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02 Dec 19

Acquisition – 7% accretive in first full year

SDI has announced the acquisition of Chell Instruments; paying c.£4.3m for the business (FY 2018 EV/Sales and EV/EBIT of 0.9x and 5.5x) funded from cash and a new debt facility with net debt at year-end now expected to be c.£5.0m. SDI has shown that it can source and execute another accretive acquisition in what was a competitive tender bid process. We expect the acquisition to be c.7% accretive to EPS in FY 2021 and raise our target price by 25% to 75p to reflect the accretion as well as rolling forward our target year, implying an EV/EBITDA of 11.9x and adjusted P/E of 17.3x.

Companies: Scientific Digital Imaging

02 Dec 19

Hurricane Energy - Warwick West discovery

This morning Hurricane Energy announced the flow test results from its Warwick West well, which is the third and last well from the 2019 drilling campaign in the Greater Warwick Area (GWA). The well confirmed the discovery of 43° API light oil and tested at a stable flow rate of 1,300bod on natural flow with less than 0.5% of water being produced. Hurricane and Spirit Energy are evaluating the results of the 2019 drilling campaign and further technical analysis will determine both the potential for GWA to be a single accumulation and its volumetrics. Our risked valuation of Hurricane stands at 102.8p/share, with GWA tieback valued at 3.5p/share and GWA full field development at 21.6p/share. Hurricane shares are trading at 37.5p after dropping c 20% this morning. This implies the market is not attributing any value to the GWA full field, even though an oil discovery was observed.

Companies: Hurricane Energy

03 Dec 19

LIBERUM: Ramsdens Holdings* - 12% adj. PBT growth. On track for H2.

We welcome a confident outlook statement and dividend raise after hitting H1 expectations, even excluding the extra profit from gold sales. EPS estimates unchanged.

Companies: Ramsdens

28 Nov 19

LIBERUM: Codemasters* - Slightly Mad deal enhances EPS by 32%

Codemasters is acquiring racing developer Slightly Mad Studios (SMS) for an initial $30m consideration. The deal combines two leading developers in the racing genre, adds 150 proven developers, diversifies CDM’s IP and game release schedule, and broadens the global partners to now include a Hollywood Studio. We forecast SMS contributes £10m of EBITDA in FY21 although it is clear from the earn-out deal structure that the ambition of their Management team is significantly higher. We upgrade our EPS by 32%. We believe this deal, together with news flow around future games, should catalyse a re-rating from the current P/E of 15x to closer to UK developer comps on 30x. We increase our Target Price to 370p from 310p.

Companies: Codemasters

03 Dec 19

Record Black Friday with trading “comfortably in line with expectations”

Boohoo Group has released a brief statement confirming ongoing strong trading across its key brands (boohoo.com, PrettyLittleThing, Nasty Gal and BoohooMAN) and another record-breaking performance over the allimportant Black Friday weekend. Confirmation that the Group is trading “comfortably in line with market expectations” (FY20 company complied revenue growth consensus +37.6% YOY), implies growth at the top end of management’s guided 33% to 38% range. We upgrade our forecasts to reflect this, having previously sat at the mid-point of this range and the lower end of consensus. We see scope for history to repeat itself and deliver further upgrades in January, given management’s traditionally cautious stance ahead of peak December trading in contrast to ongoing momentum across the Group’s portfolio of brands.

Companies: Boohoo.Com

03 Dec 19

Vicon continued strength; Yotta ARR building

Prelims reveal continued progress, particularly within Vicon, where sales grew an impressive 16% y/y, in turn driven by success within both new and existing verticals and so consistent with strategic objectives. Relative to forecasts, sales of £35.4m (+12% y/y) are in line and so too is adj. PBT of £5.5m, following continued investment and also IFRS 15 adoption. We leave forecasts essentially unchanged, believing the drivers for both divisions remain firmly intact and indeed reaffirmed, following an excellent FY’19, particularly in Engineering and ‘Adjacent Verticals’ within Vicon. On valuation, we continue to apply a SOTP methodology, reflecting both Vicon’s industry leading position and cash generative qualities and further, Yotta’s growing ARR in our fair value calculation. This arrives at 108p, implying some 20% upside.

Companies: Oxford Metrics

02 Dec 19

Outstanding contract win and pivot to recurring

Pelatro has won a landmark contract with one of the biggest telcos in the world; a major global operator and household name – an outstanding achievement for a small newcomer in the market. After careful deliberation, it has been taken as another recurring revenue/gain-share deal (a fourth this year) rather than a large upfront licence. As Pelatro matures and feels more established, management can afford to take a longer-term view, sacrificing short-term growth and profit for the stability of recurring, incremental revenue streams. A likely $7m of upfront licence has now been foregone in these deals this year and thus FY 2019 revenue guidance is cut to $6.5m (still up 6% YoY). The impact of this pivot to much higher quality revenue should not hide remarkable performance this year. For comparison, had these been taken as licences, FY 2019 sales would have been $13.5m; 28% ahead of our $10.5m forecast set mid-2018, and 121% YoY growth on a comparable basis. That follows 161% and 95% YoY growth in FY 2017 and 2018 respectively. This breakthrough win comes on top of consistently strong sales growth and the increasing quality of earnings, and we reiterate our 125p TP.

Companies: Pelatro

03 Dec 19

Interim results – trading on track

Interim results show a decent level of organic growth and points to trading being on track to achieve full-year expectations. Trading remains at a record level with improved gross margins and operational drop through. Sector diversity has increased. Cash generation has been creditable, allowing for the early pay-down of Pacer-related loans. No change to forecasts. The shares have performed well on the back of several upgrades over the past year, a combination of acquisitions and contract wins, but still trade at a discount to its peer averages and continue to offer good upside with trading momentum remaining positive.

Companies: Solid State

03 Dec 19

Acquisition of VCT contracts, £30m ABB; HY results show NAV growth

Mercia has announced the proposed acquisition of three VCT contracts for a total consideration of up to £25m, which would add £270m AuM – driving the group to pro-forma cash profitability from asset management in the first full year. An accelerated bookbuild has been launched to raise £30m (gross) at 25p in order to fund the initial acquisition consideration (£12.4m) and £15m to drive the Mercia balance sheet towards an evergreen (self-funding) position. Interim results, also announced, show NAV growth (+2.6%) including £3.2m net revaluation gains in the portfolio. As joint broker to Mercia, we await the outcome of the General Meeting (20/12) before updating our forecasts.

Companies: Mercia Technologies

04 Dec 19

CloudCall

New partnership with TargetRecruit; Positive

Companies: Cloudcall Group

05 Dec 19

LIBERUM: PayPoint* - Growth drivers becoming more powerful

The H1 20 results were ahead. PBT fell 5% yoy to £24.0m and FD EPS fell 5% to 28.5p due to the non-repeat of the VAT credit in H1 19, although both were 7% ahead of our estimates.

Companies: Paypoint

06 Dec 19

Cenkos: Duke Royalty Ltd -- Scaling of the portfolio delivering riches

Duke delivered significant YoY growth in H1/20A results, as earlier efforts to broaden the royalty portfolio came through this year. This strong growth will continue with recent debt & equity raises forward funding investments to income levels of £15m by FY21E. Met with an enhanced, but now stabilised cost base, operational leverage should drive continued strong adj EBIT growth (to £13m, at a c85% margin) and further DPS rises.

Companies: Duke Royalty

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

28 Nov 19

Cenkos: TClarke Plc - Sparking into life

We effectively re-initiate TClarke on a buy rating against a ‘model fair value' of 136p (20% upside). A positive trading update confirms 2019 consensus and the achievement of target 3% margins. The next leg of growth will focus on revenue expansion (and margin sustainability) which potentially drives high-single digit earnings growth beyond 2021. This is scarcely recognised by a 2021e PE of c6x, dividend yield of 4.4% and FCF yield rising through 9%. The stock has clear attractions on valuation and income grounds.

Companies: TClarke

03 Dec 19

Morning Comment

This morning’s interims illustrate, as expected following the trading update of 24 October, a very strong H1 2020E performance with a 43% rise in revenue (+11% organic) driving a 61% increase in adjusted PBT. These results represent 49% and 63% of our FY 2020E revenue and PBT expectations respectively. Key standouts were the Manufacturing division (Power in particular, bolstered by good demand for battery packs), which grew revenue by 22%; and a group forward order book +5% LFL at £37.8m. Whilst the latter underpins our full year expectations, caution over wider macro events and movements in FX lead us to maintain our upgraded full year expectations for the time being. Even so, the shares continue to trade at a material discount to our estimate of fair value of 640p, which is based on a current year PER of 15x against its closest quoted peer discoverIE on 17x.

Companies: Solid State

06 Dec 19

Is the scrubbers growth over?

The return to growth in Marine was much appreciated when the Q3 figures came out. This was, once again, largely driven by the IMO 2020 sulphur regulation. Now, the question is rather to identify where the industry is going and what level of growth in scrubbers is sustainable.

Companies: Alfa Laval

06 Dec 19

Executive interview - Voltabox at EKF 2019

06 Dec 19

On the road to security solutions and electronic security

Securitas has been involved in the development of security services and electronic security for many years. Security services and electronic security sales reached SEK20.5bn with an operating margin of 8-10% of sales in 2018 vs 4% of sales at best in traditional manned guarding. What is new is the target of sales assigned for 2023, or SEK40bn, including further acquisitions. These should have a gradual positive impact on the group’s operating margin given the training, IT and R&D costs needed.

Companies: Securitas

06 Dec 19

Executive interview - Tinexta at EKF 2019

06 Dec 19

Executive interview - Heidelberg Pharma at EKF 2019

06 Dec 19

Executive interview - Mybucks at EKF 2019

06 Dec 19

Executive interview - PAION at EKF 2019

06 Dec 19

Executive interview - Lloyd Fonds at EKF 2019

06 Dec 19

Executive interview - Ringmetall at EKF 2019

06 Dec 19

Executive interview - PANTAFLIX at EKF 2019

06 Dec 19

Executive interview - CLIQ Digital at EKF 2019

06 Dec 19

Executive interview - EQS at EKF 2019

06 Dec 19

Electrification Investor Day : seems to be on the right track

On the back of the Electrification Day, we are much more confident on the integration of GEIS. ABB provided a very high level of detail compared to previous events. The operating margin corridor of 15-19% was reaffirmed for next year. On the other hand, we remain a bit more cautious on the pricing power aspect that should remain weak in the early days at least.

Companies: ABB LTD-REG

06 Dec 19

Impax Asset Management reveals key themes investors should look out for in 2020

06 Dec 19

Delivery growth accelerated in November

Growth continued to be negative in Europe outside Germany (-3.0% to 51k in November and -1.6% to 565k ytd), but the growth rates accelerated about everywhere else. Excluding deliveries in China (unfortunately and unlike BMW, Daimler does not give a break-down between joint-venture deliveries and direct numbers), the number increased by 3.3% to 151k in the last month but was down by 0.5% to 1.49m ytd.

Companies: Daimler