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15 Oct 19

Earnings risk remains but how much bad news is in the price?

Following the 1H 19 results, we trim our earnings by ~2%/3% for FY19/20e to account for a more synchronised global slowdown. At a PE of ~8x on our FY20e estimates, we believe current levels are now pricing in a ~35% peak-to-trough volume cut vs. the ~70% cut seen during 2007-10). While this may warrant investor interest, we retain our Neutral stance (but lower our PT from 275p to 200p) as we see heightened earnings risks, and importantly note an absence of positive catalysts. Recap on H1 interims. H1’s results came as a mild surprise with revenues outside North America falling ~19% y/y. We note that volumes across the product suite fell 16.5% y/y, mildly offset by a +3.8% y/y gain in average pricing.

Companies: Somero Enterprises

10 Oct 19

Strong earnings support transformation

Morses Club’s result for the six months to 31 August confirmed the group’s strong position to both build on its strength in the Home Collect Credit (HCC) market and ultimately benefit from the changes in customer behaviour by broadening the product range and acquiring further HCC loan books. The results showed strong progress in the digital offering, with close to 14% of HCC customers now signed up for the customer portal launched earlier this year, but also indicated that the level of investment needed to follow the changes in customer behaviour is significant, and will have a near-term negative impact on profitability. The level of investment needed in the industry is, however, also likely to result in more acquisition opportunities as other HCC lenders are unable to make the needed investment. We retain our 190p target price.

Companies: Morses Club

10 Oct 19

IQE - Optimising Asian operations

IQE has acquired the third-party shareholdings in its CSDC joint venture in Singapore for a nominal fee. This gives it control of the operation, which is currently loss making, enabling it to restructure the business and focus it on emerging sales opportunities in Asia for molecular beam epitaxy (MBE)-based products. Short term, the deal has a negative impact on earnings. We reduce our FY19 and FY20 EPS estimates by 8% and 5%, respectively.

Companies: IQE

11 Oct 19

SAP founder/CEO steps down, Boeing partners with Porsche, Ford launches in-car VR

Bill McDermott stood down on Friday after a decade building up SAP as the world's leading enterprise software company, handing the task of completing its transition to cloud computing to new co-CEOs Jennifer Morgan and Christian Klein. SAP announced the management overhaul, with immediate effect, after rushing out third-quarter results that showed it gaining traction in its drive to offer a more streamlined range of services and boost profitability. The company’s stock has climbed 21% this year. It’s up 75% in the past five years, topping rival Oracle, which is up 46%, and the S&P 500′s 54% gain.

Companies: EVRH TRAK CPX CALL ECK IMMO LOOP NET SEE TCM TRCS QTX VRE

14 Oct 19

LP-LDL achieves two major milestones

Last week, OPTI announced two major milestones for marketed ingredient LP-LDL, currently sold as a probiotic in foods and food supplements for the reduction of cholesterol: (1) achievement of process validation under good manufacturing practices ("GMP"), a necessary step in developing LP-LDL as a pharmaceutical drug; (2) confirmation of generally regarded as safe ("GRAS") status by the FDA. Both milestones reflect OPTI's commitment to improving the quality of the science and manufacturing conditions for probiotics to bring them closer to pharmaceutical standards. They should increase LP-LDL's attractiveness to both food companies looking to differentiate their products with evidence-backed ingredients and pharma companies looking to target the microbiome with live bacteria. With both events taking OPTI closer to achieving our forecasts and hence valuation expectations, we reiterate our OUTPERFORM recommendation and target price of GBp97 per share.

Companies: Optibiotix Health

16 Oct 19

Tristel - FY 2019 results: new three-year financial plan

Full-year results were in line with July’s trading update. Revenues grew by 18% CER, with a stronger-than-expected UK performance (+9% vs +2% in FY 2018), driven in part by the launch of new products, supporting the continued expansion in international markets (+26%) that now account for 55% of group revenues. The expected response to Tristel’s pre-submission request to the FDA, expected in December, should help determine the next steps for US registration. We maintain our FY 2020 adjusted pre-tax profit forecasts (+16%) with changes to reflect IFRS16 and introduce FY 2021 forecasts for 10% and 7% revenue and EPS growth. These are towards the bottom of Tristel’s newly set three-year financial plan, which bodes well for potential upside given the strong delivery over the past three years. Our unchanged 325p target price implies a 4% FY 2020 FCF yield.

Companies: Tristel

15 Oct 19

Core holding continues to deliver

dotdigital’s final results contain no surprises, having been largely flagged at the trading update in July. The group continues to deliver high quality growth, with good progress being made across each of its strategic pillars. Group organic revenue growth from continuing operations of 15% was driven by growth in all geographic regions, with new product functionality continuing to drive increased revenue from existing customers. Further strong execution is expected and we are making no major changes to our forecasts. With net cash balances forecast to rise quickly from here, we believe the group has strong opportunities for both organic and acquisitive growth, offering multiple avenues for future value creation.

Companies: Dotdigital Group

10 Oct 19

XP Power - Q3 order intake encouraging

Despite a tough trading environment in Q3, XP Power saw improving order flow and a book-to-bill ratio of 1.04x for the quarter and management anticipates meeting its FY19 expectations. Helped by currency, our FY19 revenue forecast appears conservative but in the face of volatile trading conditions, we maintain our estimates.

Companies: XP Power

11 Oct 19

Positive Trading Update

Dart Group has released a positive trading update indicating booking trends have continued to strengthen, boosted by later season bookings, and that the Board believes market expectations for FY20 PBT will be exceeded. There had been indications from other market players that demand had been strengthening in the later season and this announcement suggests Jet2 has been well positioned to capture the upside. Reiterate Buy.

Companies: Dart Group

11 Oct 19

Retail ready for a renaissance?

There have been few structural shifts in the property sector as profound as the one currently taking place in retail. Consumer spending patterns have drastically changed over the past five years, with online sales now accounting for 19.7% of all retail spend in the UK (August 2019, source: ONS), compared to 11.5% in August 2014. When you look at fashion retailing specifically, online sales accounted for 26.8% of consumer spend on clothing in 2018 (source: Mintel).

Companies: CAPC CAL HMSO INTU NRR SHB

11 Oct 19

Retail ready for a renaissance?

Companies: CAPC CAL HMSO INTU NRR SHB

16 Oct 19

Positive trading update, material upgrades

Augean has issued an update that highlights a strong Group trading performance in the third quarter. As a result, management expects adjusted profit before tax to be materially ahead of the current consensus forecast of £16.5m for the year to 31st December 2019. The Group notes that it has benefitted from a 20% increase in landfill volumes across all waste types, a further 20% improvement in landfill pricing, increased radioactive waste profit and a good performance by both the treatment and North Sea businesses. We have upgraded EPS forecasts for FY2019E by 17%, including the benefit of our revised expectation of a sustainable 19% tax charge compared to 23% previously. Outer year forecasts rise further as we adjust to factor in established trends and remove now undue levels of conservatism.

Companies: Augean

09 Oct 19

Positive momentum: another £642m net inflow in Q2

Liontrust has seen another impressive quarter of net inflows, against an uncertain market backdrop of geo-political uncertainty. AuM grew by 4% with the majority of the £642m net inflow coming from the core UK Retail channel. The Neptune acquisition completed postperiod end, taking AuM to £17.4bn. We see upside as the Neptune fund range is marketed to Liontrust’s core clients. In our view, a 12x FY20e PER is undemanding for a resilient growth profile which sets it apart from peers.

Companies: Liontrust Asset Management

02 Sep 19

Interim results

CentralNic Group has a solid set of interim results for the first six months of FY2019E, it was a busy period with the group completing 3 acquisitions immediately post the period end, issuing a €50m listed bond instrument and making solid progress in delivering on its stated accelerated strategy. Revenue for the first six months is up 225% yoy, with c.6% organic growth, in line with long term trends for the group. These results are the first time the group have reported in US Dollars. The group’s main functional currency is USD and we believe this is a sensible decision and should remove some currency related risk from the forecasts. CentralNic has made significant progress in delivering on its stated strategy of supplementing organic growth with quality acquisitions, focusing on recurring revenue businesses, in attractive regions. On our new USD based forecasts, the group trades on a 2019E EV/EBITDA of 8.7x (falling to 7.0x in 2020E) and a P/E of 11.0x.

Companies: Centralnic Group

10 Oct 19

Cenkos: Falcon Oil & Gas Ltd - Drilling Commences

Yesterday, Falcon Oil & Gas announced the spudding of the Kyalla 117 N2-1 exploration well in the Beetaloo Sub-Basin, Australia. The Kyalla 117 N2-1 well is the first well in the Stage 2 drilling programme to evaluate the potential of the Kyalla shale liquids rich gas play, with Falcon and its partner, Origin Energy looking to build on the 6.6Tcf of gross 2C contingent resource already discovered within the Middle Velkerri B shale dry gas play during 2015/2016. Following the Stage 2 programme, the JV will look to achieve commercial production flow rates in the most prospective play(s) through the drilling and stimulation of two horizontal wells in 2020. With a largely carried work programme and a resource base far in excess of any of its peers we believe Falcon offers investors a low-risk, low cost entry point into an emerging world-class basin. We maintain our BUY recommendation and our 41p price target.

Companies: Falcon Oil & Gas

16 Oct 19

Q3 release: on track to achieve FY guidance

ASML has released a good and reassuring publication, in line with consensus, and remains well on track to achieve its full-year guidance. We particularly appreciate the level of net bookings that reached a new record high, providing more visibility to achieve the 2020 objectives. However, Memory demand remains weak and we believe further improvements are needed on that side to justify a strong re-rating.

Companies: ASML Holding

16 Oct 19

Improved traffic in Q4 and better efficiencies expected in FY2020

Asos has managed to solve its operational warehousing problems and buoyed up its traffic in Q4. Sales were up 15% in Q4 and 12% in FY19. Total orders placed increased by 14% and the number of active customers was up 10%.

Companies: ASOS

16 Oct 19

Panther Metals set up for its next strategic move with an 'enviable' portfolio of assets

16 Oct 19

Genesis Emerging Markets Fund - Exciting long-term opportunities

Genesis Emerging Markets Fund (GSS) was launched in 1989 and is one of the first funds listed in the UK focused on this asset class. Its objective is to deliver capital growth over the long term through investing in high-quality companies listed in, or with substantial exposure to, emerging markets. Unconstrained by index considerations, the portfolio reflects the highest-conviction investment ideas from a team of emerging markets specialists. The fund has a solid long-term track record of outperforming the MSCI Emerging Markets Index and, over the past 10 years, has delivered an annualised NAV total return of 8%. Investor appetite for the asset class is currently subdued; however, the manager has a long-term investment horizon and is finding exciting opportunities.

Companies: Genesis Emerging Markets Fund

16 Oct 19

The NewCo will be called Siemens Energy

Siemens AG today announced that its new energy company will be called Siemens Energy. The name of this new entity is expected to take effect in April 2020, while the listing of the company is still expected by September 2020. This confirms that the spin-off as well as Siemens’ ambition to create a leading company in energy are both on track.

Companies: Siemens

16 Oct 19

Q3 preview: still positive

Schneider is due to report its Q3 sales on 24 October. We expect the company to deliver 3.5% organic growth, which is broadly in line with consensus. Although the group noticed a deterioration of the macro environment (trade wars, HK’s tensions, Brexit), it remains confident of reaching its full-year guidance of 4-5% organic growth, as well as to increase its EBITA margin by 200bp by 2021. We remain positive on the stock as it should continue to outperform its peers.

Companies: Schneider Electric

16 Oct 19

Brady - Recommended cash offer at 10p

Brady has received a recommended all-cash offer at 10p per share (a 50.8% premium to the closing price), valuing the issued share capital at £8.3m, from Hanover Active Equity Fund II, a private equity (PE) investor focused on SMEs in the UK and Nordic markets. The cash offer has been declared final, will be declared unconditional as to acceptances based on 50% of the share capital and may only be increased if there is a counter-offer. Before the bid, Brady had been looking to secure additional funding for a turnaround strategy, and although negotiations have advanced, the company has not yet secured unconditional funding.

Companies: Brady

16 Oct 19

A capital structure conundrum, but …

Our previous short report included a comment on TUI’s shareholding structure which needs to be clarified as any discussion about shareholding in a pre-Brexit context is bound to be a complex one.

Companies: Tui

16 Oct 19

Deinove - Steady progress on all fronts

Deinove released its H119 results on 26 September 2019. The company reported progress with most of its projects in the pipeline, which is well diversified across a number of different programmes and technologies. We believe the antibiotic asset DNV3837 is the most valuable, as it is a pure drug development programme. Deinove has been preparing for the Phase II efficacy trial in C. diff infections and the first patient should be recruited in the coming weeks. The company also reported multiple developments in its bioactives portfolio. The first two commercialised products (Phyt-N-Resist and Hebelys) are expected to start generating sales this year. We have slightly increased our valuation of Deinove to €72m or €4.2/share.

Companies: Deinove

16 Oct 19

Q319 update shows therapy business momentum

Nexstim’s Q319 trading update confirms growth in both the number of customers and recurring revenues, with rapid expansion of the installed base of NBT (navigated brain therapy) systems and high system utilisation rates.

Companies: NEXSTIM OYJ

16 Oct 19

GMP FirstEnergy ― UK Energy morning research package

Gulf Keystone Petroleum (GKP LN) (not covered): Shaikan payment

Companies: Gulf Keystone Petroleum

16 Oct 19

Oil & Gas Daily Flow

Diversified Gas & Oil (DGOC): Extended Kentucky Agreement | Gulf Keystone Petroleum (GKP): Shaikan Payment Update | Tlou Energy (TLOU): Active work programme in Botswana, financing crucial for development

Companies: DGOC GKP TLOU

16 Oct 19

AAC Microtec - Eutelsat order enhances growth prospects

ÅAC reported a weaker H119 than expected. However, we still anticipate some growth for the full year despite slower than hoped for recruitment of technicians and engineers but note the deferral of revenues to H219 from some delayed projects and the progress made in orders. The order backlog grew to SEK126m at H119 and has been enhanced by the recent addition of Eutelsat as a customer, with an initial two-satellite order worth over SEK24m with a potential to increase to SEK53.5m. However, the growth path appears to have been deferred by a couple of quarters. The revised expectations leave our DCF derived fair value at SEK8.4 per share and is contingent on securing the right skill sets to ramp up production.

16 Oct 19

SP Angel . Morning View

Arkle Resources* (ARK LN) – Glencore agrees C$1m of funding for Stonepark Zinc project in Ireland | BlueRock Diamonds* (BRD LN) – Houston and Simbanegavi drive record production and new value at Kareevlei diamond mine | Cora Gold* (CORA LN) – Flash note: De-risking Sanankoro Gold Project | Orosur Mining* (OMI LN) – Q1 results | Strategic Minerals* (SML LN) – Resumption of regular sales at Cobre magnetite in the US | Tri-Star Resources* (TSTR LN) – Tri-Star reports antimony concentrate grade at 99.5% with 5% gold | Wealth Minerals (WML CN) – Uranium One MOU signed for the Atacama Lithium Project

Companies: ARK BRD CORA OMI SML TSTR WML

16 Oct 19

Production figures

Two weeks before the Q3 figures (expected on 30/10/2019), Iberdrola released updated production figures. Generation represents on average around half of EBITDA, the other half is the less volatile regulated network activities. Even though figures are far from being disappointing, they are not positive enough to justify a second rally of the stock price. Positive view reiterated, but with a limited upside.

Companies: Iberdrola