarter results confirmed the group’s structural profitability issue in our view. Within this context, we suspect that management’s commitment to resuming capital distribution as soon as allowed by the regulator corresponds to a statement under duress, backed by no real conviction. We continue to believe that consensus expectations are still too optimistic.

Companies: Standard Chartered PLC

29 Oct 20

NFON - Cloud calling

NFON is a pan-European provider of business telephony services via the internet. The rising adoption of IP-based, cloud-hosted switching systems (cloud PBX) is driving rapid sales growth and, with penetration still at low levels, this trend is expected to continue. From a strong base in Germany, it aims to expand into Europe and believes the combination of its scale, in-house IP and balance sheet will enable it to execute this strategy.

Companies: NFON AG (NFONF:OTC)NFON AG (NFN:ETR)

29 Oct 20

Pixium Vision - Q3 results in line, awaiting pivotal study approval

Pixium Vision provided an update on its 9M20 cash flow results, which are broadly in line with H120 trends. The company reported a 9M20 operating cash outflow of €4.2m and a gross cash position of €13.3m at the end of the quarter. We believe Pixium’s funds on hand should be sufficient to support its ongoing operations into Q421, thus including at least several months of initial ramp-up of the upcoming PRIMAvera pivotal study on the Prima bionic vision system (BVS).

Companies: PIXEUR PXH ALPIX