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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

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

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

16 Oct 19

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

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

11 Oct 19

Outperformance at Mobile Nations now expected

Future Plc has today announced the achievement of accelerated earn-out payments related to the acquisition of Mobile Nations in March’19. Deferred consideration of $55m (50% cash/ 50% new shares) becomes payable, with management assuming the achievement of an $11.5m EBITDA contribution from Mobile Nation operations to March’20. Mobile Nations management team will continue to work within Future within the newly created Future Labs, tasked with driving additional organic growth by integrating new initiatives, businesses, tools and processes once they reach a suitable maturity level. Future management continue a strong record quickly bedding down new acquisitions. The modest outperformance in Mobile Nations performance is largely offset by a marginally bigger than expected share base increase. We make no changes to our forecasts however at this time.

Companies: Future

15 Oct 19

Cenkos: IXICO Plc - Accelerated revenue growth

IXICO has released a trading update for FY19 (YE September), announcing revenues of £7.6m and a first full year EBITDA profit, driven by accelerated revenue growth. Revenues for the year are ~6% ahead of our previous forecast and ~15% ahead of our ‘initiation' forecast (29 Apr 19). Having reported an EBITDA profit for H1/19A, the company is expecting to deliver a full year EBITDA profit, supported by strong revenue growth and operational leverage. We have upgraded our forecasts to reflect this update. IXICO's strong revenue generation and operational gearing support our BUY recommendation.

Companies: IXICO

17 Oct 19

Cenkos: Record Plc - Strong quarter of inflows bodes well

The notable highlight of Record's Q2/20A update is the +$1.7bn net client inflow, which builds on Q1/20A's inflow of +$0.3bn. This takes AUME to $59.9bn, ahead of our year-end expectations. When combined with broadly unchanged fee rates over the quarter, we see upgrade potential should this level of AUME be maintained. We prudently keep forecasts unchanged today, noting materially stronger GBP this month, which would counter some of this upside to forecasts should it be sustained.

Companies: Record

17 Oct 19

Morning Note – 17 October 2019

Companies: Tekcapital

17 Oct 19

Arkle Resources' Stonepark zinc project gets boost from Glencore investment

17 Oct 19

Esker - Accelerating SaaS growth

Esker has seen revenue growth accelerate through the course of 2019. Group revenues grew 18% y-o-y in Q3 on a constant currency basis while cloud-based revenues grew 22% over the same period. The company has maintained its full year revenue guidance, which we view as conservative. We maintain our estimates, but highlight that risk is weighted to the upside.

Companies: Esker

17 Oct 19

Not that bad indeed !

The still robust indexation, well above global inflation, brought half of the organic growth in Q3 19, as it did in H1 19. In Q4 19 and Q1 20, Mercialys and other similar companies will benefit from the positive basis effect of the impact from the French Yellow Vests protests (Q4 18 and Q1 19). Reassuring figures are therefore due in the next two quarters, or a positive optical illusion vs. the long-term transformation issues in the shopping mall industry.

Companies: Mercialys

17 Oct 19

Scale-up train on track

Tatton’s trading statement for the half-year ending 30 September 2019 confirmed continued momentum in AUM growth, which increased to £7.0bn, up 14.8% over the half-year (from £6.1bn on 31 March 19) and 23% year-on-year. The group’s first acquisition since its 2017 listing (a strategy made explicit at that time) has also been announced, which contributed £135m of the £0.9bn AUM increase. Organic AUM growth was 12.5%. We see significant opportunity for the asset management side of the business to scale quickly and be the primary driver of strong future earnings growth as operational leverage kicks in.

Companies: Tatton Asset Management

17 Oct 19

Q3 19 revenue only slightly below expectations and guidance unchanged

Management has maintained its full-year guidance for both revenue and operating profits, although revenue of €4.19bn was slightly below consensus projections of €4.27bn and our projection of €4.33bn. It continues to see sales (ex currencies) outperforming car production by between 150bp and 350bp and the EBIT margin to reach at least 7%.

Companies: Faurecia

17 Oct 19

Morning Note – 17 October 2019

Companies: Gateley

17 Oct 19

Investor Update: Horizonte Minerals unveils 'compelling' Vermelho pre-feasibility study

17 Oct 19

LIBERUM: Alpha FX* - Broad-based upgrade to revenues and profits

Alpha has released a brief trading update which highlights a strong Q3TD and the Board’s view that FY19 profits will now be ahead of expectations. The strength is broad-based, across UK and European clients, together with momentum in the Institutional, Alpha Pay and the Canadian initiatives.

Companies: Alpha Fx Group

17 Oct 19

Trading update & acquisition

Tatton’s trading update for the six months to 30 September is accompanied by a bolt-on acquisition: Tatton has agreed to acquire Sinfonia Asset Management for up to £2.7m (£2.0m on completion; £0.7m on performance) from the Tenet Group.

Companies: Tatton Asset Management

17 Oct 19

RA’s acquisition expands UCB’s neuromuscular portfolio

UCB has broadened its neuromuscular portfolio with the €2.2bn acquisition of RA pharmaceuticals – blockbuster potential drug, Zilucoplan (expected launch in 2023), is RA’s key drug which complements UCB’s rozanolixizumab. As UCB will invest in R&D and marketing of the drug, the deal would be margin-dilutive until 2023. Nonetheless, we foresee EPS accretion thereafter as sales momentum picks up. The deal is all the more important at a time when UCB’s CVN drugs are about to hit the patent cliff.

Companies: UCB

17 Oct 19

Pantheon International presentation at Mello Trusts & Funds May 2019

16 Oct 19

A 25% premium vs. H1 19 NNNAV despite Brexit issues

Segro reported nice H1 19 figures, due to the completion of recent pre-let ground and undergoing low speculative developments. We nevertheless point out the coexistence of Brexit issues and the 25% premium of the share price vs. H1 19’s NNNAV.

Companies: SEGRO

16 Oct 19

Good traction in the Location technology offer

TomTom’s Q3 release is of good quality, in our view, underpinning the good traction of its Location technology offer. The lower revenue guidance for FY19 has been triggered by accounting treatments, therefore, the cash generation assumption still holds true.

Companies: TomTom