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18 Apr 19

LIBERUM: Sylvania Platinum* - More value and more options

We recently attended a company site visit which highlighted that we have considerably undervalued the tail of Sylvania’s operations. Also, now that its host Samancor has grander ambitions, Sylvania too has possible growth opportunities.

Companies: Sylvania Platinum

18 Apr 19

FY 2019 ahead of expectations

The post YE trading update revealed that a strong Q4 performance meant that the company’s FY March 2019 revenue and earnings will be ahead of expectations and we raise our forecasts accordingly. We expect this strong demand for data solutions to continue and cautiously ease forward FY 2020 forecasts too. However, we note that IFRS 15 adoption saw £1.7m of revenue brought forward from FY 2018 (now restated) into FY 2019, skewing organic growth comparisons. Furthermore, EPS will also be skewed; not only by IFRS 15 adoption but also by an exceptionally low FY 2019 tax rate, due to relief on management options. Thus adj. FD EPS appears to fluctuate unpredictably when actually, underlying these headline numbers, the D4T4 business is steadily growing and maintaining margins while also increasing investment in the US operations. This is another year of excellent performance and we lift our TP to 300p in response.

Companies: D4T4 Solutions

11 Apr 19

Quarterly Research Outlook

We’re just over three months in to 2019 and we’ve seen a 10% UK market rally, retracing much of the Q4 decline, such is the nature of fickle market sentiment. That said, many of the issues we wrote about three months ago that were impacting markets remain: notably Brexit, trade wars, geopolitics and global monetary policy. The 2019 rally thus far feels somewhat fragile, with competing forces of optimism on a potential trade deal which could underpin the rally, against the deterioration in underlying economic data that could ultimately undermine the recent market gains. In this context, we look at what the lead indicators and the market are telling us about the industrial cycle and the stocks most exposed to various industrial trends. The Q4 derating in short cycle industrials and autos had been vicious and while these sectors have seen a more solid footing in 2019, with earnings downgrades being priced in, it will likely take a trough in lead indicators before short cycle stocks can start to perform again and re-rate relative to the market.

Companies: ARS CYAN HYR LIT SOM ABBY AMS AMER ANX ATYM AVON BLVN PIER BUR CGS CAML CALL CSRT TIDE DTG DEMG EMR FPO FST GTLY GENL GOR GRI GEEC HDY HMI HAYD HEAD HILS HTG HUR IBPO INDI JHD JOG KEYS KCT KGH LAM LOK MACF MNO MANO MOD MKLW OXIG PCA PANR PARK PGM PHC PMO RBW RMM REDD RSW RNO RKH RBGP ROR SUS SCPA SHG SOLG TRAK TRI VNET VTC ZOO ZTF

15 Apr 19

Cenkos: Filta Group Holdings Plc - FY18A results

Strong growth across Filta's service offering led the company to outperform our expectations on revenue, EBITDA and EPS. The purchase of WatBio has significantly transformed Filta's grease management operation into one of the UK's major players, whilst the buy-in of the master franchise in Germany establishes a platform for franchise expansion into Europe. Each of these 2018 acquisitions further supports Filta's recurring revenue business model.

Companies: Filta Group

15 Apr 19

XP Power - Q1 book-to-bill of 1.16x

XP’s Q1 revenues reflect varying performance by end-market: encouraging growth from industrial, healthcare and technology customers was offset by the expected decline in demand from the semiconductor sector. Order intake was higher on a year-on-year and quarter-on-quarter basis, resulting in a book-to-bill of 1.16x for the quarter. With management’s full-year expectations unchanged, we maintain our forecasts.

Companies: XP Power

16 Apr 19

FY results in line, scope for margin and cash flow growth

The FY results were in line with the pre-close trading update, with a strong boost from the Balu acquisition in March last year, with organic growth of 5.7%. Strategic focus points to a pause in acquisitions and re-emphasis on gaining integration benefits, driving margin and cash generation improvements. No change to adjusted PBT and EPS forecasts. The shares trade at low levels and a considerable discount to its peers. Our TP remains 200p, pointing to a fair value EV/EBITDA of 9.4x and P/E of 11.0x, with considerable scope for a rerating once management delivers on the targeted internal improvements.

Companies: Flowtech Fluidpower

15 Apr 19

H1 trading ahead of expectations

Sanderson has issued an update indicating that first half trading is ahead of management’s expectations with all group businesses performing well. Digital Retail continues to deliver double-digit growth, Manufacturing sales order intake has grown over 10%, and Supply Chain Logistics made a good start to the year. A positive outlook is supported by good sales order intake in the half, strong sales prospects for H2 and a healthy order book (c£8.0m). Despite this trading strength, we are adopting management’s cautious approach given underlying economic uncertainty and make no changes to our forecasts ahead of interim results on 15 May. We continue to believe that the current valuation (FY 2019 EV/EBITDA of 8.4x, falling to 7.5x for FY 2020) fails to reflect an attractive combination of strong trading momentum, good revenue visibility, healthy cash generation and a decent dividend yield.

Companies: Sanderson Group

15 Apr 19

Wrapping Up a Strong Year

By leveraging its innovation and efficiency in manufacturing and sourcing, maintaining strong customer relationships, successfully integrating acquisitions and continuing strong financial management, Design Group is expecting to deliver 9.8% organic sales growth with a 37% annual increase in sales. Margin expansion is expected to continue and impressive cash conversion has driven average gearing below 1.3x EBITDA.

Companies: IG Design Group

17 Apr 19

Games Workshop Group - Marching on up

As outlined in our recent initiation note, ‘On a mission’, Games Workshop’s (GAW) focus on international multi-channel expansion, customer engagement and product innovation, alongside its openness to exploring ways in which to leverage its rich intellectual property (IP) to generate royalty income, is continuing to deliver outstanding results. Strong trading since the half year, and new licensing agreements, lead us to upgrade our FY19 and FY20 earnings forecasts by c 14%.

Companies: Games Workshop Group

16 Apr 19

Solid FY18 results and a good start to FY19

Revenue increased 42% to £111.1m (FY17: £78.3m) with organic growth a pleasing 5.7%. Adj. operating profit of £11.4m (FY17: £9.1m) improved £2.3m in absolute terms, a 25% increase yoy. Margin decreased 130bps to 10.3% due to the lower margin businesses joining the Group through acquisition. Forecasts assume a conservative 50bp margin recovery in FY19. Trading in the new year has been encouraging with Group revenue increasing 14% and organic growth of 4.0%. The shares trade on a significant discount to peers, trading on 7.7x FY19 earnings and yield 5.2%.

Companies: Flowtech Fluidpower

16 Apr 19

Keywords Studios - Structural strength

Keywords Studios looks structurally well placed to continue performing well in an industry where change and innovation are the norm. The company again showed the resilience of its model in FY18, delivering 10.1% l-f-l revenue growth and 53% adjusted EPS growth in the face of considerable industry turbulence. Looking ahead, we see sustained growth from the launch of streaming services by industry majors and the continued shift towards outsourcing. Keywords’ strategy, which has delivered a five-year EPS CAGR of 53%, appears sustainable. As such, we believe that the shares remain set for continued appreciation.

Companies: Keywords Studios

16 Apr 19

Q1 2019 AIM Review

2019 started well for investors with U.S. stocks rallying on the back of trade talks between China and the U.S. resuming. Sterling rebounded in Q1 2019 as expectations built the UK would avoid a “no deal” Brexit, providing a further tailwind to more internationally focused UK companies. This sentiment spread across the globe and filtered its way down into small caps.

Companies: PRSM KMK SYS RAI MNO CCS MANO CBOX KGH

10 Apr 19

Games Workshop Group - On a mission

Games Workshop (GAW) is the global leader for tabletop miniature gaming, a market it created and the fastest-growing segment of the $12bn global non-digital games market. GAW drives international multichannel sales through a robust pipeline of innovative new product launches and extensive use of online and social media marketing to engage with customers. The company is highly cash generative and delivers outstanding returns on capital, supporting a healthy c 4% yield. Both our forecasts and valuation of 3,490p have upside potential.

Companies: Games Workshop Group

17 Apr 19

2018 Full Year Results

Central Asia Metals (CAML LN) having delivered on production guidance for 2018 released robust full year results underpinned by the low cost base of the group. Revenue of US$192m was up 88% YoY while Kounrad unit costs of US$0.54/lb were up 4% YoY, in line with our forecast. Sasa unit costs were 5% higher YoY. The stronger top line and low cost base meant EBITDA was up 88% YoY to US$125m. Net income from continuing operations was up 48% YoY while EPS up 8% YoY to 31 cents per share highlights the accretive nature of the transaction. The full year dividend of 14.5p/sh. was 5% ahead of our estimate.

Companies: Central Asia Metals

12 Apr 19

LIBERUM: Plus500* - From too much volatility to too little

A low volatility quarter combined with clients making money (pre spreads) to mean very weak Q1 revenues at a third of the level of Q4, however new customer numbers are good, and spread revenue ARPU only down 14% on Q4. The $28m of client P&L takes 6% off our revenue estimate, and then it was a very weak quarter anyway.

Companies: Plus500

19 Apr 19

The strong momentum continues in Q1

A strong set of Q1 results from Rentokil. The top-line was led by a sound organic performance (a resilient Pest Control business and improved Hygiene proposition) and the continued M&A activity by the company. The strong momentum should continue throughout the year. We will tweak our estimates slightly but the stock recommendation might remain unchanged.

Companies: Rentokil Initial

18 Apr 19

Cenkos: 88 Energy Ltd - Q1/19 Update

This morning, 88 Energy released its Q1/19 operational update. At Project Icewine, 88E has selected a preferred bidder as part of the conventional farm-out campaign, which, subject to successfully negotiating terms and conditions, is targeted to conclude in Q2/19, before a potential exploration/appraisal well in 2020. Evaluation work by Baker Hughes and the USGS continued the unconventional portfolio at Project Icewine, with a farm-out process planned to launch mid-2019. Petrophysical analysis at the Winx-1 well indicated that the Nanushuk topset primary target was not conducive to flow, with the reservoir compromised by dispersed clay in the matrix. Data acquired from the Winx-1 well will be integrated with the reprocessed Nanuq 3D seismic in order to evaluate the remaining prospectivity on the Western Leases. Processing of the 3D seismic on the Yukon Leases was completed during the quarter, with interpretation and resource evaluation currently underway on the inversion product. We reiterate our BUY recommendation and our price target of 3.1p per share.

Companies: 88 Energy

18 Apr 19

Executive Interview - Regional REIT

18 Apr 19

Cenkos: Empyrean Energy Plc - Coro Deal Done

Yesterday, Empyrean Energy announced that it had received US$120,000 in cash and US$185,000 in consideration shares as part of the agreement with Coro Energy, whereby Coro has agreed to acquire a 15% interest in the Duyung PSC, offshore Indonesia from West Natuna Exploration Limited (WNEL). Under the agreement Coro will also contribute US$10.5m to the 2019 exploration/appraisal campaign, which in addition to appraising the Mako gas field, will also look to test the deeper Tambak structure, containing gross-prospective mid-case resources of 250Bcf. We reiterate our BUY recommendation and our target price of 31p per share.

Companies: Empyrean Energy

18 Apr 19

Cenkos: Venture Life Group Plc - Delivering on the strategy

Venture Life's full year results show a strong growing company generating profits and positioned to deliver both organic and M&A driven growth going forward. Revenues were £18.8m (trading update expectation £18.7m) and adjusted EBITDA was £2.7m versus our expected £2.3m. The 17% revenue growth was relatively evenly split between organic and M&A driven, demonstrating the potential of both aspects of the group's strategy. The company closed the year with a net cash position of £5.8m (2017A net debt £6.3m). We maintain our Buy recommendation.

Companies: Venture Life Group

18 Apr 19

LIBERUM: Sylvania Platinum* - More value and more options

Companies: Sylvania Platinum

18 Apr 19

£5m placing

Evgen Pharma has raised £5.0m by way of an oversubscribed placing of 33.3m shares at 15p, a 7% discount to the prevailing share price. The funds will be used to strengthen the balance sheet for partnering discussions as well as enabling additional formulation and toxicology work for SFX-01 to be completed. This follows positive Phase II data from an open label study released on 25 March. These funds, together with existing cash, should provide a cash runway to mid-2021, which is beyond the next key valuation milestone: the readout of the Phase IIb subarachnoid haemorrhage study in Q3 2019. A positive outcome is expected to result in a significant uplift in the company’s valuation. Our new forecasts and near-term target price reflect the dilutive impact of the new shares to be issued. We retain a target EV of £45m, which implies a target price of 35p. Our risk-adjusted target valuation, however, would rise to c.£110m upon a successful Phase IIb readout for SAH, implying an increase in the target price to c.85p.

Companies: Evgen Pharma

18 Apr 19

Encouraging year-end trading update, slight EPS boost

An encouraging year-end update, with profits slightly ahead of expectations, although signalling that the trading environment has become more challenging. Revenue growth has been achieved across all regions. New banking facilities have been announced, providing firepower for future acquisitions. We slightly upgrade 2019 expectations, with a 1.5% EPS increase. Momentum is returning to the shares but they still look attractive at these levels, with 26% upside to our maintained 270p price target.

Companies: Trifast

18 Apr 19

FY 2019 ahead of expectations

Companies: D4T4 Solutions

18 Apr 19

Morning Note – 18 April 2019

ANGLE (AGL): Corp External endorsement of Parsortix | D4T4 Solutions (D4T4): Corp FY 2019 ahead of expectations | Evgen Pharma (EVG): Corp £5m placing | SimiGon (SIM): Corp US government agreement should drive sales | Trifast (TRI): Corp Encouraging year-end trading update, slight EPS boost

Companies: D4T4 SIM TRI AGL EVG

18 Apr 19

VSA Morning Flow Test

Columbus Energy Resources (CERP LN)# has provided Q1 2019 quarterly operational update demonstrating significant progress in progressing the SWP exploration programme with a well location chosen for Q3 2019 and advanced discussion in relation to the acquisitive growth strategy in South America.

Companies: Columbus Energy Resources

18 Apr 19

Contract wins and pipeline support the outlook

Trifast has released a pre-close trading update ahead of preliminary results. The update indicates a good finish to the year and Group underlying profit is slightly ahead of management expectations on the back of good trading and revenue growth recorded across all regions. We believe the investment and structural opportunity for Trifast will be increasingly recognised by the market. Reiterate buy rating.

Companies: Trifast

18 Apr 19

GMP FirstEnergy ― UK Energy morning research package

Columbus Energy Resources (CERP LN) (not covered): Operational update in Trinidad | PetroTal (PTAL LN/TAL CN)1; BUY, £0.40: Exploration drilling results in adjacent block | G3 Exploration (G3E LN) (not covered): FY18 results | Jadestone Energy (JSE LN/CN); HOLD, £0.50: 4Q18 results | Equinor (EQNR NO) (not covered): Divestment in Norway | Valeura Energy (VLE CN)7; BUY, C$10.00: London listing | Maurel & Prom (MAU FP) (not covered): 1Q19 update

Companies: CERP PTAL G3E JSE VLE MAU

18 Apr 19

(Almost) Daily Market News Update

Both consumer price inflation and retail price inflation remained below expectations in the UK. Year-on-year increases in consumer prices stuck below 2% for the third month in a row thanks to lower food prices, while core inflation remained at 1.8%. Overall, despite a tight labour market and strong wage inflation, overall inflation in the UK remains stubbornly low, which opens the question of whether the Bank of England will hike interest rates in 2019. Given the extension of Brexit to the end of October and the non-existent increase in inflation, it seems likely that the Bank will stay put for the rest of the year.

Macros: Commodities - EnergyCommodities - Metals & MiningEconomic DataIndices and MarketsForeign ExchangeCommodities - EnergyCommodities - Metals & MiningEconomic DataIndices and MarketsForeign ExchangeCommodities - EnergyCommodities - Metals & MiningEconomic DataIndices and MarketsForeign ExchangeCommodities - EnergyCommodities - Metals & MiningEconomic DataIndices and MarketsForeign ExchangeCommodities - EnergyCommodities - Metals & MiningEconomic DataIndices and MarketsForeign ExchangeCommodities - EnergyCommodities - Metals & MiningEconomic DataIndices and MarketsForeign ExchangeCommodities - EnergyCommodities - Metals & MiningEconomic DataIndices and MarketsForeign ExchangeCommodities - EnergyCommodities - Metals & MiningEconomic DataIndices and MarketsForeign ExchangeCommodities - EnergyCommodities - Metals & MiningEconomic DataIndices and MarketsForeign ExchangeCommodities - EnergyCommodities - Metals & MiningEconomic DataIndices and MarketsForeign Exchange

18 Apr 19

Reassuring Q1 publication

The company unveiled good Q1 19 results, beating the consensus and, most importantly, keeping its view unchanged for the rest of year. The latter is maybe the most important as the market feared a struggle coming from the memory market, and this publication should then clear up fears about the guidance.

Companies: ASML Holding