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12 Dec 18

Cenkos: Seeing Machines Ltd - Collaboration with L3 for Flight Simulators

Seeing Machines Limited, the advanced computer vision technology company that designs AI-powered operator monitoring systems to improve transport safety, has announced that it has partnered with L3 Commercial Aviation, a leading provider of airline pilot training solutions, to deliver integrated eye tracking capabilities into their Full Flight Simulator (FFS). The first device with this functionality will be delivered to a major Australian airline in 2019.

Companies: Seeing Machines

13 Dec 18

Protecting shareholder value

Strix announced three important updates in relation to its IP and patent protection in an RNS yesterday. This announcement is important both for the quality of the company’s growth and for the valuation placed on the company’s shares. As a result, we view it positively.

Companies: Strix Group

13 Dec 18

Another non-core business to sell

According to Sky News, L&G has instructed Fenchurch Advisory Partners to sell its general insurance business. This is a small business unit that has no significant impact on the insurer’s operating earnings. The revealed valuation matches our figures. However, this sale may be difficult to achieve, as the general insurance market remains tough.

Companies: Legal & General Group

18 Dec 18

Scientific Digital Imaging - Interims – strong H1, characterised by record cashflows

Interim results to 31 October provide a solid foundation for FY 2019, with revenues rising 23% (12% attributed to acquisitions) and adjusted pre-tax profit up 32% to £1.5m, benefiting from the leverage afforded by higher-margin Atik and Sentek growth. The results were characterised by strong free cashflow, rising 117% to £1.15m (+£0.6m) more than funding the EPS-accretive (7%) Fistreem acquisition during the period. With management having indicated that it hopes to acquire at least one other company before the financial year-end, the potential for upgrades is likely. We reiterate our target price of 44p, which implies a CY 2019 EV/EBITDA of 10x, adjusted P/E of 17.9x and FCF yield of 5.4%, mindful also of the prospect of further acquisitions and stronger than currently forecast trading.

Companies: Scientific Digital Imaging

10 Dec 18

Laundry continues on growth path

H1 results show continued strong growth in Laundry and a faster than expected recovery in Japan but slower B2B and third party sales in the UK. These later two points are expected to improve in H2 and guidance for the full year is maintained but there is clearly some risk here. We retain our target price of 183p based on a 5% FY 2019E free cash flow yield.

Companies: Photo-Me International

11 Dec 18

FY18 results in line with October guidance

Zytronic reported results for FY18 in line with its October guidance, with adjusted PBT down 16%. This was driven by a decline in gross margin, due to operating inefficiencies resulting from lower revenues to its Financial end market, and yield problems as new designs for the Gaming market, requiring new processes, moved into production. We have made no changes to our forecasts for adjusted PBT and EPS, which assume modest sales growth and no uplift in margin while the group works to improve yields. These put the shares on an EV/EBITDA multiple of 7.6x for calendar 2019, which represents a c.13% discount to the smaller cap goods stocks.

Companies: Zytronic

11 Dec 18

FY18 PBT in line; Positive dividend surprise

Driver’s FY18 results were well flagged in the October trading update (EPS upgrades of 9%/12% in FY18/19 at the time). Today’s results are in line with expectations, highlighting a year of significant profit growth. Adj. PBT increased by 54% to £3.8m, driven by higher utilisation rates (80% in FY18 vs. 76% in FY17) and a focus on higher margin work (e.g. growth in services provided by Diales). The turnaround has been delivered and management’s focus is now on growing revenue, profit and cash generation. The outlook statement is positive and a return to dividend payments (0.5p final dividend recommended) is a statement of management’s confidence in the outlook for the Group. We believe earnings momentum will continue to drive the share price higher and we expect a positive reaction to today’s results.

Companies: Driver Group

05 Dec 18

Interim CEO appointed

The resignation of Hagai Tal has now been accepted, and the experienced divisional CEO, Rivi Bloch, has stepped up to Interim Group CEO, reporting to (although not joining) the Board. Ms Bloch is an extremely capable executive with many years of experience at Taptica, and currently leads the Performance Marketing business. We have every confidence she will prove a safe pair of hands to take the group forward and look forward to an update in the new year. In the meantime, we have sought greater clarity on the sharp fall in revenue and rise in margin guidance from the company yesterday. We understand that there has been a rapid change in the underlying ecosystem for the business, particularly the Performance Marketing division (the old Taptica business) to which these changes mainly pertain.

Companies: Taptica International

10 Dec 18

Interim Results

Photo-Me has announced H1 2019E results. Underlying revenue grew 2.5% and although adjusted PBT fell 7.9%, the Group maintains its strong cash generation with net cash of £32.4m. Laundry continues to perform strongly, ID saw growth through the roll-out of secure upload enabled booths, the first banking booths were launched in France and the Japanese re-structuring is proceeding as expected. The Group maintains its full year estimate of c.£44m adjusted PBT but notes that the ability to achieve this will be dependent upon consumer sentiment, the economic environment and foreign exchange movements.

Companies: Photo-Me International

11 Dec 18

Significant disruption during peak Q2 trading period due to GST changes in Oz

The changes to the general sales tax (GST) in Australia from 1st July, that removed the exemption for low value e-commerce direct imports with a value below A$1,000, has had a severe impact on MySale’s recent trading (GST is 10%). Although plans were in place and trading during Q1 was in line, several factors have combined during the peak Q2 period that will have a significant impact on forecasts, with a small loss expected in the first half to December. Accelerating planned cost reductions, as well as changes in product strategy alongside efficiency gains due to prior investment in technology over the last several years should mean profitability will return in the second half.

Companies: Mysale Group

14 Dec 18

GB Group - Location, location, location

GB Group’s Loqate division was the focus of yesterday’s capital markets day. Presenters highlighted the need for accurate address data as a prerequisite for many business processes, including e-commerce, insurance and invoicing. Loqate’s ability to provide the “golden record” in a simple, fast and consistent way gives it a competitive edge and supports the division’s international growth ambitions.

Companies: GB Group

17 Dec 18

Cenkos: RA International Group Plc - Trading Update

RA International has announced an operational update this morning, highlighting the progress made in the current year but also that several contracts have been delayed into early 2019, leading to expected revenue and profit for FY/18being slightly below current expectations. We have reduced our FY revenue and profit forecasts by c10% to reflect contract timing differences, leaving 2019 and 2020 forecasts unchanged. FY/18 net cash is expected to be cUS$29m despite increased working capital expected to release early 2019. With a 2018E PER of 9.3x and EV/EBITDA of 7.0x, falling to 7.8x and 4.3x 2019E respectively, we continue to believe RA shares offers significant upside as some larger contract awarded commence and further multi-year contracts are awarded.

Companies: RA International

13 Dec 18

Nanoco Group - On track for an inflection in FY20

Nanoco’s AGM statement flags that good progress is being made in both the Runcorn site build out and developing next-generation materials for the major US client. Guidance for FY19 revenues is re-affirmed and the company remains well placed to deliver an inflection in revenues after that.

Companies: Nanoco Group

13 Dec 18

H1 Results/ Buy back

RhythmOne has announced H1 result for the year to Sept 2018. They have also announced approval of a share buy back. In H1 revenues grew to $175.5m up 53% YoY. Gross margin improved significantly to 45% from 38%. There was a significant improvement in Adjusted EBITDA to $20.5m, $17.5m better than H1 2017 $3.0m. After seasonal working capital outflow, cash flow is expected to be very strong in H2 and they will buy back shares. Our EBITDA forecasts are unchanged. We retain our Buy rating and 770p price target.

Companies: Rhythmone

12 Dec 18

2019 interims - LfL growth, net debt reduction

Against a back-drop of the casual dining sector being under intense pressure, The Fulham Shore Plc (“FUL”) has issued a solid set of interims for the six-month period to the end of September 2018. Revenues of £33.0m and underlying EBITDA of £4.6m were up 19.8% and 1.4% year on year respectively. Margins remain under pressure but cash generation continues with net debt at £8.9m at period end, down from £9.7m a year earlier and down from £12.0m at the end of March 2018. Current trading remains upbeat and the Company now expects to open more restaurants in the year to March 2020 than the forecast four openings in the current financial year to March 2019. We have increased our March 2019 revenue forecast (+6.2%) but our 2019 underlying EBITDA forecast remains essentially unchanged at £7.5m.

Companies: Fulham Shore

18 Dec 18

Morses Club - Zero negative impact to well-prepared Morses

The FCA’s consultation does not introduce suggestions for new lending practices that Morses Club’s current technology set-up cannot cater to. The company continues to abide by regulatory rulings and indeed is a market leader in that it is already prepared for the introduction of any implementation of the FCA’s proposals.

Companies: Morses Club

18 Dec 18

MOD Resources - Discoveries made, exploration concept validated

MOD Resources (MOD) is a copper-silver exploration and development company with a substantial ground holding in the Kalahari Copper Belt, Botswana. The company has been very successful with its regional exploration concept, which has led to the discovery and drill-out of the significant T3 copper-silver deposit and the delineation of a preliminary resource at the T1 copper-silver deposit. Regional drilling in the T3 Expansion Project has led to two additional discoveries, A1 and A4, while regional drilling at the T20 Exploration Project has also returned interesting results at T4 and T23. MOD is completing a feasibility study at T3, which will benefit from a coarser grind size and an increased base case plant size, and a scoping study at T3 underground, both due for completion in Q119, while continuing its regional exploration programme.

18 Dec 18

ValiRx - Article accepted for publication of VAL401

18 Dec 18

Kodal Minerals - End Year Update

18 Dec 18

discoverIE Group - H1 organic growth supports FY19 outlook

discoverIE reported H119 revenue growth of 11%, with 7% organic growth and 5% growth from the Santon acquisition offset by a 1% currency effect. Good order intake in H1 provides support for growth in H2 and management sees FY19 trading in line with its expectations. We have revised our forecasts to reflect H1 trading, resulting in upgrades to our normalised EPS forecasts of 3% in FY19e and 2% in FY20e.

Companies: Discoverie Group

18 Dec 18

Flat Q1

Q1 trading update: revenue was flat organically (+0.3%, with volume -0.6%, price/mix +0.9%) and -5.2% on reported figures (net disposals: -5.3%, FX: +0.2%). By division, Europe recorded +2.0% OG (weaker than Q4 due to lower volumes), North America recorded -2.8% OG (which is weaker than Q4). ROW recorded a solid +7.7% (+6.1% volume-driven). The FY guidance is maintained: organic EBITDA to be up to a mid-to-high single-digit (excluding any disposals).

Companies: ARYZTA

18 Dec 18

Aberdeen Asian Income Fund - Finding attractively valued income opportunities

Aberdeen Asian Income Fund (AAIF) aims to provide its investors with an attractive income, plus the potential for capital growth, by investing across the Asia Pacific region. The fund’s target c 4.5% yield is fully funded from portfolio income. AAIF’s investment process is bottom-up, with a strong focus on finding quality companies at attractive valuations. The managers meet all the companies they hold at least twice a year, and place great emphasis on understanding each company’s balance sheet and growth drivers to ensure everything in the c 40–70 stock portfolio is worthy of its place. AAIF’s quality and income focus means it has a natural bias to some more defensive areas, which could stand it in good stead in the current bout of market volatility. Its managers note that valuations in Asia are low in relation to Europe, North America and their own historical averages, and some individual stocks are very inexpensive versus history.

Companies: Aberdeen Asian Income Fund

18 Dec 18

Focusing on digital industries, at its own pace!

ABB announced two major transformations: i) the divestiture of a large part of its Power and Grids (PG) unit, and ii) the reshaping of its current business structure. On the one hand, the PG sale seems to be a positive move as the unit was a drag on the company with less than an 8% EBIT margin compared to 11.5-13% in the other divisions. On the other, the business structure’s transformation should have a positive impact, though not before 2021. We keep our positive view.

Companies: ABB LTD-REG

18 Dec 18

Morning Note – 18 December 2018

Companies: BYOT SAV SDI PPC

18 Dec 18

Byotrol - Interims – pointing the way to sustainable profitability

Byotrol reported substantial progress for the six months to 30 September, benefiting from an underlying improvement in operating cashflow and the one-month inclusion of Medimark Scientific. Revenues increased by 54% to £1.44m, resulting in an adjusted pre-tax loss of £0.46m (vs. -£0.74m), with period-end cash of £3.55m – down £0.3m from 31 March 2018. Confirmation that Medimark should meet its earn-out targets for FY 2019 is encouraging. A shortfall in the US, due to delays at the EPA in extending the range of Byotrol24, is expected to result in a £0.25m LBITDA for the full year, despite which we expect a profitable and cash-generative second half. With a full-year contribution from Medimark and sales synergies still to be factored into expectations, we reiterate our 7p price target.

Companies: Byotrol

18 Dec 18

Scientific Digital Imaging - Interims – strong H1, characterised by record cashflows

Companies: Scientific Digital Imaging

18 Dec 18

No respite from cost pressures or operating environment

At the time of the interim results in September forecasts were unchanged with the results stating that profit before tax in FY18 was anticipated to be in line with expectations. Forecasts were heavily H2 weighted in anticipation of a positive impact from price increases and operational efficiencies. We continue to expect a material improvement in terms of operating costs, however, we now assume these to be offset by increased raw material prices particularly PVC resin and glass. This follows on from comments made by others in the sector and leads to a downward revision in gross margin reducing our EPS forecasts by c. 8% across the forecast period. ZC current year estimates move back in line with consensus following today’s cut. In a sector that is cyclically depressed Epwin continues to stand out, trading on 7.1x FY19 earnings.

Companies: Epwin Group

18 Dec 18

GMP FirstEnergy ― UK Energy morning research package

Canacol Energy (CNE CN) (not covered): 2019 guidance | President Energy (PPC LN) (not covered): Drilling update in Argentina | Niko Resources (NKO CN) (not covered) receives notice of default in India | IGas Energy (IGAS LN) (not covered): No primary target at UK shale well

Companies: IGAS NKO PPC CNE