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19 Sep 18

Cenkos: Seeing Machines Ltd - Smooth transition for fleet

This morning, Seeing Machines released its FY18 results within which there is an increase in the forecast revenues from the five automotive OEM deals to A$138m (from A$110m), demonstrating the ever-broadening scope for DMS. The board has opted for a smooth transition to a license model for the fleet business and based on this we have substantially pared back our revenue expectations for FY19. Despite this, we believe Seeing Machines remains funded through FY19 thanks to lower expected cash requirements associated with the license model. We re-instate our BUY recommendation and adjust our target price to 15p (from 19p) to reflect recent events.

Companies: Seeing Machines

18 Sep 18

Board changes accompany Interim results

Interim results are in line with the previous trading update, although the outlook statement now points to some slightly softer market conditions, particularly in Flowtech’s engineering-oriented business. The company has recently seen a delay for a customer contract in PMC, which is likely to result in the group trading marginally below expectations. Sean Fennon has also announced that he is retiring as CEO, with Bryce Brooks stepping up to the plate. We reduce our 2018 EPS forecast by 7.7% to 14.8p, with a 5.7% reduction also in 2019. Our TP also reduces by 7% from 215p to 200p.

Companies: Flowtech Fluidpower

18 Sep 18

A year of transition

H1/FY2018 represents another period of significant development at Flowtech. Organic growth of c.9% and the benefit of the Balu acquisition in March for £10.2m, alongside four during H2/FY2017, has seen revenue increase by 65.1% to £56.4m, and operating profit from £4.5m to £5.7m (margin 10.1%). These acquisitions have also driven an improvement in the gross margin by 2% to 36.1%. The Board remains highly confident in the direction of travel and its commercial positioning to capture much further scale within the €12.4bn European fluid power sector. However, the shorter-term focus is firmly on investment that can deliver sustained operational improvements, procurement benefits and wider Group synergies. Our reduced forecasts incorporate increased operational costs associated with this investment and additional overhead from recent acquisitions. We also take a more cautious tone within Flowtech’s OEM-based businesses, including uncertainty on timing over a £1.5m order. Nevertheless, Flowtech continues to trade at a discount to peers on a PER of 11.5x in FY2018E, falling to 10.6x in FY2019E.

Companies: Flowtech Fluidpower

18 Sep 18

Cenkos: CloudCall Group Plc - New CRMs to drive additional growth

The 30% revenue expansion secured in H1A has been driven by voice-only products. H2E will see a broadened launch of the unified communications platform and further growth opportunities. The recent fund raising has helped finance the development of a scalable architecture and widen the number of CRM integrations which should lead to supplemental revenue expansion thereafter. The over-sold stock price is not fairly valuing the enlarged addressable opportunity in our opinion.

Companies: Cloudcall Group

18 Sep 18

Cenkos: Bango Plc - Interim results

This morning, Bango announced interim results for the period to 30 June 2018, showing a strong increase in End User Spend (EUS), up 138% to £220m. EUS growth remains on track to more than double for the fourth consecutive year. Audiens has added a completely new and high margin, revenue stream during the period and there remains a growing pipeline of new MNO/App Store integrations to complete as well as further Google Play upgrades, together representing well over US$4 billion in EUS. Further expansion of the Bango platform has also enabled MNO customers to sign-up for Amazon Prime Video in the US, UK and India, and Pandora customers in the US; generating new subscription-based revenues for Bango.

Companies: Bango

19 Sep 18

FY 2018 results – Boots to range Skinny Tan

Full-year results were in broadly line with the 19 June trading statement, with revenues rising 21% to £10.7m (£0.3m shortfall attributed to timing and despatch of June sales into July), resulting in a pre-tax profit of £0.7m and year-end cash of £1.9m. Confirmation that Boots is to range Skinny Tan online and in 1,250 (50%) of its UK stores from February/March 2019 significantly expands the retail footprint to more than 2,000 stores (2.7x), whilst Roots should benefit from a 4x expansion to more than 1,600 stores by year-end. We retain a 220p target price, which implies a calendar-adjusted 2019 P/E, EV/EBIT and EV/Sales of 24x, 14.0x and 1.8x, respectively. Strong growth expectations justify these premia.

Companies: Innovaderma

12 Sep 18

Share & share alike

Here we go again – the company reporting season is gathering pace. The MPC is likely to leave rates unchanged although expectations still remain for an increase next year. The UK economy expanded at a faster pace in July helped by the weather and better retail sales. General sentiment continues to be impacted by tariff concerns, combined with Brexit uncertainty. As Table 1 shows, all major indices have fallen over the last month. In Share News & Views, we comment on AorTech*, Bonhill*, DeepMatter*, EU Supply* James Fisher, Haynes, Hunting , Location Sciences*, Marshall Motor and Synectics*.

Companies: AOR APC BMS CRPR DMTR ESC EUSP FDM FA/ GETB LSAI PCF SNX TCN W7L

17 Sep 18

CEO Appointment & board changes

boohoo Group has this morning announced the appointment of John Lyttle as Group CEO (effective 15th March 2019) and the re-alignment of its wider executive board as it positions itself for the next stage of growth. John is currently the COO of Primark, one of Europe’s fastest growing and most profitable retail businesses, a role he has been in for eight years. His appointment brings complementary operational experience to boohoo’s senior management team as it focuses on rolling out the infrastructure and technology needed to realise its ambitions of reaching £3bn in annual sales. Joint co-founders Mahmud Kamani and Carol Kane will remain close to the businesses, moving to Group Executive Chairman and Group Co-Founder and Executive Director respectively, with a focus on driving the longer-term strategy and creative vision for the enlarged Group. Current Non-executive Chairman Peter Williams will step down from his role next March with a replacement NED role to be announced in due course. Interim Results will be announced on 26th September, and the shares trade on 44.3x FY19 PE based on Friday’s close.

Companies: Boohoo.Com

17 Sep 18

LIBERUM: Sirius Minerals* - 2.5mtpa binding offtake and vertical integration in Brazil

Sirius have announced a binding offtake agreement at a peak volume rate of 2.5mt of POLY4 with Cibra, Brazil’s 6th largest distributor. In conjunction Sirius will purchase a 30% stake in Cibra, via an equity swap and the issuance of 95m Sirius shares.

Companies: Sirius Minerals

11 Sep 18

Cenkos: Seeing Machines Ltd - Backup-driver Monitoring System

Seeing Machines has announced that it has launched a retrofit driver monitoring system for autonomous vehicles called the Guardian Backup-driver Monitoring System (Guardian BdMS). The system is designed to ensure that the backup-driver in a self-driving research vehicle is alert, aware and ready to take control of the driving task whenever necessary. The product is in response to clear demand from producers of semi-autonomous and autonomous research vehicles and Seeing Machines has signed an agreement with one customer and is in advanced discussions with several leading companies in the space. The Guardian BdMS product is based on a repurposed Guardian (fleet) Gen-2 unit but using updated FOVIO algorithms and an interface and API designed for this application.

Companies: Seeing Machines

18 Sep 18

All on track for ramp-up in H2’18

CloudCall’s performance in H1’18 was robust, as per the pre-release, with management confirming its H2’18 outlook and target to break-even during FY19E. Our estimates are unchanged. On strategy, the Phase II roll-out of UCS is due to go live in Q4’18, positioning the group to accelerate into FY’19E. We reiterate our Buy rating and continue to see compelling upside.

Companies: Cloudcall Group

12 Sep 18

Game Digital - Part of the retail answer

Even as Game Digital (GMD) faces short-term trading pressure, its developing BELONG gaming arena concept is arguably part of the answer of what to do with the UK’s high streets and shopping centres. The first BELONG sites under the February 2018 agreement with Sports Direct are now opening. With GMD’s share price still less than net cash of 32p, neither the existing business, which currently contributes £10m of EBITDA, nor BELONG which we value at 23p, are attributed any value by the market. Our total valuation is 75p.

Companies: Game Digital

12 Sep 18

Growth in a critical global market

Water Intelligence has reported another strong set of results providing further evidence of the scale of the opportunity and ability of management to execute. H1 sales increased +39% on last year and adj. EPS +38%. The group is building a scaleable, technology-backed distribution platform for water solutions in a range of international markets. With the focus on reducing water leakage continuing globally, we see the recent share price weakness as an opportunity.

Companies: Water Intelligence

14 Sep 18

Avon Rubber - Delivering growth

Avon Rubber’s pre-close trading statement demonstrates the underlying growth in both divisions. Success continues to flow from the enhanced product portfolio and order progression is building visibility. We have made modest changes to our forecasts to reflect currency and the Merrick’s acquisition.

Companies: Avon Rubber

18 Sep 18

Cenkos: Smart Metering Systems Plc - Interim results

SMS has reported interim results for the period to June 2018 showing a significant increase of 43% in annualised recurring revenue (ARR) to £69.3m. Investment in meter assets, particularly domestic smart meters, increased in the period to a record £78.3m, up 60% (H1/17: £48.9m) and growing the portfolio of assets managed to 2.5m, up 24% since FY17 and 50% since H1/17. The core strategy of SMS remains to build its meter asset portfolio on which it earns long term, index linked ARR. ARR had reached £71.4m by 31 August 2018, 95.2% of our current FY18 forecast of £75m. The recent weakness in the share price has created an opportunity, that in our view, investors should not miss out on and we strongly recommend buying the share.

Companies: Smart Metering Systems

20 Sep 18

Investors Day raises doubts due to lower European growth

Key highlights: Lower organic growth expected in Q3 18: 2% vs. 4% in Q2 18 (adjusted for trading days) Strategic plan unchanged Costs already adjusted to reflect lower growth environment

Companies: Adecco Group

20 Sep 18

EPS cut (2018: -19.5%, 2019: -8.8%) (EasyVista)

EPS CHANGE CHANGE IN TARGET PRICE€ 48.6 vs 50.4 -3.61% Target price is slightly down (€48.6 vs €50.4), as a consequence of some changes in our earnings assumptions. CHANGE IN EPS2018 : € 1.51 vs 1.88 -19.5% 2019 : € 1.83 vs 2.01 -8.76% The EPS changes stem from our new EBITDA 2018-20 estimates: in particular €4.5m in 2018 (vs €5.5m), and €9.5m in 2020 (vs €10m). In a fixed cost model, earnings can vary significantly more rapidly than sales, which we anticipate to be €1m lower than previously (€36.8m vs €37.8m previously). Nevertheless, it still represents +28% growth vs 2017.

Companies: Easyvista

20 Sep 18

Danske Bank's uncertain future

Yesterday Danske Bank released its findings of the eagerly-awaited investigations relating to the money-laundering issues. Unfortunately, there is far too little to extract in terms of potential financial impacts on the Danish Bank as most of the report was about methodology. The investigations are continuing as there remains much to explore in terms of either customers or transactions. As we expected, governance issues within the bank have emerged in a radical form with the resignation of the CEO, Thomas Borgen.

Companies: Danske Bank

20 Sep 18

InMed Pharmaceuticals - Progressing their programs

InMed continues to make progress on its biosynthesis platform, optimizing the genes that lead E. coli to express the cannabinoids and scaling up the fermentation process, both crucial steps needed to achieve commercial scale to address the market. InMed is also optimizing the formulation for INM-750 for epidermolysis bullosa (EB). A final formulation is expected by the end of 2018. The company is also conducting pharmacology, toxicology and other pre-clinical studies in preparation for detailed discussions with regulatory authorities, which it expects to occur in H119. InMed is on track for an IND filing in H219.

Companies: INMED PHARMACEUTICALS

20 Sep 18

GVC Holdings - Strong growth amid integration

GVC has announced a strong set of H118 results, with pro-forma net gaming revenues (NGR) increasing 8% to £1,717m, driven by an impressive 18% growth in Online. The integration of Ladbrokes Coral is on track, with an additional £30m capex synergies identified. GVC is now a leading player in the global gaming market and is well placed to continue gaining share across all its key territories. M&A are likely to remain a feature and there is significant potential upside from the US, which is not in our estimates. The stock trades appropriately towards the top of its peer group, at 10.3x EV/EBITDA and 13.5x P/E for 2018e.

Companies: GVC

20 Sep 18

Cenkos: Venture Life Group Plc - Growth set to accelerate

As announced with its August Trading Statement, Venture Life Group has delivered revenues of £8.3m, representing growth of 6%; EBITDA of £0.7m also increased versus H1/17A. The acquisition of the Dentyl brand in August 18, increased listings for UltraDEX in the UK and order phasing at the Italian manufacturing facility on top of organic growth should see stronger H2/18E performance. Further, improved H2/18E gross margin (vs H1/18A), the Dentyl acquisition and debt repayments (post period) are expected to deliver increased profitability and cash generation. We maintain our Buy recommendation.

Companies: Venture Life Group

20 Sep 18

PetroMatad - Snow Leopard – potential breached fault seal

The Snow Leopard-1 well (100% Petro Matad) was drilled to total depth of 2,930m in granitic basement. No sands were encountered in the shallow target, although gases (C1 to C5) and an oil sheen were observed in the drilling mud. The deeper objective encountered an overall gross interval of more than 400m. However, no oil or gas shows were observed and the interval was found to be water-bearing. Once operations to plug and abandon the well are complete, the rig will move to the Wild Horse prospect, targeting 480mmbo of unrisked prospective resource in the Baatsagaan Basin. Our valuation included 4.2p/share risked for the Snow Leopard prospect, which we expect to remove from our RENAV of 30.8p/share, reducing it by 13.6% to 26.6p/share.

Companies: Petro Matad

20 Sep 18

SCISYS - Strong H1 but more balanced year is expected

SCISYS has reported a strong H1 with professional fees jumping 24%. However, this was off a weak H117 and some business was brought forward from H2. Consequently, we are forecasting a more balanced H1/H2 in FY18. We have increased our FY18 revenues by £3.0m to reflect this balancing, but we have maintained our profit forecasts. All divisions posted record revenues, the order book remains robust at close to £100m and net debt continues to decline. Management’s goal of £60m in revenues and double-digit margins within the next few years looks increasingly conservative and we believe the stock is solid on c 14.6x our FY19e EPS.

Companies: Scisys

20 Sep 18

Cenkos: Empyrean Energy Plc - Chinese Treasure

Empyrean Energy is an international oil and gas company with a diverse portfolio of assets encompassing the full oil and gas lifecycle. The Company's foremost project is the exploration of Block 29/11, offshore China, with gross best case prospective resource of 774 million barrels (mmbbls). Beyond this, the Company is engaged in the appraisal and development of the Mako gas discovery in Indonesia, with 2C contingent resources of 373bcf and the exploration and production of gas within the prolific Sacramento Basin in California. With the recent uplift in prospective resources and oil migration study confirming the potential of Block 29/11, and with further upside potential in Mako Deep and Dempsey 1-15 coming onstream, these are exciting times for Empyrean. The next 12 months could be transformational for Empyrean. Foremost to the value proposition is the continued de-risking of the highly prospective Block 29/11, with the Company employing Gaffney Cline to undertake a third-party certification of the prospective resources. The Company will also continue to progress the development of the Mako gas discovery, whilst further delineating the high impact Mako Deep exploration target, which could be targeted via a 2019 high impact dual purpose exploration/appraisal well. In California, the Company will be drilling the low cost, high impact Alvares structure, with prospective resources of over 2tcf. We believe Empyrean offers a low-cost entry to investors seeking exposure to conventional, low cost onshore US production, with high impact international exploration. We initiate coverage with a price target of 20p and a BUY recommendation.

Companies: Empyrean Energy

20 Sep 18

Cenkos: Providence Resources Plc - 2018 Interims

This morning, Providence Resources released its interim results, and announced an amended and restated Farm-out Agreement with APEC to complete a busy first half of 2018. The Barryroe farm-out includes a firm drilling programme comprising of four vertical wells (previously three) and one extended horizontal sidetrack, cash advances for certain operational costs of $19.5 million, plus the financing of two further optional wells. Subject to regulatory consents and appropriate arrangements with contractors, Providence expect drilling to commence drilling in Q2/19.

Companies: Providence Resources

20 Sep 18

Herantis Pharma - Innovation at its core

Herantis Pharma is focused on the development of innovative regenerative medicines targeting unmet needs. Its two lead assets are cerebral dopamine neurotrophic factor (CDNF), a potential disease-modifying treatment for Parkinson’s disease (PD), and Lymfactin, the only gene therapy in development for breast cancer-related associated (BCAL) secondary lymphedema. The underlying science for both is novel and positive efficacy/safety data from ongoing proof-of-concept clinical trials expected in 2019–20 would serve as validation of the research efforts and additionally could crystallise value through partnering opportunities for these unique assets. We value Herantis Pharma at €9.3/share.

20 Sep 18

Flowtech Fluidpower - Half year results

20 Sep 18

Morning Note – 20 September 2018

Companies: ACP COG IOF SAV SSY

20 Sep 18

LIBERUM: The City Pub Group* - Building confidence, developing locals

City Pubs continues to invest in new sites and staff to deliver a 25% increase in Adj EBITDA in 1H18. The number of trading sites has already surpassed plan with 42 open and four in development with the expectation of reaching 50 by mid-2019.

Companies: City Pub Group