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.

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%.

Tristel - FY 2020 results

Full-year results were 4% above expectations, with revenues and adjusted pre-tax profit rising 21% and 27%, respectively, boosted in part by acquisitions in FY 2018 and 2019 but also from COVID-19 related buying, particularly Cache surface disinfection products. We raise FY 2021 adjusted pre-tax profit by 3% to £7.2m and introduce FY 2022 forecasts, which point to c.11% EPS growth. FY 2021 growth is held back by the stated c.£0.75m commitment to developing a fuller pipeline of products to take to the FDA/EPA and Canada Health. We view this as a strong endorsement of the progress that has been made to date. We also lift our target price to 500p on the back of a small FY 2021 upgrade and outlook for growth in 2022, supported by renewed commitment and resourcing for North American regulatory approvals.

Open Orphan - £10m COVID-19 challenge contract with UK Govt

ORPH has signed a contract with the UK Government for the development of a COVID-19 human challenge model. This will involve manufacture of the challenge virus and a first-in-human characterisation study. The contract begins immediately and is likely to be worth c.£10m. The government has also reserved the first three slots to test vaccines using the challenge study at a total cost of £7.5m. We revise our forecasts and increase our SOTP target price to 28p (range 25-31p), reflecting ORPH’s world-leading position in traditional challenge models, and now COVID-19 challenge models, with additional upside from the potential development of new challenge models, the monetisation of valuable challenge model data and the potential sale of its non-core pharmaceutical assets.

Synairgen - £80m funding for COVID-19 study and supply chain

Synairgen has raised £80m to fund a Phase III trial for SNG001 in COVID-19 disease, which is due to commence in Q4 2020 and will be run globally by Parexel, with results expected in Q2 2021, and scale up manufacturing. This follows a successful pre-IND meeting with the FDA, which provided the guidance to commence such a study. Assuming that this trial replicates the results seen in the 100-patient Phase II trial, we would expect Emergency Use Approval (EUA) to follow shortly thereafter. Meanwhile, the Managed Access Programme (MAP) in the UK and Europe, run by Clinigen, could generate early commercial revenues. We have made adjustments to forecasts to reflect these costs and raise our SOTP rNPV target price to 420p, which could rise further should stockpiling orders be received.

Morning Note – 22 October 2020

Quartix - Strong Fleet recovery drives an earnings upgrade

This new Q3 update is a welcome addition to QTX reporting calendar, particularly as it reveals impressive resilience through the pandemic; far better performance than originally thought. Management expects FY 2020 revenue and FCF to be in line with consensus forecasts but with earnings substantially ahead. There is a caveat on the impact of the second wave of COVID-19, but so close to YE the risk is relatively low and we raise our forecasts appropriately. Fleet is the driver; despite the impact of lockdowns on new subscriptions in Q2, the subscription base has grown 11% YoY across the 9 months to 168k, fuelling 7% YoY growth in Fleet revenue. The annualised subscription base has risen 5.3% from £20.8m at YE to £21.9m in September, comfortably underpinning our FY 2021 forecast.

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.

Alumasc - Positive AGM trading update

The group’s AGM statement reads well, with record Q1 trading and strong cash flows. Net debt now stands below £1m, with significant headroom in facilities. Previous restructuring has delivered £2.4m of efficiency gains, which particularly benefit Levolux and Gatic. The UK market has seen a strong bounce accompanied by a strong export performance and a high level of export orders recently gained. No change to trading forecasts. The shares remain at a deep discount to our 130p price target and today’s update should be taken well.