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19 Feb 19

Cenkos: Duke Royalty Ltd - A myriad of royalties to come

Duke has announced a new £10.0m royalty investment into MRDB Holdings, trading as Miriad Products (Miriad), the largest privately-owned wholesale supplier of recreational vehicle (RV) parts in the UK. Following the recent addition of Capital Step, Miriad represents Duke's twelfth core holding, further diversifying the royalty portfolio. The deal continues the theme of investment into well-established UK businesses, with strong barriers to entry that help protect long-term royalty income.

Companies: Duke Royalty

19 Feb 19

Cenkos: Seeing Machines Ltd - Sixth Automotive OEM Design Win

Seeing Machines, the advanced computer vision technology company that designs AI powered operator monitoring systems to improve transport safety, has secured a new programme design win with a global US-headquartered automotive OEM to deliver the Group's Driver Monitoring System (DMS) technology. Seeing Machines is working alongside a major Tier 1 partner to deliver the new programme via its highly scalable FOVIO Chip, with mass production scheduled from late 2020, and an estimated lifetime revenue of A$6M for the initially planned car models. The design win is classified as a small value programme but is considered strategic with a significant potential for volume/model expansion with increasing demand for driver monitoring systems, globally.

Companies: Seeing Machines

20 Feb 19

Refocused and primed for growth

Wey Education plc is a UK-based educational group delivering online education services in the UK and around the world. The tragic loss of its Executive Chairman towards the end of last year has necessitated a refocusing of Wey’s strategy, the details of which were announced in early February. Under the Chairmanship of Barrie Whipp, and led by CEO Jacqueline Daniell, the Group is now set to be more focused and streamlined around its existing businesses of InterHigh and Academy21. Coupled with a revised sales and marketing campaign, Wey is seeking to capitalise on the growing demand for online-based education, alongside targeted overseas opportunities to be achieved from the UK. Although there is a material rebasing of our estimates, we believe near-term forecast risk significantly reduces with potential, certainly in 2020E, towards the upside. Our DCF valuation conservatively sees fair value at 35p.

Companies: Wey Education

12 Feb 19

LIBERUM: Plus500* - Too much of a good thing

Elevated volatility is good for trading platforms, but market falls in Q4 caused significant client losses ("P&L gain”), rather than higher spread revenue. The company is choosing to subtract this gain from Q4 revenues and to base 2019 guidance on the organic growth which they have always achieved.

Companies: Plus500

19 Feb 19

HomeSend progress update

Regular updates give us visibility into progress at HomeSend (HS) – the company’s 35.69%-owned JV with Mastercard. Today’s update excites with the first clear evidence of the changed focus as almost a third of the December flow now comes from account-to-account (A2A) transactions rather than remittances (i.e. banks and financial institutions instead of just MTOs). Although a key element of the eServGlobal investment, HS is private and at this stage commercial sensitivity limits information available. We assume that more information will become available as its scales. ESG’s management provides these updates to enable us to fine-tune our financial expectations for the JV and the group as a whole. This HS update follows on from one in late November and comes just ahead of the ESG’s FY 2018 results, due next week.

Companies: eServGlobal

21 Feb 19

Update on trading & management

Purplebricks’ trading update reveals subdued trading in challenging market conditions. The Board has reduced the guidance for group revenue for the year to 30 April 2019 from £165m to £175m to £130m to £140m under IFRS15.

Companies: Purplebricks Group

19 Feb 19

Morning Comment

Walker Greenbank is a higher end interior furnishings business with well-established global brand names and manufacturing facilities in the UK. The Group has this morning provided a year-end update confirming that results for the year to 31 January 2019 are anticipated to be in line with the Board’s revised expectations; these benefitting from significantly higher licensing income, including from a major contract with H&M. Underlying core trading, most notably in the UK, has continued to be challenging, a trend that in the near term shows little sign of abating. Reflecting these trends, whilst assuming that licensing income reverts to more normalised levels in the current financial year, leads us to reduce our FY 2020E earnings expectations by 25% this morning. Today’s update again illustrates the current market uncertainty and whilst this will take time to improve, we do believe that the Group remains strategically well positioned in its markets and should benefit from its overseas presence, further licensing opportunities and other initiatives in time.

Companies: Walker Greenbank

20 Feb 19

Accelerated savings gains delivery

Second half operating trends were in line with plan, enabling management to reiterate its financial objectives for this year secured by accelerated savings gains delivery.

Companies: Lloyds Banking Group

21 Feb 19

InnovaDerma - Interims – better H2 expected, driven by new launches

Interim results to 31 December were in line with the 10 January trading statement, with revenues falling 7% to £3.9m, resulting in a pre-tax loss of £0.4m and period-end cash of £0.7m. Whilst no announcement of an initial purchase order from Boots is included within the interim statement, preparations for a mid-March retail launch are fully underway, with shelf space already allocated in some of the 1,305 stores. We use this opportunity to make changes to our forecasts, reducing revenues, PBT and EPS by 8%, 10% and 6%, respectively. This, in our opinion, reflects the H2 outlook, with much still dependent on the Boots initial order and subsequent re-order rates. Consequently, we reduce our target price to 200p (-9%), which implies an adjusted CY 2019 P/E, EV/EBIT and EV/Sales of 23x, 14.5x and 1.9x, respectively, underpinned by rising ROCE and free cash flow yield.

Companies: Innovaderma

19 Feb 19

Robust interims show opportunity

In the first full six-month period since GDPR, DOTD has demonstrated that the Engagement Cloud platform continues to generate robust growth, through yet greater data integration and customer empowering insights. 33% headline growth from three strategic pillars included 15% organic revenue growth: pillar one, revenue from sales of additional functionality, grew 50%; pillar two, sales via strategic partners, grew 43% to constitute 41% of group revenue; and pillar three, international revenue, achieved growth of 40%. While Comapi suffered from UK retail exposure, the technology integration is well underway, leading to global opportunity from a fully omni-channel platform with broader functionality. With net cash of £16.7m at December 31st, the board has the benefit of balance sheet strength to consider all strategic opportunities. 12-month target 135p reiterated.

Companies: Dotdigital Group

18 Feb 19

Nuclear contract win highlights growing momentum for Hayward Tyler

Avingtrans’ subsidiary, Hayward Tyler, has been awarded a material aftermarket contract from Vattenfall in Sweden for critical parts and components to help extend the life of the Forsmark nuclear power station. These parts will replace original equipment supplied by Hayward Tyler in the early 1980s. The contract is worth over £10m, with delivery expected to be broadly evenly split across FY2021 and FY2022. We have made no changes to our estimates, as contributions from the new contract begin after our current forecast horizon. However we are encouraged by the increasing momentum at Hayward Tyler since its acquisition by Avingtrans. We also see good potential for the business to win further contracts in nuclear life extension, given its installed base of original equipment within nuclear plants around the world. Avingtrans shares remain on undemanding EV/EBITDA multiples (8.3x FY19 and 7.1x FY20), with interim results scheduled for 27th February.

Companies: Avingtrans

20 Feb 19

Gooch & Housego - AGM warns of softer microelectronics but better subsea

The AGM update points to a change in the business mix, with weaker microelectronics demand, particularly in China, partly offset by better-than-expected growth in subsea fibre couplers. 2H order books and demand profile signals a stronger 2H. The change results in a less rich margin mix and prompts us to downgrade 2019 EPS by 11.6%. We reduce our price target by a similar amount from 1,675p to 1,475p, pointing to a 2020 P/E of 22x. We anticipate that the shares will react to this disappointing statement but believe that the group’s fundamental attractions remain, but may need confirmation of a stronger level of microelectronics demand to restore outperformance.

Companies: Gooch & Housego

22 Feb 19

AGM statement affirms outlook positive

Oxford Metrics released a brief AGM statement yesterday afternoon highlighting a positive start to the new financial year. Based on trading performance to date, management see traction as consistent with achieving FY’19 market expectations. In line with previous years, the group’s revenues are expected to be second half weighted, yet we are encouraged by management comments regarding strong pipelines building across the business. Management remain on track to deliver on its strategic goals of doubling profits and tripling recurring revenues by FY’21. We make no changes to forecasts, and expect group revenue growth of >10% y/y (constant currency) to continue through FY’19.

Companies: Oxford Metrics

19 Feb 19

13.5p special DPS

CLIG’s interims released yesterday are precisely in line with the update given on 16 January, except that it revealed: Group FUM rose 9.7% in January 2019 to US$5.1bn: with Sterling strengthening from $1.28/£1 to $1.30/£1, Group FUM rose circa 8% to £3.9bn. 9.0p interim DPS (1H18 interim DPS: 9.0p) will be accompanied by a 13.5p special DPS: both dividends will be paid on 22 March 2019.

Companies: City Of London Investment Group

19 Feb 19

Beware of hasty conclusions

The group missed expectations by a wide margin. However, this was largely attributable to adverse market conditions, not to troubles in Asia, as evidenced by management’s comments on the lack of a radical move need and the reiteration of its mid-term objectives.

Companies: HSBC

22 Feb 19

Investment Research Landscape Post MiFID II

22 Feb 19

ReNeuron Group - Exciting positive data in retinitis pigmentosa (RP)

ReNeuron’s announcement of early but exciting data on three patients in the clinical study of its human retinal progenitor cell (hRPC) product was well received. Although the patient numbers are small and the follow-up time points are short (two months and 18 days), the improvements in visual acuity are striking and may enable an earlier start to the pivotal programme.

Companies: Reneuron Group

22 Feb 19

Sale of the Centro American activities and satisfactory Q4

The group released its Q4 results yesterday which once again were quite good if we leave out of the equation…the negative FX impact. Revenues were up organically by 3% yoy, a quite good number reflecting a slight acceleration compared to the +2.7% and +2% recorded during Q3 and H1. And if, as usual, the reported revenues declined due to the South American FX, it was however less than in the previous quarters as they were eventually down by only 1.9% (vs. -8.3% in Q3 and -6.75 in H1). Q4 EBITDA has increased by 2.4% yoy in organic terms at constant change (and by 3.3% excluding regulation). Note however that Q4 EBITDA decreased by 9.6% in reported terms, not only due to FX but also with restructuring costs and a goodwill write-off in Mexico. Telefonica has confirmed its final remuneration for 2018 (the second half part of the dividend: €0.2 to be paid in June) and has decided to maintain the dividend for 2019 at €0.4 (to be paid in December and in June 2020). As for 2019, the new guidance remains cautious with expected revenue and EBITDA growths of around 2%. Note in parallel Telefonica has reached an agreement with Millicom for the sale of its activities in Costa Rica, Panama and Nicaragua for an aggregate amount (in terms of EV) of c.€1.45bn (c.€500 million for Costa Rica, c.575m for Panama and c.380m for Nicaragua), corresponding to 6.7X the estimated 2018 EBITDA of the three companies. With this transaction, together with the sales of its activities in Guatemala and Salvador (announced on January 24), Telefónica completes the sale of all its operations in Central America for an aggregate amount (EV) of €2.03bn (7.4X the estimated OIBDA 2018 of all companies) and with an estimated debt reduction of approximately 1.4bn.

Companies: Telefonica Sa

22 Feb 19

Darzalex to reach triple blockbuster in FY19; R&D investments set to continue

While sales for Darzalex were a tad below estimates, total revenue exceeded expectations in FY18 on the back of higher milestone income. Robust revenue acceleration is anticipated for FY19 as well, though operating profit would continue to be weighed down by higher investments into R&D. Given that the multi-blockbuster potential of Darzalex is still intact, we reiterate our ‘Buy’ recommendation.

Companies: Genmab

22 Feb 19

Eliott is making its plan a reality

Remember that in a surprise move Telecom Italia had released its 2018 preliminary results on 18/1. So the annual release of this morning is not a surprise. Q4 revenues were down by 2.5% yoy in organic terms: - Italian activities were down by 4.1% yoy and nevertheless suffering from regulation and from the entry of Iliad into the Italian mobile market; - the Brazilian unit has seen its revenues grow by 5.1% (a good number compared to Telefonica Brazil) in BRL (they were down by 2.5% in reported terms with the forex). Q4 EBITDA was however good, up by +0.4% in comparable terms and by 10.9% adjusted from Brazilian FX. But the key point of the release is that the group has delivered in parallel its new strategic plan for 2019-21 with in particular: - active sharing through an agreement with Vodafone on 5G in Italy - a business combination of INWIT and Vodafone’s infrastructure on mobile antennas - started negotiations with Open Fiber to evaluate all possible options including a full business combination on fixed networks. As for 2019-21 organic domestic EBITDA is expected to decrease low to mid single digit in 2019, with low single digit growth targeted for both 2020 and 2021. Well, 2019 will be slightly tougher than expected but it is for a good reason: 2020 will be the year of the recovery… with solid ultrafast broadband networks (most of them shared). As for Brazil, the prospects look good: revenues should grow by 3-5% in BRL in 2019, growing mid single digit in both 2020 and 2021 while the EBITDA is expected to grow mid/high single digit in 2019 with a 40% margin target for 2020 confirmed.

Companies: Telecom Italia

22 Feb 19

Cenkos: Inspiration Healthcare Group Plc - Constraining environment

Inspiration Healthcare has announced its trading update for the 12 months to Jan-19 (FY19). Revenues are expected to be £15.5m, c£0.7m below our previous estimate, despite this PBT of £1.2m is in-line with our forecasts. In our view these results reflect solid performance from Inspiration Healthcare in a European medical devices market dealing with significant changes to the regulatory environment resulting in approval delays and the downstream consequences to revenues of such. We maintain our BUY recommendation.

Companies: Inspiration Healthcare Group

22 Feb 19

GMP FirstEnergy ― UK Energy morning research package

Bahamas Petroleum Company (BPC LN) (not covered): Licence Term Extended | Gran Tierra Energy (GTE CN): Acquires consolidating Putumayo and Llanos basin positions for US$104 mm |

Companies: Bahamas Petroleum Company Gran Tierra Energy

22 Feb 19

AGM statement affirms outlook positive

Companies: Oxford Metrics

22 Feb 19

Trading in line with expectations.

APC’s AGM statement highlights that “the Board are pleased with the start to the new financial year” and confirms that “the Company continues to trade in line with management expectations”. APC remains focused on its growth strategy. We maintain all of our forecasts at this stage. Our FY2019E forecast is for PBT of £1.63m and EPS at 0.74p putting the shares on a PER of 8.3x. Interims are expected in April. We reiterate our Buy recommendation and 12p target price.

Companies: APC Technology Group

22 Feb 19

(Almost) Daily Market News Update

After yet another round of discussions between the UK and the EU on Brexit failed to deliver any progress, EU officials are now allegedly preparing to grant the UK a three-month extension to the Brexit deadline to give Parliament enough time to pass the necessary legislation. This is about the longest time period that is possible without the UK participating in the European elections on May 23 to 26.

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21 Feb 19

2018-20 under pressure, causing uncertainty about the dividend

Centrica delivered a mixed set of results FY18, adjusted operating cash flow and net debt were within the target ranges, but EPS is 2.6% lower than expected. Due to the UK default tariff cap the low volumes in E&P and nuclear, group downgraded AOCF guidance for 2019 is 1.8-2.0, or 13.6% lower than the required average pace of growth to reach the 2018-20 target.

Companies: Centrica

21 Feb 19

LIBERUM: RPS* - EPS ahead and estimates increased due to lower tax

FY 18 PBT in line with expectations, but EPS higher than our estimate due to lower tax. We increase both FY 19 and FY 20 FD EPS by 1.7% due to lower tax.

Companies: RPS Group

21 Feb 19

Check-mate for Sainsbury’s?

CMA has released provisional findings on the proposed merger between Sainsbury’s and Asda, which states that the deal could: 1) push-up the prices and worsen the experience for in-store and online shoppers, 2) lead to a reduction in range and quality of products offered, and 3) the prices could also rise at a large number of Sainsbury’s and Asda petrol stations. The potential options set out by the UK regulator include blocking the deal altogether or requiring the merging companies to sell-off a significant number of stores or other assets (e.g. disposal of one of the brands). Sainsbury’s, which has been at loggerheads with the regulator for many months now, has strongly refuted these claims and reiterated that the combined entity will lead to cost savings, in turn resulting in price decline for customers (the opposite of what the CMA has assessed). The company’s spokesperson has also alleged that the CMA has ‘moved the goalposts’ and its analysis is inconsistent with comparable cases.

Companies: J Sainsbury

21 Feb 19

Strong audience share, resilient TV advertising revenue.

The audience shares remained solid in TV and radio in 2018. TV advertising revenue increased very slightly (+0.5%) in a difficult environment for TV advertising and Group RTL gained market share in advertising thanks to higher audience share. The EBITA margin improved moderately in the TV division (+0.2pt to 22.1% of revenue) while the Radio division brought in €28m (16.8% of revenue) on twelve months. M6 turned to a net cash position following the disposal of monAlbumPhoto and FCGB.

Companies: Metropole Television

21 Feb 19

First signs of a (much awaited and needed) recovery

- Q4 shows a rebound in volumes (particularly in EAMEA). - EBITDA substantially better in Q4, as expected and even better. - FCF positive in Q4 (first time since… 2015). - Outlook quite confident (to be slightly mitigated by our view on top management). - Management reasserts they can live without a share issue in FY19. - No big change to our numbers. We will reconsider after Q1/H1 if we sill believe in a capital increase.

Companies: Vallourec