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18 Feb 20

LIBERUM: Sylvania Platinum* - Dislocation from record prices

Sylvania Platinum is trading at extremely cheap levels, just 0.9x adjusted EV/EBITDA on spot. The market clearly feels nervous about the rapid rise in the underlying commodities, palladium and rhodium.

Companies: Sylvania Platinum

13 Feb 20

Y/e trading update – sales ahead, cash in line

Checkit has provided an encouraging year-end trading update to January, disclosing sales of £11.8m, 5% ahead of forecasts, equivalent to +3% LFL growth (group basis), or +8% (ex. EET; non-core). Cash is also reported at £14.3m – ahead of forecasts, but distorted by non-trading activities. After adjusting for both, we believe the underlying cash position is £12.4m – in line with forecasts, in turn implying that CKT’s investment program (and resulting cash burn) is proceeding as anticipated. The update also splits out Checkit Europe’s and Checkit UK’s sales. While such segmental reporting will not be continued, it is reassuring to note that Checkit Plc has acquired a company (now branded ‘Checkit UK’) in good financial health, as it grew pro-forma sales 7% y/y to £11.6m. Checkit Europe meanwhile grew more strongly, at +30% (but off a low base) to £1.3m. Looking forward, y/e pro-forma sales of £14.8m compares against £17.2m expected in FY21E, implying 16% growth. Driving this, we expect Checkit’s landmark contract win with BP (announced Oct-19) to be a material driver. To remind, Checkit won a three year deal to provide its Real Time Operations Management capability to BP at 320 sites. Naturally, we viewed this announcement very positively – as it provided validation of Checkit’s proposition (at an enterprise scale). We look forward to future news flow, confirming the roll-out is going to plan and - potentially - ‘sub contract wins’ also, as the contract may be extended beyond BP’s (320) owned sites, to dealer-owned sites and internationally also. N/c to forecasts.

Companies: Checkit

12 Feb 20

LIBERUM: Plus500* - Q4 stronger than thought

Q4 saw $100m of revenues ex customer P+L. The company will return 100% of 2019 profits to shareholders through dividends and buybacks, has $293m net cash, and may seek targeted acquisitions, new licences and product extensions.

Companies: Plus500

19 Feb 20

Kape Technologies

Reiterating the Buy case

Companies: Kape Technologies

18 Feb 20

The Industrial Revelation

BHP could revise down estimates if "viral outbreak is not well contained" in Q1 20, HeidelbergCement sees positive demand in 2020, Kone withdraws from Thyssenkrupp bid

Companies: Rotork Somero Enterprises

12 Feb 20

Scapa Group

FY20 trading update – trading profit “significantly below expectations”

Companies: Scapa Group

12 Feb 20

The Industrial Revelation

UK GDP in line with Dec construction beat but manufacturing miss, Japanese machine tool orders fall 36% y/y in Jan, Boeing nets no orders in Jan

Companies: HAYD HILS JHD OXIG RSW RNO SCPA TWD ZTF SOM GHH

17 Feb 20

CloudCall

New CRM partnership with Vincere

Companies: Cloudcall Group

17 Feb 20

WHI Morning Comment: Spectra Systems (SPSY)

Good entry point for great business Only marginally above levels last seen a year ago, we view shares in SPSY at the current price as representing an excellent entry point after coming off on profit taking. This was not, after all, an ordinary year for SPSY but an excellent one, characterised by upgrades, contract wins and most importantly, a significant collection of major opportunities which the company is working through and any of which has the ability to be a game changer for the business. To name a few among many: (1) potential further new work for a G7 central bank (existing client), (2) potential wins from a major Asian central bank, (3) major prospective polymer substrate contract, (4) tobacco smartphone authentication opportunities (TruBrand). As a provider of advanced technology solutions for banknote, product authentication, and secure lottery transactions, SPSY is a highly specialised producer of proprietary equipment, solutions and services, with high entry barriers to match. It is well-invested, hence the enhanced DPS in recent years; and the balance sheet is strong, with $11.1m of net cash (excluding $1.1m of restricted cash) reported with the most recent (H1) results, underpinning future growth expenditure. Importantly, our forecasts only encompass firm business prospects / established contracts. With TruBrand conducting tests in China (see above), this may have affected sentiment, but if so this is misconceived, since (a) this potential future revenue stream is immaterial or non-existent in our forecasts and (b) SPSY is not a one-trick pony – the pipeline is strong with other and major opportunities.

Companies: Spectra Systems

12 Feb 20

LIBERUM: Premier Miton Group* - Net flow stabilisation should be a positive catalyst for the shares

Following a sharp rally in December 2019 many UK listed asset managers have continued to see small share price gains in 2020 with the sector up 4.0% year to date. However, we note that there has been a particular under-performance of Premier Miton’s shares, currently down 17.2% over the same period.

Companies: Premier Miton Group

13 Feb 20

CMD flags strong near-term opportunities

We take the opportunity after last week’s Capital Markets Day to review key themes touched on by management, and the impact on likely future performance. Takeaways impacting organic growth are: 1) The speed at which migrations/ launches occur with Vanilla is faster than previously expected; 2) Video Content and Intent Marketing opportunities open up new streams; and 3) The Group has more potential to generate value from back catalogue content than previously thought. Organic Media sales growth of +3% in our FY’21E forecasts looks too prudent in view of these updates. We therefore upgrade organic Media growth forecasts to +10% y/y, with modest upgrades of +2% and +3% to FY’21E sales and EBITDA. FY’21E FCF yield is 6.8% (Sept y/e); A yield of 4% would generate an intrinsic value per share of >£20.

Companies: Future

14 Feb 20

The Industrial Revelation

German GDP stagnates in Q4, BorgWarner expects weak 2020, IPG Photonic cuts Q1 numbers on Coronavirus disruption

Companies: CGS JHD OXIG RSW RNO SCPA TRI ZTF SOM GHH

17 Feb 20

The Industrial Revelation

Japanese Q4 19 GDP sees largest fall since 2014 following recent tax hikes, US industrial production fell due to warm weather and Boeing 737 Max issues

Companies: HTG OXIG RSW RNO SCPA ZTF SOM GHH

12 Feb 20

New supply and license agreements with New Wave

Building on its existing collaboration, Itaconix has extended its commercial relationship with New Wave, a leading North American detergent supplier. Itaconix has entered into a licensing agreement for a new dishwashing detergent formulation based on Itaconix’ TSI 322 detergent polymer, which was launched last month. Since the announcement of the original December 2018 license agreement (for a triple-chamber dishwashing detergent pod based on Itaconix CHT 122), New Wave has gained new accounts and grown its volumes for use in private label brands at retailers throughout North America. As well as adding the new detergent formulation, a new supply agreement provides New Wave with certainty on pricing and supply of up to 1m lbs of Itaconix polymers over the next two years.

Companies: Itaconix

13 Feb 20

Premier Oil

Schemes approved by debt holders

Companies: Premier Oil

19 Feb 20

Mosman Oil's Andy Carroll hails continued production increase as it narrows focus on Stanley

19 Feb 20

Kodal Minerals - Bougouni Lithium Project Update

19 Feb 20

Higher dividend but serious concerns from 2019-nCoV

Ageas reported a FY 19 net income of €979m, up 21% yoy. The Q4 was difficult with a 34% drop in the net result to €102m. Earnings were driven by Life operations (up 65% yoy to €841m). By market, Belgium and Asia contributed up to 96% of the group’s net result. The Solvency II ratio stood at 217.3%, but it does not include the impact of the transaction on Fresh securities (-12%). The proposed dividend exceeded estimates at €2.65/share.

Companies: Ageas

19 Feb 20

Morning Report: Crispin Odey wades into Sirius Minerals takeover battle

19 Feb 20

The Phoenix continues to rise

After a twenty-year history, AorTech has started to live up to its rich asset base in medical devices. A management restructuring, reduced cost base and business alignment was complemented by a fund raising in June 2018. The progress made since the fund raising has been noted by investors and the share price has nearly tripled in 20 months. Investors may worry that they have missed the opportunity in AorTech, but we think the alignment and maximisation of assets has probably only just begun.

Companies: Aortech International

19 Feb 20

WHI Morning Comment: Pennant International (PEN)

New £5m contract win heralded – expected to convert in 2020 News from PEN this morning that it has received a Statement of Intent for a contract to supply training aids to a long-standing client in the Middle East adds yet another piece to the 2020 jigsaw, assuming conversion. With £20m revenues forecast for the current year, and the company “optimistic” about conversion FY20E, the extra £3m anticipated for 2020 looks like taking estimated revenue cover in the current year from 70%-plus to more like c.85%. We see this as a very healthy figure at this stage in proceedings. This is the second Middle East win announced in so many weeks, once again involving a long-standing client. It also follows in the footsteps of the Australian Defence Force (ADF) contract announced earlier in the month and the £3.4m helicopter training aid contract with a major UK OEM which emerged at the end of October. No guarantees re this specific contract, but PEN is continuing to throw off plenty of signs of ongoing progress.

Companies: Pennant International Group

19 Feb 20

Morning Note – 19 February 2020

Companies: Cambridge Cognition Gooch & Housego

19 Feb 20

Cambridge Cognition - FY 2019 trading update and £1.4m placing

Cambridge Cognition has raised £1.4m to finalise development of NeuroVocalix and digital health products, accelerate commercialisation of its compelling product portfolio (evidenced by the tripling of orders in digital health) and provide the necessary working capital to support the business. This follows a disappointing 2019, which was negatively affected by the postponement of a c.£1m order with large pharma, as it underwent a merger, a £1.4m fall in cognitive safety studies and the additional costs incurred to deliver on a c.£1.3m digital health order, although the outlook remains very promising. Together, these impacted profits and cash by c.£1.3m. We are leaving FY 2020 sales unchanged at £6.2m, which is supported by the 2019 year-end order book and prospective qualified order pipeline, although losses are reduced by c.£0.2m due to lower R&D and elimination of non-recurring costs. We have adjusted 2020 forecasts to reflect the capital raise and introduce forecasts for 2021. Our target price of 75p reflects the dilution resulting from the equity raise, with scope for this to be raised on any larger partnership deals, which are under active discussion.

Companies: Cambridge Cognition

19 Feb 20

Morning Comment

Pennant International -New £5m contract win heralded – expected to convert in 2020

Companies: Pennant International Group

19 Feb 20

Gooch & Housego

AGM statement – appears in-line; expect y/y progress

Companies: Gooch & Housego

19 Feb 20

£22m equity raise to reach key data readouts

4D Pharma has announced the completion of an accelerated book build (ABB) raising £22m (gross) by means of a Placing and Subscription of 44m new ordinary shares with existing and new investors at 50p/share. Proceeds will fund the ongoing development of clinical candidates and two key data readouts from the MRx0518 and Blautix programmes is expected over the coming months. **As Nomad, and joint broker and bookrunner to the placing for 4D Pharma, we are restricted and can therefore provide factual comment only. Shareholder approval for the placing will be sought at the General Meeting to be held on the 9th March 2020**

Companies: 4D Pharma

19 Feb 20

Strategic deal to tap significant potential

Gamma has made an offer to acquire VozTelecom (currently trading on the Mercado Alternativo Bursátil), one of the leading Cloud PBX providers in Spain, for an implied enterprise value of around €30.5 million (£25.3 million). In our view, the deal represents further progress in delivering on the Group’s strategy of expanding its footprint in Western Europe through an acquisition in another of its previously-identified target markets. Spain has a sizeable PBX market with a low level of cloud penetration and provides Gamma with the opportunity to invest in accelerating VozTelecom’s growth in an attractive market. The price implies an EV/EBITDA multiple of 12.2x VozTelecom’s pro forma (including recent M&A) 2019 EBITDA compared to our respective estimate of 19.3x for Gamma. Gamma’s net cash position stood at £53.8 million at the end of 2019 and the deal will be financed from that cash resource. We leave estimates unchanged ahead of Gamma’s upcoming full-year results and note that the acquisition will progress as a takeover offer under the relevant Spanish legislation.

Companies: Gamma Communications

19 Feb 20

With high risk can come high reward

Arix Bioscience (Arix) is a listed global venture capital (VC) company that presents an opportunity for institutional and retail investors to participate in the high riskreturn profile of early-stage biotech investing. Arix minimises risk through its expert investment team and with portfolio diversification, sourced via its extensive network and partners. An experienced board protects the interests of Arix’s shareholders. Arix’s latest published Net Asset Value (NAV) of £232m (1H’19) includes 17 portfolio companies (PCs) into which Arix has invested ca.£135m since launch in 2016. The net cash position at 31 December 2019 is forecast at ca.£48m.

Companies: Arix Bioscience

19 Feb 20

LIBERUM: RPS* - FY19 results in line, but FY20 PBT expected to be flat yoy

FY19 results were in line with expectations, but there were £23.4m of exceptional costs. We expect FY20 PBT in line with FY19 at £37m, but expect a return to growth in FY21 and assume 5% EPS growth.

Companies: RPS Group

19 Feb 20

Gooch & Housego - AGM update; coronavirus uncertainties

The group’s AGM trading update highlights that in the first four months of the year, trading conditions remain similar to previous trends, with strong subsea fibre couplers, A&D and life sciences. A slight improvement has been seen in microelectronics demand, while the effect of the coronavirus on Chinese demand is currently difficult to quantify, but is likely to be a drag on short-term performance. We therefore prudently cut EPS by 12.4% this year and 6.2% next year. The price target is also reduced from 1250p to 1150p.

Companies: Gooch & Housego