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30 Jun 20

D4T4 Solutions - A transitional period sets up secure growth in FY 2022

The FY 2020 results are in line with our expectations and reflect the impact of the previously announced switch from large perpetual licences to recurring annual term licences during the year. Despite the COVID strictures, with its large global partnerships, D4t4 continues to close numerous lucrative data gathering and data management contracts with major blue-chips around the world. It is successfully converting a high proportion of its new sales to recurring revenue contracts, but this will sacrifice growth and earnings in FY 2020 and FY 2021. Nevertheless, with growing recurring revenue base, an exciting pipeline and a very strong balance sheet, D4t4 is very well positioned for continued long-term growth and security.

Companies: D4T4 Solutions

01 Jul 20

THE MONTHLY July 2020

A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.

Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA

03 Jul 20

Manolete Partners

Accelerating activity in to FY21

Companies: Manolete Partners

30 Jun 20

Full-year results

Full-year results were at a record level and slightly ahead of expectations by £0.2m at the adjusted PBT level, or 2.8% better at the EPS level. Cash generation was also stronger than expected, resulting in net cash of £3.2m. The dividend was maintained – a sign of confidence. Good strategic progress was made, helped by the integration synergies of Pacer and new product development programmes. Our forecast and price target remain under review given COVID-19-related uncertainties.

Companies: Solid State

02 Jul 20

Strategically important acquisition in Germany

Gamma is acquiring around 80% of HFO Holding AG (HFO), one of the leading SIP Trunk providers in Germany, for an initial consideration of €20.4m in cash with an option to purchase the remaining shares over the next three years. In line with its stated strategy, Gamma can invest and use its commercial strength and expertise to accelerate HFO’s growth and replicate the Group’s success in the UK by developing a market leading position in Germany. Noting net debt of €2.9m when the deal closed, the implied historical EV/EBITDA multiple of about 10x compares with Gamma’s equivalent of 18.7x. We estimate that the deal will be 4% earnings enhancing in the first full year of ownership and our estimate upgrades reflect that. The European markets for cloud telephony in which Gamma is now represented will ultimately overtake the UK in size, providing Gamma with significant future growth potential. We view this acquisition as another significant step in Gamma’s strategic aim to expand into Europe via exposure to another lucrative market opportunity.

Companies: Gamma Communications

02 Jul 20

£55m placing as brick demand bounces back

Brick and concrete products manufacturer Forterra has raised c. £55m gross in an equity placing in order to maintain its strong balance sheet and support the Group's continued investment programme. It was accompanied by, in our view, a reassuring trading statement which we believe is backed by yesterday’s brick industry data and comments from housebuilders, which suggest that demand has been recovering from its lockdown lows, before the PM’s promises to “build, build, build” housing and infrastructure.

Companies: Forterra

03 Jul 20

Avon Rubber - Cream rises to the top

The announcement that Avon Rubber is to sell milkrite | InterPuls, its dairy division, to DeLaval Holding for £180m gross proceeds is strategically logical and financially compelling. The fit of dairy and defence has always looked slightly anomalous and the terms of the deal show that the opportunity to augment dairy through value-accretive deals is difficult given the scale of the business and opportunities. Management must now recycle the cash balances that will be created into Avon Protection, where there are a greater number of potential investments.

Companies: Avon Rubber

02 Jul 20

GB Group - Managing cash now to support long-term strategy

GB Group reported strong performance in FY20 and started taking measures to preserve cash in Q420. Trading in Q121 has been mixed and while management is unwilling to provide guidance for FY21, it has confidence that in the longer term it is well positioned to benefit from the acceleration in digital transformation that should drive demand for its identity data intelligence services. We have upgraded our EPS forecasts by 5% in FY21 and 3% in FY22.

Companies: GB Group

06 Jul 20

Macfarlane Group*

Resilient Trading Update

Companies: Macfarlane Group

03 Jul 20

CentralNic Group - A platform business, looking to scale

CentralNic’s capital markets day (CMD) on 24 June 2020 introduced the divisional management team and provided insight on each of the three key segments as they will report in FY20: Indirect (Wholesale, Registry); Monetisation (Team Internet); and Direct (Retail, Corporate). We have picked out what we believe are the four key themes from the CMD: FY20 performance, COVID-19 and seasonality; organic growth; M&A; and, pulling it all together, the benefit of scale. CentralNic continues to trade on an FY20 EV/EBITDA of 9.1x and a P/E of 15.8x, a material discount to its peer group, with our DCF indicating further share price upside. M&A could bring CentralNic’s multiples down further.

Companies: Centralnic Group

05 Mar 20

Licensing led strategy delivering strong growth – shares remain significantly undervalued

Gaming Realms is a creator and licensor of innovative games for mobile, with operations in the UK, U.S. and Canada. Through its unique IP and brands, Gaming Realms brings together media, entertainment and gaming assets in new game formats.

Companies: Gaming Realms

03 Jul 20

Cenkos: Arena Events -- FY20A Results

Whilst Arena delivered FY20E results in line with our expectations, this has inevitably been overshadowed by the challenges posed by COVID-19 to the industry. Arena acted swiftly to cut costs and preserve cash, such that it currently has a c£23.5m cash balance. This is enough to see the company through into 2021, even if the global event market remains heavily disrupted for the rest of the year.

Companies: Arena Events

07 Jul 20

Open Orphan*

Laboratory Services Contracts Signed

Companies: Open Orphan

07 Jul 20

Cenkos: Seeing Machines Ltd -- USA to mandate DMS from 2024

The ‘Moving Forward Act', the strongest automotive safety bill in decades, has now been passed in the House of Representatives. The bill is focused on advancing safety technologies proven to reduce crash and harm and to make sure strong safety standards are in place to save lives. The bill, which now needs to be passed in the Senate, will mandate automatic braking, lane-keeping, blind-spot detection, event data recorders as well as DMS in all cars and trucks sold in the US from 2024. This aligns with the European General Safety Regulation, which passed into law in November 2019. However, in the EU, the European Association of Automobile Manufacturers (ACEA) has requested a 2‐year delay for the introduction of the 2022 Euro-NCAP protocols due to the projected lengthy time that will be needed to recover from the effects of COVID-19. Euro NCAP has agreed, and a delay is now expected to the 2022 and 2024 rating. The new dates will give automakers and Tier 1 suppliers more time to incorporate the necessary changes given the events of recent months with a number of manufacturers announcing 12 month delays to new models.

Companies: Seeing Machines

29 Jun 20

Cenkos: Equals Group Plc -- An eventful and improving Q2/20 hinted

Equals' FY19A results confirm another year of strong, double-digit revenue and adj EBITDA growth. The move to a B2B focused offering continues to progress and looks well timed in view of Covid-19's impact on overseas travel. While the pandemic impacted Q2/20E trading early on, we note June KPI's indicate a positive rebound. Given the continued uncertainty as to Covid's full impact upon FY20E trading, we refrain from reissuing forecasts and thus leave our recommendation under review.

Companies: Equals Group

07 Jul 20

WHI Morning Comment: Aura Energy (AURA)

Gold JV to explore Aura's gold licences in Mauritania Aura has announced a JV with Chilean Metals (TSXV:CMX) to advance the exploration of its highly prospective (in our view) gold and base metal licences in Mauritania. Some early geological work (including shallow drilling) highlights the gold enrichment in the area and the potential for nickel-copper-(cobalt) mineralisation as well. Nearology – along strike from Kinross' giant Tasiast deposit (7Moz gold in Proven and Probable Reserve) – only adds to the prospectivity we see. Aura's other project in Mauritania, Tiris uranium project, is at an advanced stage and has many competitive advantages – not least its low-capital intensity (per lb of U3O8), its low operating cost (compared with global peers), its scalability and the fuller area potential. Häggån is Aura's other project - larger-scale proposition in Sweden with a defined resource and under PEA to prioritise the production of vanadium. For now, attention will focus on due diligence and signing the definitive agreement with Chilean before the work on the gold and base metals in Mauritania can begin in earnest, as Aura looks to deliver exploration success into a rising gold price environment.

Companies: Aura Energy

07 Jul 20

Cenkos: Seeing Machines Ltd -- USA to mandate DMS from 2024

Companies: Seeing Machines

07 Jul 20

finnCap CEO Sam Smith says new year has begun 'phenomenally well' with record first quarter

07 Jul 20

Well positioned with excellent growth prospects

Kape’s recent Capital Markets Day (CMD) was an extremely useful update on the many benefits of integrating complementary acquired businesses (including the collaboration between engineering teams) and the opportunities for upselling that new product development brings. Over the last six months, Kape has proceeded with the integration of PIA, expanding the growth of new users through the application of the Group’s user acquisition knowhow and technology. It has also made further enhancements to its product offering which, inter alia, will improve user engagement and retention. This note looks to bring out the main points from the CMD and highlights the significant progress that has been made this year.

Companies: Kape Technologies

07 Jul 20

Resilience from a broad set of services

finnCap has reported full year results for the twelve months to the end of March 2020 in line with previous guidance. It was a period in which the uncertain political and economic environment produced low market volumes and fewer deals (which also took longer to complete). COVID-19 had little impact on these numbers but, at the beginning of April, finnCap took some significant measures to enhance its near-term cash position and strengthen its balance sheet. Subsequently, the Group has displayed a resilient performance thanks to its suite of services to companies with strong growth ambitions and the subsequent three months (Q1 of finnCap’s FY 21) have seen a significant uplift in revenue – to a level which is a record quarterly performance for the Group - as clients moved to raise funds and trading volumes picked up, although deal numbers slowed worldwide. The combination of cost control and improved performance leaves the Group with a more robust balance sheet and well placed to drive its growth strategy forward.

Companies: finnCap Group

07 Jul 20

Trading update and contract wins

The group has issued a trading update for the year ended 31 May 2020 highlighting an adjusted EBITDA of at least £11.5m which is close to the group’s original expectation, despite widespread disruption to operations in the second half. The statement notes ample liquidity headroom in excess of £10m with net debt (excluding IFRS 16 lease liabilities) reducing in H2 to £7.5m as planned. The Group’s order book and prospect pipeline remains strong overall and the update is accompanied by the announcement of two meaningful contract wins in the nuclear sector. A further significant positive development is the grant of outline planning permission for the conversion of the group’s 7 acre Hayward Tyler site in Luton into residential housing for up to 1000 dwellings. Whilst financial guidance for FY2021E remains withdrawn at this point due to on-going uncertainties around the impact of COVID-19, we see the group continuing to demonstrate good resilience, operating at close to normal levels, supported by exposure to multiple markets and a strong customer base that includes governments and their agents.

Companies: Avingtrans

07 Jul 20

Finally, a change of strategy?

With a new CEO, Amanda Blanc, Aviva’s shareholders could dream of a possible change in the group’s strategy, with a more focused insurance business. The new Chief has an opportunity to take painful decisions in a year where no one will require a high operating performance.

Companies: Aviva Plc

07 Jul 20

Morning Note – 7 July 2020

Companies: ALT AVG PHTM PCIP LPA ORPH

07 Jul 20

About to turn the corner in Q2/20

We expect NORBIT to report Q2/20 EBITDA of NOK 20m, 49% above latest Factset consensus of NOK 13m. We estimate Y/Y revenue growth of -16%, as all three business segments are negatively impacted by the ongoing Covid-19 outbreak. However, we expect Oceans to show a positive development Q/Q as business activity in Asia is starting to recover. We expect Q2/20 to mark the bottom of the current business cycle for ITS, as we expect truck sales to pick up in H2/20.

Companies: Norbit ASA

07 Jul 20

Restructuring and cutting costs

Photo-Me was trading in line with expectations until COVID-19 hit in the final months of FY 2020. FY 2020 sales declined by -5.6% to £215.4m including £22.7m sales lost due to COVID-19 as consumer activity was impacted significantly. The Board believes that activity levels could take a long time to return to pre-COVID-19 levels; a thorough review of the business is underway and restructuring programmes are being implemented to better align operations to the current trading conditions. Net cash at April 2020 was £7.9m, comprising gross cash of £66.5m and drawn debt facilities of £58.5m. A €30m additional credit facility was received in May and June.

Companies: Photo-Me International

07 Jul 20

Trading update and contract wins

The year-end trading update was encouraging, with expected results showing good YoY growth, modestly below but close to our earlier expectations. Trading has been resilient, particularly in safety critical areas such as its nuclear exposure, with some weakness being seen in oil & gas, where there is limited exposure. Two new contract wins in the nuclear sector have also been announced today. FY 2021 forecasts remain under review. With strong finances, the company is well positioned to maximise M&A opportunities, through its PIE strategy.

Companies: Avingtrans

07 Jul 20

Y/E trading update reveals impressive growth

Revenue for FY 2020 is ahead of expectation and we adjust our forecast accordingly. Sales are growing at an impressive rate; >50% pa despite COVID-19 and the virus had no effect on the company’s ability to deliver projects with 23 new customers live in Q4. We note COVID concerns are causing some delay on contract decisions, and sales would have been even stronger but for that. These delays do lead to caution on FY 2021, and we ease back our forecasts on more prudent management guidance. However, with the recent £5m equity placing, PCIP has plenty of cash to continue to invest in rolling out its exciting secure payments proposition. This cloud-based solution can be deployed remotely and assists call centres in moving agents to WFH and still collect payments securely. The outlook remains very bright with continued rapid growth expected.

Companies: PCI Pal

07 Jul 20

The outcome of eBay classifieds likely soon

We expect to see the most severe impact from Covid-19 in Q2, but recovery thereafter. We expect focus to be on improved traffic trends into Q3. Another investor focus is the outcome of the sale of eBay classifieds (ECG), where reportedly Adevinta, Prosus and private equity are interested. This may be a near-term catalyst, as eBay’s CEO has stated that he expects to share an update by mid-year on ECG. Our Buy rating stands firm.

Companies: Adevinta ASA