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15 Aug 18

H&T Group PLC - Disciplined Growth in H1

H&T Group PLC (LON:HAT), the UK market leader in pawnbroking, released results on August 14 for the first half of 2018, showing sustained growth both in the core pawnbroking and other financial services.

Companies: H&T Group

13 Aug 18

LIBERUM: Plus500* - Now the #1 CFD broker in UK, Germany and Spain. 90% of FY est’s earned in H1!

Amazing H1/18 results with revenue +147% yoy and PAT +190% yoy. Customer deposits in H1 were up 130%, though Singapore is just getting going. The company has made diligent progress with the Elective Professionalisation offer to qualifying EEA clients, who already represent 22% of EEA revenues, and they expect to hit over 40% (cf. IG expecting 50%).

Companies: Plus500

14 Aug 18

Strong market dynamics with consolidation opportunities

Falanx has established itself as a trusted advisor in the cyber security sector through the high-quality execution of its cyber services proposition, based on a methodology and set of processes that have been built up over many years, enabled by strong technology and experienced analysts. The Falanx Group offers an opportunity to invest directly in the growing cyber security market while gaining exposure to the benefits of M&A consolidation in a fragmented segment, led by an experienced team with a proven track record.

Companies: Falanx Group

16 Aug 18

7digital Group - Ready to rock ’n' roll

7digtal has now reported its FY17 results, which show a strong uplift in revenues, reflecting the 24-7 acquisition, and a greatly reduced EBITDA loss. The publication of the results was delayed in order to conduct a thorough review by new auditors, resulting in a significant strengthening in reporting procedures and systems, and a restatement of historical figures. The rapidly shifting streaming market gives the group significant B2B opportunities, with music a key element of customer engagement for retailers, connected devices and mobile network operators.

Companies: 7Digital Group

21 Aug 18

Off to the races as NFL season draws closer

The US sports betting market has the potential to be significantly large. However, lack of federal level legislation, sluggish state by state legislative processes, and other limiting factors will cause a likely drag on the sport betting market’s full potential. The American Gaming Association estimates at least $150bn is wagered annually with offshore books, which implies a $10bn - $12bn revenue market. We estimate, onshore online sports revenue in 4 - 5 years of $6bn (table 6, p14) should be achievable across 25 States where Daily Fantasy Sports is legal in 22 states, if we include California, implies a market as large as $7.5bn in revenue. UK listed operators not necessarily only winners as US operators, Stockholm listed and some private companies make early inroads. Sports betting live in New Jersey, Mississippi, Delaware and Nevada, with West Virginia and Pennsylvania expected to follow soon.

Companies: GVC WMH PPB PTEC SPO 888 GAN NKTN KAMBI GIG SGMS IGT

15 Aug 18

Cenkos: Arena Events Group Plc - Successful Placing for Acquisitions

Arena Events Group plc has conditionally raised £20m via a placing, subject to shareholder approval, to facilitate making two material acquisitions, one in the West Coast USA and the other in the Middle East. Both acquisitions are expected to be earnings enhancing this year and in future years. We assess Arena to offer investors access to growth at an affordable valuation. We upgrade our forecasts and reiterate our Buy recommendation.

Companies: Arena Events

21 Aug 18

Cenkos: Angling Direct Plc - FY19E Interim Trading Update

Angling Direct has announced a trading update for H1/19E guiding to performance ahead of expectations. Revenue for H1/19E increased 56% YoY, ahead of our full-year run-rate of c37%. The German website was successfully launched in Jun-18, providing an additional platform for continued growth. The soon-to-open Guildford store will bring the store count to 23 (our FY19E forecast = 24). Management continues with its successful strategy focused on organic growth, new store expansion, ecommerce investment and potential acquisitive growth. We assess this niche market leader has sufficient runway to capitalise on a consolidating industry, as competitors struggle to expand and/or retain profitability. We will reassess our forecasts at the interims but reiterate our Buy recommendation.

Companies: Angling Direct

17 Aug 18

Hutchison China MediTech - Establishing a global operational presence

Highlights from Hutchison China MediTech’s (HCM) H118 results relate to the substantial pipeline-related newsflow expected in 2018/19, the recent expansion of its US and international operations (which will enable HCM to execute its international R&D and commercialisation strategies) plus strong operational and financial performance by the China commercial platform division. Fruquintinib (third-line CRC) remains on track to launch in China by year end (approval decision expected by the CNDA in the next few months). Encouraging Phase II data so far on savolitinib (first-line NSCLC exon14m/deletion) could lead to accelerated approval in China, contingent on final data (expected in 2020) being consistent with data to date. We value HCM at $6.4bn or £73.3/share.

Companies: Hutchison China Meditech

21 Aug 18

Game Digital - Pressures countered: BELONG moves ahead

Game Digital (GMD) has finished its year with cost measures countering trading pressures and with BELONG moving into action as the first, larger, sites open. The clearer future represented by BELONG is not reflected in the share price, which remains less than cash.

Companies: Game Digital

15 Aug 18

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21 Aug 18

LIBERUM: GAME Digital* - FY18E gross margin pressure, but net cash beats

GAME's year-end update highlights a continuation of the H1 trends, which leads us to lower our adjusted EBITDA forecasts by 8%-10%. Pre-Owned Software, which is higher margin, continued to be challenging with this impact more than offsetting continued growth in Mint Hardware and Digital.

Companies: Game Digital

07 Aug 18

IQE - Six more VCSEL projects in mass production

IQE’s post-H118 close trading update notes the group continues to trade in line with current market expectations. Importantly, it comments on a significant increase in photonics revenues from product qualifications, underpinning management’s expectation of a photonics ramp-up in H218 and FY19. We raise our revenue estimates slightly but otherwise leave our forecasts unchanged.

Companies: IQE

20 Aug 18

Cenkos: Kromek Group Plc - Scaling up production

A spate of contract newsflow is increasing revenue visibility over this year. Some new and incremental addressable markets are being discovered for Kromek's CZT based detection equipment. The footprint of the business is steadily increasing and its size will be enhanced materially as the US manufacturing facility ramps up this fiscal year.

Companies: Kromek Group

01 Aug 18

The Monthly

Hardman & Co’s analysts have direct experience of uncovering accounting frauds. In this article, Steve Clapham outlines why we might see a surge in them over the next few years. He is engaged by institutions to teach their fund managers and analysts how to identify risks brought about by such frauds. Hardman & Co is pleased to offer this service to private investors.

Companies: OPM AVO AGY APH ARBB AVCT BUR CMH CLIG COS DNL EVG GDR INL KOOV MCL MUR NSF OXB PHP RE/ REDX SCLP SCE SIXH TRX TON VAL W7L

10 Aug 18

Cenkos: Smart Metering Systems Plc - Smart time to BUY

The British Infrastructure Group of Parliamentarians (BIG) published a report on 20 July entitled “Not So Smart. A comprehensive investigation into the roll-out of energy smart meters” (the BIG report). Although the report is generally supportive of the UK transition to smart meters, it was widely picked up in the press and the domestic smart roll-out programme heavily criticised. In our judgement, none of the findings in the report constitute fresh news and indeed there are several inaccuracies that could potentially undermine confidence in the adoption of smart meters. Following the recent decline in the SMS share price we have examined two very conservative DCF valuation scenarios. Even if SMS was to undertake no further smart meter installation activity after the current year we value the shares at 751p. However, with our current target of 2.45m meters installed by 2020 and valuation of 1015p, c57% ahead of current level, investors should take advantage of the recent weakness in the SMS share price.

Companies: Smart Metering Systems

21 Aug 18

Exploration watch: Argentina

Argentina has experienced major changes in its oil and gas industry over the last five years. The country holds world-class shale potential in the Vaca Muerta and is the second-largest shale region undergoing development in the world after the US. Discovered in 2010, the Vaca Muerta has attracted major companies to invest in the region including Chevron, Dow, ExxonMobil, Shell and Total. Production has historically been dominated by the state majority-owned company Yacimientos Petrolíferos Fiscales (YPF), but this is shifting as it partners with the majors to develop the Vaca Muerta and as the country moves to more market-friendly policies under President Mauricio Macri, elected in 2015. Unconventional development is not the preserve of the majors, however, and independent Phoenix Global Resources’ 2018 programme is designed to accelerate unconventional growth in the Vaca Muerta. Meanwhile, the shift of focus of the majors to unconventionals has created an opportunity for independents operating in the conventional space, where production has been declining. Both President Energy and Echo Energy are focused on growing conventional production in Argentina and have active programmes in 2018.

21 Aug 18

RCM Beteiligungs - Moving on

Having reported a bumper first quarter, RCM Beteiligungs has predictably met H118 expectations of €2.4m PBT, which alone exceeded full-year 2017 (€2.1m). Favourable macro factors and scope for efficiencies and asset development encourage continued confidence, even if this risks being tempered by a quiet Q2 (lower profit) and the lack of elaboration on post-Q1 guidance of €3m+ 2018 PBT. Sound finances (high interest cover and an above industry average equity ratio of 45% at June 2018) should allow a resumption in property expansion after a pause in 2017 and subsequent disposals.

Companies: RCM BETEILIGUNGS NA. O.N.

21 Aug 18

Aladdin Blockchain Technologies - Progress on all fronts

Aladdin has issued a series of updates on its progress with the development and implementation of its technology suite. Perhaps most significantly, it has launched its prototype blockchain network and is now adding some quarter of a million electronic health records (EHR) to the platform. Separately, Aladdin has announced a prototype for the diagnosis of diabetic retinopathy, with early analysis indicating that accuracy is similar to, or better than, humans. Information on the commercial aspects of these developments is extremely limited and we await further updates with the H1 results in September.

21 Aug 18

Lakehouse - Promised disposals achieved

In its interims on 20 June Lakehouse indicated it had reached heads of terms to sell its property services and construction operations. The company announced on 17 August that the sale is now completed. The business has been divested for a potential consideration of up to £1.5m in cash. The final outcome depends on the performance of the business between the date of completion and 30 September 2021. This uncertainty is normal in the industry as there are ongoing projects and final accounts to settle on completed works. Our forecasts are unchanged as the divestment is in line with our assumptions, although the financial outcome, while potentially material, is uncertain. The provision for losses in the disposed operations, taken at the interims, of £11.8m is deemed adequate by the company at this stage.

Companies: Lakehouse

21 Aug 18

Basilea Pharmaceutica - Cresemba growth, pipeline expansion

Basilea reported a strong set of interim 2018 results; H118 total revenues grew to CHF59.9m (+30%, H117 CHF46.2m). Notable is Cresemba’s (invasive mould infections) performance; its revenue contribution increased 30% to CHF26.3m (H117 CHF20.3m), which includes royalties on sales of CHF10.8m (H117 CHF5.3m) received from partners. Zevtera (severe bacterial infections) sales remain lacklustre; however, the US opportunity is key and the two required registration ceftobiprole trials (SAB and ABSSSI) are now underway. We value Basilea at CHF1,239m.

Companies: Basilea Pharmaceutica

21 Aug 18

Wheaton Precious Metals - Q218 results in line with expectations

Wheaton Precious Metals’ (WPM) Q218 results were closely in line with our forecasts in terms of production, sales, prices and financial results, with better than expected performances at Salobo, in particular, but also San Dimas (gold) and Antamina offsetting weakness at Sudbury, in particular, and also Minto and 777. Somewhat unusually for a second quarter, sales correlated closely with production.

21 Aug 18

Game Digital - Pressures countered: BELONG moves ahead

Companies: Game Digital

21 Aug 18

Cenkos: Angling Direct Plc - FY19E Interim Trading Update

Companies: Angling Direct

21 Aug 18

Morning Note – 21 August 2018

Companies: Castleton Technology Tracsis

21 Aug 18

LIBERUM: GAME Digital* - FY18E gross margin pressure, but net cash beats

Companies: Game Digital

21 Aug 18

First Light

Pennant International (PEN) – Corporate – Small but helpful wins underline software strength and global brand awareness

Companies: Pennant International Group

21 Aug 18

Major partnership with Bosch

Today’s strategic collaboration and licence agreements with Bosch is a very meaningful milestone for Ceres and its SteelCell® technology. Previously an unnamed OEM, the agreements will see both parties further develop Ceres’ fuel cell technology, establish small-volume production, and longer term scale up and mass-production capability. This targets multiple applications Ceres Powerin multi-kW stacks, particularly for use in distributed power. Associated long-term revenue is expected to be material as licence royalties are achieved. Ceres will initially receive c.£20m over the next two years, through technology transfer and joint development work. In addition, Bosch will make a c.£9m equity investment that we believe significantly de-risks the opportunity and brings a high-quality global OEM alongside management’s aspirations. We have updated our P&L and cash flow forecasts in this note on today’s news flow and other recent events. The balance sheet has been greatly strengthened, and we forecast Ceres to be c.£67m net cash by FY2019E end, while the after-tax loss is expected to materially reduce.

Companies: Ceres Power

21 Aug 18

GMP FirstEnergy ― UK Energy morning research package

Nostrum Oil & Gas (NOG LN)1,6; BUY, £5.40: 2Q18 results | Wentworth Resources (WRL LN/NO)1,6 (not covered): Discontinuing coverage

Companies: Nostrum Oil & Gas Wentworth Resources

21 Aug 18

Off to the races as NFL season draws closer

Companies: GVC WMH PPB PTEC SPO 888 GAN NKTN KAMBI GIG SGMS IGT

21 Aug 18

Betsson contract extention, receivables update, own financial trading brand on track for 4Q18 launch

VLTY announces that it has extended its marketing contract with Betsson (sports & casino) for a further three years to May 2021. Management reference that progress is being made with receivables, and on track to launch own regulated financial trading brand in the 4Q18. Cash has improved since July to currently €1.3m a further c. €0.65m expected before the end of August, management expects to take cash to c. €1.8m at the end of August.

Companies: Veltyco Group