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14 Nov 19

Evolving investment case - the next phase

While the FY20 interims are in-line, this does not tell the whole story with the investment case for Volex evolving away from the recovery mode of the last few years to a growth business which now focuses on cash generative, higher margin customers in new markets. The business is substantially de-risked with the top three customers now accounting for 25% of revenues – down from 47% in FY15 and when combined with a re-iteration of our PBT growth forecast of 47% for FY20, an upgrade to our expected net cash estimate from US$17m to US$23m at March 2020, a restored dividend and with it trading on a FY20 PE rating of just 10x, we re-iterate our buy recommendation with a price target of 160p.

Companies: Volex

11 Nov 19

LIBERUM: AFH Financial Group* - Organically growing and improved FCF

AFH continues to grow at an impressive rate compared to peers in a tough market environment. It has delivered 8% organic net flows and new business written is up 46% yoy.

Companies: AFH Financial Group

08 Nov 19

Games Workshop Group - Strong five-month trading update

Games Workshop (GAW) has published a trading statement for the first five months of FY20, highlighting an acceleration in revenue growth to c 12% (versus our previous forecast for the year of c 4%), strong margin growth and encouraging signs with respect to its ability to leverage its intellectual property through royalty income. Our PBT estimates increase by c 9% for FY20 and FY21, and our DCF-based valuation increases by 10% to 5,176p.

Companies: Games Workshop Group

11 Nov 19

LIBERUM: Sirius Minerals* - Cost savings at the crux of the new plan

Sirius’ announcement this morning has confirmed it will split the financing of the shafts and the remainder of the project, with the $600m shaft component targeted before April. We outlined the rationale for this strategy in September and ran through some of the maths, but today’s release implies scope for less dilution than expected, if it can be executed.

Companies: Sirius Minerals

12 Nov 19

Cenkos: Seeing Machines Ltd -- EC safety regulations for DMS adopted

The European Council announced on Friday 8 November that it has adopted a regulation on the general safety of motor vehicles and the protection of vehicle occupants and vulnerable road users. This follows an agreement with the European Parliament in March 2019 and is part of the "Europe on the Move" package, launched by the European Commission in May 2018. These new regulations are to help transition towards a mobility system which is safe, clean and automated. Of relevance to Seeing Machines is the Regulation for the adoption of safety features that include advanced driver distraction warning systems and driver drowsiness and attention warning systems. These regulations will apply from May-2022 to all cars, vans, trucks and buses (including SUVs) and amend several existing safety regulations for EU-type approval.

Companies: Seeing Machines

14 Nov 19

Strong interim results

Volex has announced results for the 26 weeks to 29th September 2019 that reflect management’s focus on operational efficiency, cost control and margin analysis to drive business at acceptable margins. Adjusted PBT and EPS(FD) rose 69.3% and 48.3% respectively with benefit captured from targeted acquisitions. The Group has also returned to the dividend list with the payment of a 1p interim dividend, the first since 2013. On a calendarised basis the shares currently trade at a 34% PER and 36% EV/EBITDA discount to a comparable peer group for 2020. The Board has reiterated its confidence in delivering its full year expectations and in its ability to drive shareholder value.

Companies: Volex

14 Nov 19

Prelims: consistency and opportunity

EBITDA of £10.5m (£10.4mE) was delivered from revenue of £49.2m (£46.7mE) with net cash of £24.1m, (as revealed in August), comfortably ahead of our £21.5m year-end forecast. Newsflow in the period included three acquisitions, the securing of a five year framework agreement for deployment of TRACS Enterprise with a major Train Operating Group, and the successful transition of the CEO role to Chris Barnes. The Group continues to deliver the proven mix of self-funded acquisitions and organic growth, demonstrating comfortable delivery of forecasts reiterated at interims, and a very strong balance sheet giving capacity to deliver much more of the same. With the new CEO able to deliver operational efficiencies to a Group already well versed in delivering successful acquisitions, we look forward to the next part of Tracsis journey. Target 775p reiterated.

Companies: Tracsis

13 Nov 19

Full year results, first look

Avon Rubber has announced FY results comfortably ahead of consensus with the Group describing a transformational year in 2019 which sets it up well for the medium term. We see the Group as well positioned given its end markets and product development which should be attractive for investors but the recent stock run-up has been strong and valuation appears full. Neutral.

Companies: Avon Rubber

13 Nov 19

Capital Markets Event

We attended the Frontier Development capital markets day for institutional investors and analysts at the group’s offices in Cambridge yesterday. Whilst there was no new material information provided at the event, various senior managers provided valuable insight into the high-level detail of planning and execution which goes into making a game. The current managerial set-up and capacity the group has in Cambridge, validates the recent move into third-party publishing which we highly favour.

Companies: Frontier Developments

21 Oct 19

Quarterly Research Outlook Autumn 2019

Following continued delays of a Brexit agreement, few sectors within the UK market have remained attractive to investors despite low valuations. One sector which has continued to outperform despite the political drama has been the UK video gaming sector (henceforth UK gaming), which we are fans of. We believe a combination of sector-leading growth, strong cash conversion and timely cyclical positioning support our positive view on the UK video gaming sector.

Companies: ABBY AMS ANX ARS ATYM AVON BLVN PIER BUR CGS CAML CDM CSRT TIDE CYAN DTG DEMG ELM EMR FPO FDEV GTLY GENL GHH GRI GEEC GKP HMI HAYD HEAD HILS HTG HUR IBPO IOG INDI JHD JOG KAPE KEYS KWS KCT KGH LAM LIT LOK MACF MANO MOD OXIG PCA PANR APP SRE PHC PMO RBW RMM RBGP REDD RSW RNO ROR SUS SCPA SEN SHG SOLG SOM SUMO TM17 INCE TWD TRAK TRI VNET VTC ZOO ZTF

12 Nov 19

Strategic initiatives powering up the gross margin

Interims provide concrete evidence that strategic actions undertaken to boost gross margins and improve profitability are producing results. EBITDA doubled and EBITDA margin leapt 110bps. The gross margin potential exceeds the gain in H1 though so, alongside cost efficiencies, top line guidance has reduced to +10% (vs +23%) whilst being confident about meeting FY profit forecasts. Even at this early stage, any incremental growth should drop through at a high level, underlining the investment case as growth re-accelerates again next year. We estimate fair value at 300p.

Companies: Gear4music

13 Nov 19

Cenkos: Trinity Exploration & Production Plc - Q3 Results

Trinity recently released its Q3/19 operational update in which the Company continued to focus on maintaining base production, whilst increasing its low-cost, high margin production. Production averaged 2,816bopd in Q3/19, a 3% YoY increase (Q3/18 2,734bopd). Two of the four new onshore infill wells came onstream during the period, with a third well coming onstream post-period end, increasing base production to 3,017bopd during October, with an expected year-end exit production rate of c3,400bopd. Trinity continues to pioneer its SCADA (Supervisory Control and Data Acquisition) system to optimise producing wells, allowing the Company to increase production, reduce opex and add value. The focus for the remainder of 2019 will be on the completion of the H2/19 onshore drilling campaign; with the information learned to be used in preparation of further drilling during H1/20. With new wells coming onstream, and a low operating break-even we expect the Company's cash generation levels and balance sheet to further strengthen during Q4/19. We maintain our BUY recommendation but reduce our price target to 37p (from 40p) following the 2020 National Budget changes (see below) and the recent shift in the USD/GBP exchange rate.

Companies: Trinity Exploration & Production

18 Jul 19

FY results; acquisitions to fully benefit FY 2020

Full-year results to 30 April 2019 were in line at the revenue line but 5% (£0.1m) better than expected at the adjusted pre-tax profit level. Underpinned by c.5.5% organic growth, the 20% and 26% increases in revenue and adjusted EBITDA were driven by full-year contributions from ATC and QSI, acquired in FY 2018, as well as five acquisitions in FY 2019. Notable was the 35% increase in free cashflow. Additional investments into Sentek, Atik, Graticules and Astles and the integration of ATC with Thermal Exchange in FY 2020 should benefit the businesses in FY 2021. We upgrade our FY 2020 adjusted EPS by 7% as well as introduce FY 2021 forecasts, which indicate 13% EPS growth. The company indicates that it expects to add at least one new business in FY 2020, which will be incremental to these forecasts. We are raising our target price by 9% to 60p, reflecting the improved gross margins and stronger underlying cashflow.

Companies: Scientific Digital Imaging

14 Nov 19

LIBERUM: Luceco* - Initiation - Entering a new growth phase

Structural changes now enable Luceco’s business model to generate higher FCF levels & transform the balance sheet from high to low debt. Thus, for the first time since IPO, regular M&A is now possible.

Companies: Luceco

26 Mar 19

Cenkos: XLMedia Plc - High FCF yield

2019E should see the beginning of a recovery phase. Development effort into existing assets and diversification away from gambling should help reduce the volatility seen of late. The free cash flow yield is pricing in no recovery whatsoever.

Companies: XLMedia

15 Nov 19

Enteq Upstream - Expansion strategy drives strong interim results

Enteq Upstream PLC (LON:NTQ) is a leading technology provider to the global oil & gas directional drilling market. The company designs and produces high-end robust measurement-while-drilling (MWD) systems and associated components. We gave some details on the technologies and demand drivers in

Companies: Enteq Upstream

14 Nov 19

Tisci’s new collections are appreciated by customers

Burberry has recorded encouraging H1 19/20 figures. Sales and adjusted operating profit were both above consensus expectations, mainly driven by the strong double-digit growth of Riccardo Tisci’s new collections. Although the reassuring H1 figures have allowed the group to maintain FY guidance, the group’s warning about the incremental pressure on the gross margin from the ongoing protests in HK should be taken cautiously.

Companies: Burberry Group

14 Nov 19

H1: the US ensures growth

Solid H1 19/20, backed by the good progression in the UK and a slight increase in the UK Electricity Transmission division. After the promising investments, the group is well on track to meet its asset growth guidance of 5-7%. Positive view confirmed.

Companies: National Grid

14 Nov 19

Diversified Gas & Oil boosts production by 10% in third quarter

14 Nov 19

Touchstone Exploration looking to release first Ortoire results next week

14 Nov 19

Salazar Resources - Corporate video

14 Nov 19

Cyan - Focused on delivery

Over the last 12 months Cyan has focused on integrating its I-New acquisition and preparing for its Orange roll-out. Sustaining this focus on delivery over the next few months will be crucial. The company is targeting revenues of €75m by FY21, a significant uplift from the current (€16m) run rate. Investor confidence will be boosted if Cyan can deliver the large sequential jump in revenues implied by FY19 guidance and complete technical integration with Orange on time.

14 Nov 19

Q3: back the higher allowed WACC

The group benefited from the increase in the allowed WACC for its regulated activities, and non-regulated activites increased after a positive scope effect. To a lesser extent, cost reduction was also an EBITDA growth contributor. Positive view on the stock confirmed.

Companies: Snam

14 Nov 19

Active management drives +5% EPRA NAV growth

Urban Logistics REIT (“ULR”) has reported in line interim results. Rental growth continues, which in turn drives valuations and the underlying EPRA NAV: +5% in H1 to 145.2p. ULR’s brand of active asset management continues to yield results, with logical capital recycling into higher yield assets and +£0.6m rent uplifts achieved on reviews. We do not make material changes to our forecasts. We believe that the valuation remains attractive – 6%+ prospective dividend yield, trading at a 10% discount to NAV – in light of sustained value creation, clear quality of income (6.1yr WAULT) and further opportunity from a space in structural growth with strong demand.

Companies: Urban Logistics REIT

14 Nov 19

Strong interim results

Companies: Volex

14 Nov 19

Sunesis Pharmaceuticals - Insight into the future of SNS-510

Sunesis recently presented a poster on the preclinical findings of its PDK1 inhibitor SNS-510. Surprisingly, researchers found that the drug was most active in cancer cell lines with mutations in the cyclin-dependent kinase inhibitor 2A (CDKN2A) gene, with the strongest activity in melanoma, leukemia and brain cancers. Additionally, the company announced that this finding pointed to potential synergies with CDK4/6 inhibitors (such as Ibrance), which are now under investigation.

14 Nov 19

Q3: disappointing results due to poor weather conditions

New installed wind capacity and the good performance of the gas division more than offset the unfavourable wind and hydro conditions. In all, EBITDA slightly increased, but the net income was impacted by the higher amortisation. Full-year guidance was confirmed.

Companies: ERG S.p.A

14 Nov 19

A reassuring H1 but India still worries

A quite correct H1 for Vodafone with a return to growth in terms of revenue in Q2. The performance is still very solid in Germany (which will represent next year 30% of Vodafone’s revenues) and trends are improving in South Africa, Spain and Italy despite fierce competition or regulation. We maintain our opinion at Add on the group with a 15% upside.

Companies: Vodafone Group

14 Nov 19

Enteq Upstream reports significant growth in first-half revenue and earnings

14 Nov 19

Q3: guidance revised upward, but disappointing renewables outlook

After the solid Q3, driven by the acquired operations and the good trading performance, and considering the EU green light for the reinstatement of the UK’s capacity market, the group revised upwards its EBITDA guidance, from €1.4-1.7bn to €1.8-2.1bn and its net income one from €0.5-0.8bn to €0.9-1.2bn. On the negative side, pro forma figures for the renewables division are below expectations.

Companies: RWE