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13 Mar 19

LIBERUM: Burford Capital* - Beats, evolves, discloses more

$1.1bn of capital deployed, when we bullishly expected $0.6bn. Burford has also beaten profit expectations by 25%, with higher ROIC, a broader range of solutions for the legal industry and now greatly enhanced disclosure, even down to individual investments.

Companies: Burford Capital

13 Mar 19

Full-year results – eye-catching dividend pay-out

Results were slightly above recently upgraded expectations, with a stronger than expected H2. Strong sales growth was gained in the US, with ongoing demand in its construction customer base. New products provided a boost to sales, while the recently launched SkyScreed®25 will accelerate sales prospects in the medium term. A strong cash performance supports the exceptionally strong underlying and supplemental dividend growth. No change to 2019 PBT forecasts, with the year having started well, a higher tax charge results in a 2.6% EPS reduction to 40.8ȼ giving YoY growth of 8.1%. We introduce conservative 2020 forecasts pointing to YoY EPS growth of 5.6%. Our 465p price target continues to offer good upside, with an eye-catching 6.6% forecast dividend yield.

Companies: Somero Enterprises

19 Mar 19

Cenkos: Bango Plc - Final results update

This morning, Bango announced final results for the year to December 2018. During the period End User Spend (EUS) continued the trend of recent years and has more than doubled to £558.2m and revenue up 60% to £6.6m (FY18: £4.2m). Adjusted LBITDA improved to -£0.9m (FY18: -£1.6m), with positive EBITDA achieved during Q4/18. Following the Audiens acquisition in early 2018 and investment in further development, December 2018 saw launch of Bango Marketplace. This is a new business segment, adding a potentially significant and high margin revenue stream, monetising the extensive and growing amount of transactional data from the Bango Platform. There remains a growing pipeline of new MNO/App Store integrations and further Google Play upgrades, representing a significant pipeline of over US$4 billion in EUS.

Companies: Bango

18 Mar 19

LIBERUM: Miton Group* - Alpha + brand + cost control = success

Revenues beat by 3% and PBT by 9% as costs were controlled to plan. Fund performance remains good, while the range of funds offered is broader.

Companies: Miton Group

12 Mar 19

LIBERUM: Staffline* - Suspension lifted – most allegations ill-founded

Independent legal advisers have investigated the concerns raised on the eve of the results. There have been no issues identified on invoice practices.

Companies: Staffline Group

12 Mar 19

Strong update, +14% beat to forecasts; technology-led service offering

WATR is a leading and geographically diversified specialist in precision, minimally-invasive leak detection and remediation in both drinking and waste water. Technology-led, the business uses solutions such as infra-red and acoustics and continues to expand its technology offering – a key differentiator against typical support services companies. The business has been a consistent performer with a history of delivering and exceeding expectations, although the share price, latterly, has marked time. WATR has today reported an FY18A PBTA result which is a 14% beat to expectations; and while the rating could be seen as high in the context of Support Services, the valuation should be seen in the light of similar franchise businesses and technology-led companies, reinforced by strong structural growth characteristics (see below). Strong results disclosed this morning show FY sales growing 44%, demonstrating growing momentum and ahead of the already strong Q1-3. No one-off, this continues an accelerating and compounding trend over the past three years, which we expect to be maintained. Insurance channel sales have nearly doubled and this momentum notably shows every sign of carrying on, opening up a very large US market in which WATR remains the only national player. The differentiated model – advanced technology integrated into multiple and efficient delivery channels – offers meaningful opportunities, while selective franchisee reacquisitions are also adding to the growth momentum and optimising the group’s capital structure.

Companies: Water Intelligence

19 Mar 19

Strong progress in FY 2018

Kape has reported FY 2018 results in line with its January trading update with strong EBITDA growth to $10.4 million. The numbers are reported on a continuing business basis following disposals which leave the Group’s App Distribution segment as its sole focus. Kape has now completed its transformation into a privacy-led cybersecurity software provider. The acquisitions of Intego and ZenMate were concluded during the year; both are now integrated into the Group and expected to contribute to revenue growth and profitability in the coming year. The number of subscription users rose by 219% to around 830,000 while the customer retention rate improved to 74%. The numbers of paying users and subscriptions show the growth the customer base and the associated retention rate provides an indication of how well Kape is maintaining its quality of service and products. With Adjusted EBITDA in FY 2018 in line within expectations, we leave our estimates for FY 2019E all but unchanged and introduce estimates for FY 2020E which reflect assumptions of further strong user acquisition and an increase in recurring revenue.

Companies: Kape Technologies

13 Mar 19

LIBERUM: Charles Taylor* - Building a platform for growth

2018 was a busy year for the group. In addition to acquisitions which helped transform the scale of the InsureTech business, the group has built a truly global platform within Claims Services.

Companies: Charles Taylor

19 Mar 19

Pelatro - New product launches Pelatro into mobile advertising

Pelatro has launched its exciting new Data Monetization Platform (DMP) product with a revenue-share contract from an existing customer. A multi-year contract worth $0.5m in year one it is part of the expected pipeline and builds up the base of recurring revenue. Data monetisation – selling mobile subscriber data analysis and marketing services to B2C clients – is at an early stage globally but will become an important revenue and earnings generator for telcos as ARPU continues to slide; opening up the huge mobile advertising market. This is a significant move and we raise our TP by 5% to reflect the long-term opportunity.

Companies: Pelatro

19 Mar 19

eServGlobal - Payments industry M&A thoughts

There have been a few developments with Mastercard this month. Having lost out to its rival, Visa, in the auction for Earthport, Mastercard has unexpectedly signed an agreement to purchase Transfast, another cross border account-to-account network. Like HomeSend (ESG’s JV with Mastercard), the Transfast network also supports the Mastercard Send service. HS has much wider reach across multiple markets and channels, already fully integrated with transactions flowing. However Mastercard seeks to address a huge global market and Transfast will add much needed capacity.

Companies: eServGlobal

11 Mar 19

Cenkos: Redde Plc - Dented earnings in FY20, but not a crash

Management put it aptly – Redde was “obviously disappointed” at losing a contract worth 18% of consensus forecasted sales in FY20. But expecting to more than halve the impact on earnings (adjusted operating profits are expected to be down 8.7% versus consensus) speaks volumes about the adaptability and resilience of their business model. Our revised forecasts still expect a robust dividend –ie given the sharp fall in the share price, a 11% prospective yield.

Companies: Redde

14 Mar 19

LIBERUM: Clarkson* - Flooding the digital moat

Research with unrivalled breadth, depth and resources has been a key part of what differentiates Clarkson from its competitors. It has also been a key part of the barriers to entry protecting the group.

Companies: Clarkson

13 Mar 19

Strong growth achieved, ahead of bullish forecasts

FY2018 was a year of strong growth for Franchise Brands, with EBITDA growth of 37% achieved despite the challenges that required an overhaul of Metro Rod’s operations and support systems. Our expectations for FY2019 assume a continuation of the growth trend as the real potential at Metro Rod is unlocked and anticipates an organic increase in EBITDA of 28%. With the integration of Metro Rod now complete, management’s attention is turning to the selective acquisition of other reasonably valued franchise brands or businesses which can extend the scope and capabilities of existing brands. Given the expectation of further strong organic growth from a proven management team, we believe that the shares are fundamentally undervalued with fair value closer to the 2017 peak of 101p. (Ian Jermin)

Companies: Franchise Brands

05 Mar 19

XP Power - Driving share gains with expanded product range

In FY18 XP reported strong organic growth and operating margins, generating EPS growth of 18%. After a series of acquisitions, it has a full portfolio of power solutions to meet all voltage and power requirements, and management is now focused on increasing its market share at key accounts. In our view, the stock is trading at close to trough multiples with a dividend yield above 4%.

Companies: XP Power

10 Mar 19

THE MONTHLY March 2019

In the investment world, before MiFID II, essentially every institution talked to every broker, and the whole, professional market could see every research note and the forecasts in detail. This was the ‘Age of Consensus’. Everyone had the same information (well, everyone except retail investors), and this transparency helped share price formation and liquidity

Companies: OPM AVO AJB AGY ARBB AVCT CMH CSH DNL GTLY GDR KOOV MCL OXB RE/ REDX STX SCE SIXH TRX TON VAL VTA W7L

19 Mar 19

CUI Global - Preparing to step on the gas

CUI Global (NASDAQ:CUI) has reported strong results for the full year (FY) 2018, with revenues of US$96.8mln versus our forecast of US$92.8mln. The FY order backlog stood at US$37.5mln versus US$32.8mln at the end of 2017. The company reported an underlying loss (statutory LBITDA) of USS$14.0mln ver

Companies: CUI GLOBAL

19 Mar 19

Bitesize briefing - ICG-Longbow SSUP

19 Mar 19

When the largest Chinese shareholder wants a seat on the board

The chief executive of Accor said ”it would be complicated for Accor if its largest Chinese shareholder Jin Jiang requests a board seat at Accor”.

Companies: Accor

19 Mar 19

Moderate 2019 top-line and profitability

Wacker reported its full-set of 2018 figures, which confirmed the already announced preliminary figures, but broadly missed its own extensive guidance for 2018. More interesting is the given 2019 guidance, which foresees a decline in EBITDA and the respective margin, primarily stemming from Silicones’ more moderate, but still healthy, performance. Management’s view is more cautious and excludes a potential insurance compensation, which we are anticipating.

Companies: Wacker Chemie

19 Mar 19

Laboratorios Farmacéuticos ROVI - DORIA Phase III trial hits primary endpoint

Laboratorios Farmacéuticos ROVI (ROVI) has announced top-line data from the pivotal Phase III PRISMA-3 trial evaluating DORIA (ISM risperidone) in schizophrenia. DORIA achieved the primary endpoint of a statistically significant reduction (p<0.0001) in PANSS score at week 12 (both 75mg and 100mg doses once-monthly intra-muscular injection). These data not only validate DORIA but also the ISM technology platform developed by ROVI. ROVI plans to file the US NDA in H219. We forecast a potential launch in 2021 in both the US and EU and peak sales opportunities of US$411m (US and EU) in 2027. DORIA has the potential to be highly value enhancing to ROVI’s long-term profit growth. This is in line with our expectations and we leave our forecasts and valuation unchanged at €1.23bn or €21.9 per share.

Companies: Laboratorios Farmaceuticos ROVI

19 Mar 19

Gathering concerns at Asos

Sales development below estimates and growth slowing down further to 11% at CER in Q2.

Companies: ASOS

19 Mar 19

Undoubtedly making progress but still a lot to do

As expected, Pearson reported declining consolidated revenues for FY18 (-8.5% reported to £4,129m; -1% underlying, impacted by ongoing pressures in US Higher Education Courseware: -5% and US K12 Courseware). Conversely, the adjusted operating profit improved by 8% underlying to £546m, i.e. in the upper half of the guidance (£520-560m). Adjusted EPS reached 70.3p (including a c.20p one-off tax benefit and a lower finance charge) and the final dividend proposal is 13p, i.e. +8%, implying a full-year dividend of 18.5p (from17p). Acknowledging having “a lot still to do”, management expects the company’s consolidated sales to stabilise in FY19e (still underlying market pressures in US Higher Education on print courseware revenue) before growing again from FY20e. Including IFRS 16, the FY19e guidance is for adjusted operating profit of £610-660m and adjusted EPS of 55.5-61.0p including the US K12 Courseware which was held for sale and finally sold on 18 February 2019.

Companies: Pearson

19 Mar 19

Final 2018 numbers are out

After VW had released surprisingly good net earnings for 2018, Porsche’s numbers were also better than anticipated. This company’s EBIT number (which includes the VW at-equity profit contribution) increased by almost 6% to €3.50bn and net earnings were up by 6% to €3.47bn. As VW will also distribute a higher than previously expected dividend, Porsche raises its own dividend from €1.76 to €2.21.

Companies: PORSCHE AUTOMOBIL HLDG-PRF

19 Mar 19

PureCircle - Growing pains

PureCircle’s H119 results highlight the ongoing evolution in the company: sales declined 5%, partly due to phasing of deliveries, but also due to adoption of the superior-tasting, higher-margin Reb M product cannibalising the base business. Gross margins were up 240bp as a result of Reb M contributing positively to the mix. The innovation pipeline continues to strengthen and the company is well positioned to capitalise on the continued shift away from sugar and towards natural sweeteners.

Companies: PureCircle

19 Mar 19

Invesco Asia Trust - Disciplined Asia specialist, solid long-term returns

Invesco Asia Trust (IAT) aims to provide significant capital returns over the long-term through investing in listed companies in Asia. It follows a rigorous bottom-up investment process with few constraints, to build a relatively concentrated 50–70 stock portfolio representing the manager’s highest-conviction ideas over a three- to five-year horizon. The approach also emphasises the valuation discipline and favours cash-generative companies, which is reflected in the underlying portfolio yield of c 3%. IAT has increased its annual dividend in seven out of the past 10 years and over that time has delivered an annualised NAV total return of c 16%.

Companies: Invesco Asia Trust

19 Mar 19

Amundi can pay the high price...

In the frame of formal talks between Commerzbank and Deutsche Bank, DWS might potentially be sold. DWS’s share price was up 10% yesterday on rumours that Allianz is interested in the German asset manager. We believe Amundi will also be interested in the company.

Companies: Amundi

19 Mar 19

Bitesize briefing - Volta Finance

19 Mar 19

Not very convincing about a return to growth

After its stock suffered a hellish descent throughout 2018 and then a new sharp drop since the beginning of 2019, Iliad has released its 2018 results. As expected, the Q4 numbers are not very convincing about a return to growth. Q4 revenues were down by 0.5% yoy but, most importantly, they declined by 3.1% yoy in France excluding sales of terminals. Remember, they were flat in H1 18 and down by 2% yoy in Q3. So a slight acceleration in the decline, more noticeable on the mobile side (-1.2% yoy excluding sales of terminals while they had grown by 3.4% in H1 and were flat in Q3) than on the fixed side where the trend remains the same compared to the previous quarter (-3.2% yoy vs -2.2% in H1 but -3.8% in Q3). In Italy, since launching its mobile business at the end of May, Iliad has succeeded in winning 2.84m subscribers (of which 635k in June, 1.6m in Q3 and 610k in Q4) to generate eventually €70m in revenues in Q3 (c.€9 per subscriber per month). The annual EBITDA stood at €1.75bn, down by 1.2% yoy (and by 1.5% in H2). Note, however, that in France, excluding the Italian losses, EBITDA was up by 1.7% yoy (but by only 1.2% in H2). The French EBITDA margin was indeed quite resilient at 37.9% in 2018 vs 36.5% in 2017 (and at 38.5% in H2 18). But, with the logical increase in D&A (21.5% of the sales while the real capex represented in 2018 32.5% of the sales in France), operating profit and net profit were both down by c.20% for the whole year.

Companies: Iliad

19 Mar 19

Focusrite - A solid first-half performance

Focusrite has reported solid H119 revenue growth, reflecting particularly strong performance in Europe and for its Focusrite ranges globally. We leave forecasts unchanged, recognising the macroeconomic challenges in H2 arising from US tariffs and Brexit. The company is actively seeking opportunities to use its substantial net cash balance (H119: £26.2m), as reflected in the current valuation.

Companies: Focusrite