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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

06 Dec 18

Cenkos: Beeks Financial Cloud Group Plc - Tier 1 financial services customer win

This morning, Beeks Financial Cloud announced that it has secured a new contract with a Tier 1 insurance sector customer to manage the customer's hybrid cloud IT activities across the Beeks private cloud and the public cloud. Beeks will provide IaaS connectivity and managed services to connect the customers private cloud activities with its major public cloud providers. Since IPO the business has expanded into all major asset classes for automated trading IaaS services and now added a further hybrid cloud managed service offering, utilising its financial services expertise and growing network resilience and presence. Beeks enjoys high levels of subscription based revenues, with annualised committed monthly recurring revenue of £6.9m at the end of FY18. We forecast 2019E revenue growth of 44% to £8m and 51% EBITDA growth to £2.9m and prospective dividend yield of 0.5%.

Companies: Beeks Financial Cloud

04 Dec 18

Treatt - A more normal year

Treatt has reported yet another set of strong results in FY18. The company remains in the sweet spot of current consumer trends, with ingredients that help to deliver better-for-you products with clean labels and without compromising on taste. The US expansion is on track and on budget, and will be fully operational in H119. The UK relocation is progressing well, although it is more complex and the timetable has slipped by about six months. FY19 has started well, and at this stage we leave our estimates broadly unchanged. Our DCF-derived fair value remains 510p.

Companies: Treatt

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

04 Dec 18

Cenkos: Duke Royalty Ltd - A profitable operation

Duke's H1/19A interims are the first to show the company producing a statutory net profit following initial deployments of the £42m net proceeds from August's placing. While deployment of the remaining proceeds is taking longer than previously expected, we see this as a positive sign to the rigour of the company's due diligence process. We now expect full deployment to be completed by the end of FY19E. This will produce a step change in Duke's financials per our FY20E forecasts.

Companies: Duke Royalty

05 Dec 18

On track for £350m portfolio a year early

PCF Group (PCF) has delivered a small beat with adj. PBT up 50% to £5.4m (£3.6m) on a portfolio of receivables that grew 50% to £219m (£146m) on a 75% increase in new business originations to £148m. Retail deposits, which helped fund this growth, were £191m at end September 2018. With the FY2020 £350m portfolio and 12.5% RoE targets likely to be achieved a year early, PCF is investing in the infrastructure to deliver the FY2022 target of £750m. We maintain our 60p target price (0.4x forecast £350m receivables) and Buy rating.

Companies: Private & Commercial Finance Group

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

03 Dec 18

LIBERUM: AFH Financial Group* - Major acquisition increases PBT by 8%

AFH has done it again, making an acquisition which is both accretive and strategic. Established advisers want to join AFH to improve their client offering, to offer discretionary mandates, and to be part of a stronger group.

Companies: AFH Financial Group

07 Dec 18

Boku - Accelerating mobile identity offering

Boku has accelerated its move into products adjacent to its carrier billing services – it had already started developing mobile identity verification services, and the acquisition of US-based Danal will add a fully formed business in this field and bring a new set of customers. Boku is paying mainly share-based initial consideration of $37.2m, with up to a further $64m payable in equity if ambitious revenue targets for FY19 are achieved. While initially dilutive, the deal broadens the company’s product portfolio and expands the types of merchants it can serve, supporting Boku’s growth prospects in the medium- to long-term.

Companies: Boku

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

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

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

04 Sep 18

Improving margins lead to another upgrade

International expansion, notably in the Far East, together with the excellent Tremor acquisition, continues to drive revenue growth while margins are being improved by operating efficiencies. Furthermore, the $30m funding in H1 reduced debt and positioned Taptica for further earnings-enhancing M&A and discussions are already underway with targets. A winding-down of the legacy display business leads us to ease our revenue expectations slightly but the impressive growth and margins delivered suggest yet another earnings upgrade for this year, underpinning the upside in our target price.

Companies: Taptica International

04 Dec 18

Share & share alike

Market volatility persists with an agreement between the US & China to defer further tariff increases lifting major indices. However, the uncertainty surrounding the Brexit process continues to dominate in the UK. The impact on our universe is clear from the table below with AIM notably weaker. The reporting season runs on, though it should lighten, ahead of the festive season next week just as the progress of the Brexit deal reaches a crescendo. In Share News & Views we comment on AorTech*, Begbies, Bonhill*, FireAngel*, Golden Ocean, IG Design, Location Sciences*, Menzies, Nucleus & Synectics*.

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

06 Dec 18

LIBERUM: MJ Gleeson* - Strong start to FY19

MJ Gleeson’s year has started well with a 40% increase in reservation levels in the first half in Homes and good activity in Strategic Land. Strong demand for Homes and Strategic Land give management confidence that profits for the financial year will hit expectations.

Companies: MJ Gleeson

12 Dec 18

An upbeat investor update presentation

Anglo American has presented an optimistic operational outlook for the next two-three years. The company expects to exceed its 2018 production guidance by 2%, while costs would be 5% lower. In 2019, 3% production growth is targeted, and cost inflation is guided to be offset by productivity improvements. During 2020-21, another 5% annual production growth is targeted. Below is the production summary for the respective divisions – Production outlook Source – Investor Presentation December 2018 In effect, most of the growth is being targeted in the iron ore (primarily Minas-Rio) and met coal divisions. For Minas-Rio, management expects a restart of operations in December 2018. Sustaining capex through to 2021 is guided to be $3.2bn p.a. – which includes spending that would help increase some of the mining assets’ average life by c.10 years, while the long-term sustaining capex is guided to be $2.8-3.1bn p.a.

Companies: Anglo American

12 Dec 18

The warm September has cooled growth

Inditex has reported a slight deceleration in its organic growth to 3%. Sales were up 7% at CER and 2.6% reported. Operating margins were flat.

Companies: Inditex

12 Dec 18

DP Poland - Trading update

12 Dec 18

A Canadian flavoured governance

Albert Frère’s succession is in order: the joint governance agreement between Power Corporation of Canada and Frère Group, jointly controlling Pargesa Holding SA, lasts up to 2029. The Canadian side is taking the Chairmanship.

Companies: Groupe Bruxelles Lambert

12 Dec 18

Acquisition outside its domain

Dassault Systèmes announced an expensive acquisition (P/Sales >7x) outside its domain. The acquired company, IQMS, provides ERP software for small- and medium-sized companies in the manufacturing sector. Dassault Systèmes sees the ERP software of IQMS as a complementary brick to the SOLIDWORKS 3D design software and Product Data Management solution also dedicated to the mid-market. Planned in Q1 19, the integration of IQMS should have a minor impact on our estimates.

Companies: Dassault Systemes

12 Dec 18

Horizonte Minerals - Araguaia Nickel Project, Stage 2 expansion

12 Dec 18

e-Therapeutics - Rewards for keeping the faith

e-Therapeutics (ETX) has announced a long-awaited research collaboration with Novo Nordisk (Novo) on early target discovery in diabetes. This is the first commercial collaboration in ETX’s history and will last for at least a year. The financial terms of the transaction were not disclosed but the deal should be recognised for its validation of ETX’s disease-aware network-driven drug discovery (NDD) platform. This is expected to be the first in an expected series of deals on the NDD platform and the assets generated from it.

Companies: e-Therapeutics

12 Dec 18

GO internet - Full speed ahead on 5G

GO internet (GO) provides fixed wireless and fibre broadband to Italian regions with a population of 5.8 million people. New plans to accelerate the roll-out of its 5G network and reduce GO’s reliance on WiMax should boost growth in the coming years. Recent 5G frequency auctions in Italy also imply a potential value of €3.45 per share for GO’s 5G frequencies, net of group debt and the expected licence extension cost. Our DCF values GO at €1.67per share.

Companies: GO internet

12 Dec 18

France: yellow vests movement and impact on retailers

Disruption in France A social media campaign in France, which originated against the proposed rise in duty on diesel, has rapidly morphed into “the worst riots in Europe’s third largest economy since 1968”. Thousands of protesters have taken to the streets for the four consecutive Saturdays, demanding an improvement living conditions and blaming President Macron for favouring the elite classes of society. Succumbing to the pressure, government had already suspended the proposed diesel duty hike, and has now announced few more appeasing actions, which include: 1) a 7% rise in the minimum wage, 2) removal of tax and social charges on overtime, 3) encouraging employers to give workers a tax-free bonus, and 4) an end to the surcharge on most pensions. However, it remains to be seen how Macron’s promises will be received by the protesters and whether more demonstrations will follow in the future. Impact on the French economy and retailers According to the French government, the total cost of promised actions is likely to be in the range of €8-10bn, besides the absence of tax benefits from the proposed tax hikes. Moreover, the protests would cost the French GDP growth 0.1% qoq in Q4 FY18. The Banque de France has also cut the country’s Q4 FY18 GDP growth estimate by half to 0.2% qoq. There is no doubt the ongoing unrest will adversely impact some sectors, e.g. the retail sector might lose over €1bn during the period (according to the French Retailers Association). The government also believes that large-scale retailers have experienced a 15-25% revenue loss, due to these protests. Note that Q4 (October – December) is the most important period of the year for retailers. In the run-up to Christmas, such high-octane protests will take a toll on the grocers’ top-line, especially in the store formats (e-com players might still benefit from store closures to some extent; we are assuming home delivery remains a possibility amidst a disruptive environment). If the current chaos spills beyond Q4 2018, the country’s economy is likely to be adversely impacted in the near term. We believe the combination of slower GDP growth, lesser tax receipts and higher social spending might shatter Macron’s budget deficit target of 2.8% in 2019. And this might force the government to halt its plan of progressively reducing corporate tax rate to 25% by 2022 (vs 33% at present). In a nutshell, the protests might inflict a double-whammy on French retailers (lower revenue growth in the coming quarters and a higher than expected tax rate in the forecast years). Two retailers from our coverage (Carrefour and Casino) are based / operate in France. Although both have witnessed a slump in their stock prices over the past few weeks, Carrefour seems to have lost slightly more value compared to its arch-rival Casino. However, this slide has also opened an opportunity to patient investors (investment horizon of more than a year) as the ongoing disruptions are non-structural in nature. We will be tweaking our estimates but reiterate our positive recommendation on both stocks.

Companies: Carrefour

12 Dec 18

France: yellow vests movement and impact on retailers

Companies: Casino Guichard Perrachon

12 Dec 18

First read: disappointing interim results plus strategy update

Dixons Carphone reported disappointing Q2 FY18/19 results. While group lfl sales growth improved across all geographies (UK&I electricals: +3.0%, UK&I mobile: +1.0%, Nordics: +7.0% and Greece: +12.0%), the company incurred various non-recurring expenses during the quarter (including a goodwill impairment on UK mobile business, property rationalisation expenses, and regulatory and data incident costs). As a result, H1 FY18/19 net loss came in at £472m (vs £38m profit in H1 FY17/18). While management has kept its FY18/19 headline PBT guidance unchanged (£300m vs our estimate: £305m), it has announced a 40% reduction in the full-year dividend. As expected, management has also shared a strategic plan for the UK&I business. Key highlights are: 1) focus on four areas comprising online sales growth, expansion of credit availability to customers, restoring profitability to the mobile business, and customer experience improvement, 2) launch of a share ownership scheme for every permanent employee, 3) deliver £200m of gross cost savings, available for reinvestment and margin progression, 4) take the group’s EBIT margin to at least 3.5% over five years, 5) incur £200m of capex over three years, funded by working capital improvement, and 6) generate over £1bn of cumulative FCF over the next five years. Preliminary view: Despite clocking a decent lfl performance, the Q2 profitability slump is worse than our expectations (even after adjusting for the goodwill impairment + exceptional costs). Moreover, it was a much-awaited turnaround plan, considering the company has been hit by multiple profit warnings and the disposal of ‘once considered promising businesses like honeybee’ over the past two years. Although the new CEO has announced numerous qualitative measures to boost the performance (with a focus on top-line growth), it falls short of our expectations. Even if management is able to turnaround the UK business successfully (especially the revival of the loss-making UK mobile business), the execution will be spread across many years and subject to high risk of execution + competition + probable economic slump / soft consumer demand. The two biggest disappointments are management’s relative comfort with a 3.5% operating margin in the medium term and just £1bn cumulative FCF over the next five years (which is below our current estimates). While we await more information from the conference call (scheduled later today), we will be adjusting the earnings estimates to factor in the impact of the Q2 performance and the turnaround plan.

Companies: Dixons Carphone

12 Dec 18

Alba Mineral Resources - Shareholder Evening

12 Dec 18

SymBio Pharmaceuticals - Preparing to establish own sales organization

SymBio announced in October that it has begun preparations to establish its own sales organization to market Treakisym and other anticancer drugs in Japan after the marketing agreement with Eisai expires in December 2020. The announcement validates our decision earlier this year to adopt self-commercialization in Japan in our base-case valuation model. Self-commercialization will improve operating margins and allow it to establish a team of in-house experts to communicate the benefits of Treakisym (and rigosertib if approved) to healthcare providers. Our valuation increases to $225m as we roll forward the DCF model; our earnings forecasts and valuation assumptions are unchanged.