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N+1 Singer - IQE - Upgrade cycle set to continue
24 Mar 17
IQE’s FY’16 results showed good growth in all key segments and came in c.4% ahead of our recently upgraded forecasts. We have upgraded our forecasts today by 5% and 3% in FY’17 and FY’18 respectively, but expect the upgrade cycle to continue. The increase in capex in FY’16 looks to us a strong indication of future volume increases, and we see scope for significant upgrades through the course of our forecast horizon. We highlight three opportunities in this note, each of which could materially move the needle in its own right. IQE is one of our key picks for 2017 and has performed strongly YTD (+48%), but we believe there is more to go for. We increase our target price to 76p and retain our Buy recommendation.
Photonics the star of the show
21 Mar 17
IQE’s diversification strategy delivered a 17% jump in adjusted profit before tax during FY16. Strong growth in photonics revenues was a key element of this improvement. This was boosted by a return to growth, albeit modest, in the wireless sector and weak sterling. We revise our FY17 estimates upwards to reflect the progress made on customer qualifications for photonics applications, and we introduce FY18 estimates.
Another positive verdict
20 Mar 17
Burford’s results for 2016 produced another outstanding set of figures. Revenue grew by 60% to $163.4m with strong growth in the litigation finance business and an additional boost from a secondary sale in the Petersen case. On an underlying basis net income grew to $114m, a 75% increase despite the investment in growing capacity which increased costs. A combination of ongoing investment and gains and increases on valuation saw the fair value of the litigation assets increase 67% to $559m, underpinned by a growth in invested capital to $394m. With the results statement there was an announcement of a further sale of 9% of the Petersen case at a valuation of 20 times the cost of investment.
Or, helping a juggernaut turn on a dime
24 Mar 17
Sopheon has spent many years evolving a state-of-the-art platform allowing Enterprise customers to manage and monitor their pipelines of innovation. As this market matures and on the back of some major reference client wins, Sopheon’s Accolade product is beginning to see material success on a number of fronts. This note describes the marketplace, the technology, and the progress now being achieved.
Stronger and stronger
23 Mar 17
Sopheon has reported strong prelims in line with the January trading update which had demonstrated that revenue delivery had been achieved on cost underspend, leading to EBITDA (+7% vs FY16E) and adjusted PBT (+22%) outperformance. Strong licence sales, high levels of recurring revenue retention (94% by value), and ever upgrading product portfolio in terms of functionality delivered revenue strength. Gartner recognition illustrates the transition from a product which needed to be described then sold, to a solution set sought by customers to deal with the increasingly acknowledged enterprise problem of efficient product lifecycle management. Sopheon is well positioned for future growth, and board confidence for future growth leads to planned increase in investment, yet still delivering $5.6m ($5.3m pre FX) EBITDA. Having smashed through our FY16 forecasts and target price, we restore FY17 forecasts and lift the 12-month target from 360p to 620p.
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Transformation plan on track; business comes under competitive pressure
27 Mar 17
Kingfisher reported FY16/17 results ahead of our estimates and market consensus. The lfl revenue increased by 2.3% (vs our estimate: +2.9%), once again driven by the UK business (+5.9%; our estimate: +6.0%; c.44% of group sales). B&Q clocked 3.5% organic growth (includes +2.6% sales transference from closed stores) on the back of strong demand for both seasonal and non-seasonal products (+3.1% and +3.6% yoy, respectively). Screwfix continued its solid growth momentum with 13.8% lfl, largely driven by the robust demand for plumbing and electrical products and strong digital growth (click & collect: +60%, mobile +124%). Among other international markets, Poland led the pack with lfl revenue growth of +7.5% (supportive housing market and new ranges; c.60% of segmental sales). However, France remained in negative territory (-2.7% yoy, FY15/16: -0.4%; c.38% of group sales), due to the ongoing slowdown in the home improvement market and restrained promotional activity by the company. Despite the negative scope impact of -0.6% yoy, the reported revenue advanced by 8.7% (vs our estimate: +6.2%) on the back of FX tailwinds (+7% yoy; depreciation of the British pound vs the euro and Polish zloty). The retail profit margin came in at 7.5% (+30bp yoy), benefiting from the transformation plan, cost efficiencies and higher operating leverage in the UK and Poland. The company opened 38 stores on a net basis in FY16/17 and plans to add 54 more in the subsequent year. A final dividend of 7.15p per share was announced (taking the full-year total to 10.4p; +3% yoy) and 58m shares worth £200m were bought-back during the year (plan to return another £400m in the next two years). Management has guided for a flat gross margin in FY17/18, expecting Unified & Unique Offer CPR benefits to be offset by price reinvestment and clearance. For the five-year transformation plan, the total cost guidance (£800m) remains unchanged. However, the company has revised estimates for P&L costs (£310m vs previously £220m; to be incurred over the first three years of the plan) and exceptional costs (£170m vs previously £270m; to be incurred over the first four years against earlier guidance of three years).
N+1 Singer - Summit Therapeutics - Strengthening the data package: planned extension of PhaseOut DMD
27 Mar 17
The planned extension of the ongoing Phase II PhaseOut DMD trial will allow the gathering of further safety and efficacy data, thereby strengthening the regulatory data package required for marketing approval. We continue to expect initial, 24-week, muscle biopsy data from the PhaseOut DMD trial in Q2/Q3 2017. We are currently forecasting $2.6bn of ezutromid peak sales, supported by the broad potential utility of the programme across all patients with DMD and in combination with other agents. We remain highly positive on Summit’s commercial prospects.
N+1 Singer - Itaconix - Prelims confirm promising pipeline for 2017
27 Mar 17
Itaconix’ FY16 prelims are in line with expectations (continuing revenue £0.3m, net cash £8.8m). It has been a busy period for the Group with the disposal of the legacy nicotine gum business, a highly complementary acquisition and good commercial progress including recent Akzo Nobel and Croda agreements. Encouragingly, Croda has this month placed its first significant purchase order under the ZINADOR agreement. Our recently introduced forecasts for FY17 and FY18 are unchanged and a positive outlook statement reinforces our confidence that management will continue to deliver against its strategy over coming months.
ITM close £0.73m electrolyser sale
27 Mar 17
ITM announced this morning that it has completed the sale of a 0.5MW electrolyser with some associated ancillary hydrogen energy hardware to a customer for £0.73m. No further details of the transaction have been made public. This is further evidence of ITM building a top line and moving on a trajectory towards breakeven, cash generation and beyond.