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14 Nov 18

Strong FY 2018 performance

AB Dynamics has reported FY 2018 revenue and Adjusted PBT in line with our estimates, which were revised in October when the Group announced that it would significantly exceed market expectations. Both numbers are at record levels. The Group has delivered strong performances across a number of global geographies in the ADAS (Advanced Driver Assistance System) targets and steering robot businesses, and won its first simulator order (for delivery in FY19). As ADAS complexity is increasing, further customer demand is anticipated. The announcement also notes the tailwind of a ‘healthy’ order book at the start of FY2019. Given this strong outlook, and the prospect of another year of ‘solid progress’, AB Dynamics is to make further investment in supporting the significant growth opportunity, constraining near-term operating margin. We have upgraded our FY19 and FY20 estimates materially, while assuming an increased level of investment and upgrading EBITDA at a lower rate.

Companies: AB Dynamics

15 Nov 18

IQE - Short-term VCSEL slowdown hits profits

IQE has announced an immediate slowdown in shipments of VCSEL wafers, which materially affects FY18 revenues and profitability, and has issued revised guidance. Although we have cut our EPS estimates by 43% and 24% for FY18 and FY19 respectively, we note this is a short-term problem that does not impact the prospects for photonics growth in the medium term. Our revised estimates give an indicative value of 73p/share.

Companies: IQE

14 Nov 18

Avon Rubber - Continuing to deliver

Avon Rubber’s FY18 report demonstrates the success of the new business strategy, delivering growth across both divisions. The product portfolio has been updated and the company is winning contracts in new geographies. The company has also taken action to address its business structure and production footprint. We see continued opportunity for organic growth supported by selective bolt-on acquisitions.

Companies: Avon Rubber

06 Nov 18

North Sea Rockstar

RockRose has quickly managed to establish itself as a significant North Sea player, with an acquired portfolio of assets which were non-core to the sellers but material for a company of RockRose’s size. We initiate coverage with a BUY recommendation and a TP of 1460p, representing significant potential upside of 156% from the current share price, a gap we believe will close quickly once investors realise RockRose is trading at a sharp discount to fundamental value.

Companies: Rockrose Energy

15 Nov 18

GVC Holdings - Parliamentary U-turn

Following the resignation of Sports Minister Tracey Crouch, the UK government has bowed to pressure to bring forward the reduction in FOBT stake limits, from October 2019 to April 2019. The planned increase in remote gaming duty (from 15% to 21%) will also commence in April. We reduce our FY19 EBITDA by a further £95m and net debt/EBITDA now peaks at 3.0x in FY19. Our FY20 estimates are broadly unchanged.

Companies: GVC

13 Nov 18

LIBERUM: Codemasters* - Driving in line

Maiden interim results reflect the successful launch of F1 2018 and the increasing share of digital revenues. The investment case is based around three established franchises, with large fan bases and the potential to double revenues.

Companies: Codemasters

15 Nov 18

Gaining Market Share but Costs Rising

Dart Group has released strong interim FY19 results, citing a particularly strong season for Leisure Travel, which contrasts well with weaker commentary from peers in recent weeks. Cost pressures are rising which will impact margins but we see attractions in the Group’s strategy, attractive package holiday offering and approach to customer service. Maintain buy.

Companies: Dart Group

23 Oct 18

Quarterly Research Outlook

The June IPO of Knights Group Holdings, a Top-100 regional law firm, marked the fifth entrant to the burgeoning UK-listed legal sector. Following recent expansion of our coverage across all five listed legal firms, complemented by coverage of three broader support services peers with exposure to the sector, we revisit and build upon our views on this rapidly evolving sector.

Companies: ARS GTLY GENL KEYS KGH MNO RBGP TWD 7DIG ABBY AMS AMER ANX ARS ATYM AVON BLVN PIER CGS CAML CALL CSRT TIDE DTG DEMG ELM EMR FPM FPO FST GTLY GENL GRI GEEC HDY HMI HAYD HEAD HILS HTG HUR IBPO IOG INDI JHD JOG KEYS KGH LAM MACF MNO MKLW NAH OXIG PCA PKG CAKE PDG RBW RMM REDD RSW RNO RKH RBGP ROR SUS SCPA SHG SOLG TWD TRAK TRI VNET VTC ZTF

06 Nov 18

THE MONTHLY November 2018

In addition to Hardman’s monthly analysis of client stocks, the thorny issue of market disruption – a popular theme currently - is also addressed. In a wide-ranging article, Hardman’s utilities analyst, Nigel Hawkins, assesses the impact that market disruption has already made. In some sectors, notably telecoms and aviation, market disruption has been apparent for many years, as the rise of Vodafone, Ryanair and easyJet demonstrates. However, in some sectors, such as oil and housebuilding, structural changes have been modest – the dominance of the big players endures. For investors, there is real interest in those sectors where changes are underway. The UK groceries market, which may shortly become a duopoly, is a case in point. And, intriguingly, who knows if there is a company currently languishing in AIM, which will attain a £50bn market valuation within the next decade?

Companies: OPM AVO AGY APH ARBB AVCT DISH BNO BUR CMH CLIG CSH DNL DPP GTLY GDR HAYD KOOV MCL MUR NSF OXB PHP RE/ REDX SCE SIXH TON VAL VTA W7L

19 Nov 18

Tristel - Acquisition – material EPS accretion

Tristel has acquired Ecomed (distributor for Benelux and France) for a maximum consideration of €6.8m (£6.0m), of which €5m is paid up front with the balance contingent on achieving a minimum of €0.8m of EBITDA in calendar year 2018 and revenue growth in excess of 15%. This is in line with the company’s strategy to have a direct sales presence in markets where possible. The maximum consideration represents c.2.1x and 6.8x prospective EV/Sales and EV/EBITDA respectively, and is expected to be accretive to EPS by 5% in FY 2019 (includes the cost of acquisition and integration) and 10 in FY 2020. We increase our target price by 7% to 300p, implying FY 2020 P/E of 24.0x and supported by 2-year CAGR EPS growth of 17%.

Companies: Tristel

12 Nov 18

LIBERUM: AFH Financial Group* - FY update highlights a year of delivery

FY2018 beat expectations. The year saw success in six major areas: 16 acquisitions made; historic acquisitions integrated to plan; strong organic new business; margins raised; EPS up more than 30%; capital raised to continue to consolidate the industry.

Companies: AFH Financial Group

14 Nov 18

Trading update & EPS upgrade

We note the unscheduled trading update released this morning by Marshall Motor Holdings (MMH), confirming better than expected trading in the used car market. Together with continued growth in the aftersales business and strong operational initiatives this is driving growth in underlying PBT vs 2017A. As a result, the company now expects adj. PBT in 2018E to be ahead of 2017 (continuing basis). We update our forecasts accordingly to reflect this, which triggers a 14% upgrade to our previously below consensus estimates. We leave forecasts for 2019E and 2020E unchanged reflecting the current uncertainty heading into next year and remain cautious at this juncture as we await further clarity over Brexit. The valuation on our cautious assumptions from 2019E continue to look compelling to us, particularly in the context of its balance sheet, dividend yield and strong anticipated FCF.

Companies: Marshall Motor

12 Nov 18

Trading since 30 June

Management reported that overall performance since 30 June is consistent with performance seen at the time of the half year results, reported on 23 August. B2B Gaming in line with trends reported at half year and Asia has stabilised at an annual run-rate of €150m. In B2C Gaming, momentum in Snaitech has continued into in the 2H18. TradeTech continued to display positive moment in the 2H18, though market movements favoured customers in September and October. Plus500 shares sold and €530m bond offering completed.

Companies: Playtech

16 Nov 18

Now For the Bad News

We feel that M&S is entering a period of forecast attrition as it tries to reposition against a background of continuing weak demand. This is likely to be exacerbated by execution issues in our view. We believe that these are resulting from Too Much Disruption and Not Enough Control. We have reduced our current year estimate below £500m and expect PBT to decline again in 2019/20. Indeed we believe that investors should be valuing M&S against a base profit towards the end of its reorganisation in the range £300-400m. The dividend is becoming increasingly vulnerable.

Companies: Marks And Spencer Group

12 Nov 18

Carr's Group - Recovery in both divisions confirmed

The FY18 results for Carr’s Group show that it has delivered the promised recovery in both divisions. This is the result of (1) market conditions which have boosted demand for feed blocks in the US and a wide range of agricultural inputs in the UK; and (2) prior year investment, for example in feed block production capacity and in acquisitions. Noting that the FY18 performance was ahead of our estimates, we revise our FY19 and FY20 forecasts upwards and raise our indicative valuation by 4p/share to 182p/share.

Companies: Carr's Group

19 Nov 18

Medigene - Successful manufacturing of first TCR therapy

Medigene’s MDG1011 trial in MM, AML and MDS is ongoing and the first MDG1011 TCR cell product has been successfully produced. Additionally, procedures to speed up patient enrolment are being rolled out, including the simplification of enrolment criteria and the addition of new trial centres. We continue to forecast that clinical data from both the Phase I part of the MDG1011 Phase I/II clinical TCR trial and the now fully enrolled Phase I/II dendritic cell (DC) vaccine trial will be available in 2019. Financials for 9M18 were above guidance, driven by a reduction in expected R&D costs. We now forecast a net loss of €16.9m in FY18 vs €18.4m previously. Additionally, Medigene announced an exclusive licence agreement with Leiden University to develop a TCR against HA-1, an antigen expressed in a range of cancers. We value Medigene at €457m.

Companies: MediGene

19 Nov 18

Auris Medical Holding - Q318 results and business updates

Auris Medical recently reported its Q318 results and provided a brief business update on its active programs. R&D expenditure for the period was down roughly 60% over Q317, which reflects management’s swift pivot to focus on Phase I development. Auris plans to initiate two intranasal betahistine trials in Q119: the AM-125 Phase II trial in acute vertigo and AM-201 Phase I trial for olanzapine-induced weight gain.

19 Nov 18

Vietnam Enterprise Investments - Correction presents long-term opportunities

Vietnam Enterprise Investments (VEIL) was launched in 1995 and became a member of the FTSE 250 in July 2017. It is the largest and longest established closed-ended fund focused on investing in Vietnam equities. The fund’s objective is to generate long-term capital growth through applying a rigorous, bottom-up approach to selecting companies that can benefit from the underlying secular drivers of the country’s growth. Unconstrained by benchmark weightings, the portfolio of 35–40 high-conviction stocks often differs meaningfully from the VN Index. VEIL has generated strong absolute gains over the long term, and over 10 years has delivered annualised returns of 14.2%. The VN Index peaked in April 2018, following which it has corrected c 24% to a level that, according to the manager, presents exciting long-term investment opportunities.

Companies: Vietnam Enterprise Investments

19 Nov 18

Executive interview - Canadian General Investments

19 Nov 18

EyeGate Pharmaceuticals - Positive signals in OBG PRK and PE studies

EyeGate reported data in its Ocular Bandage Gel (OBG) studies in punctate epitheliopathies (PE) and in corneal wound healing following bilateral photorefractive keratectomy (PRK) surgery. The PRK study showed improved wound healing and the PE trial showed improvement in patient symptoms. EyeGate will meet with the FDA to discuss whether the existing data are sufficient for a 510(k) de novo regulatory filing.

Companies: EYEGATE PHARMACEUTICALS

19 Nov 18

Greatland Gold - Results from First Drill Hole at Havieron

19 Nov 18

BTG - Like a butterfly, set to transform

BTG reported good H119 results headlined by 12% and 35% y-o-y growth in revenues and operating profit, respectively. The performance was driven by volume growth from the Interventional Medicine segment, royalties from Zytiga and cost control. Cash at the end of H119 was $285m and could be a powerful asset in redressing BTG’s uncertainties.

Companies: BTG

19 Nov 18

Hellenic Petroleum - A look ahead at 2019 after strong Q3 beat

Hellenic Petroleum (ELPE) demonstrated exceptionally strong margin over-performance ($7.3/bbl) versus the benchmark in Q318, with group adjusted EBITDA at €237m beating Reuters consensus by 11%. Key drivers included high availability, normalised operations and advantageous crude selection. We see several moving parts affecting benchmark margins in 2019, including highly anticipated changes to marine fuel standards (IMO 2020), crude price volatility, Iranian crude sanctions and associated waivers, as well as c 2mmbd of new global refining capacity additions. ELPE’s bias towards middle-distillate yield ensures that it is well placed to take advantage of increased demand for low sulphur shipping fuels and to remain competitive versus emerging competition. Our blended P/E, EV/EBITDA and DCF based valuation moves from €9.0/share to €8.9/share, with FY19e adjusted EBITDA reduced by 6% combined with a sector de-rating. ELPE’s forecast FY19 dividend yield (6.0%) remains supportive, with the potential for a one-off cash return on receipt of DESFA sales proceeds in Q418.

Companies: HELLENIC PETROLEUM

19 Nov 18

Sirius Real Estate - Interim Results 2018

19 Nov 18

Carlos Ghosn apparently reported wrong corporate salaries from Nissan

According to Asahi Shimbun, the Japanese newspaper, Carlos Ghosn was questioned today by Tokyo prosecutors. They accuse him of having understated his corporate salary by several hundred million yen. The newspaper speculates that today’s questioning might result in his arrest. Carlos Ghosn is not only Chairman of Nissan but also of Mitsubishi and CEO and Chairman of Renault. In addition, he oversees the alliance of these companies which now also includes Russian Avtovaz.

Companies: Renault

19 Nov 18

Immunicum - Collaboration and supply agreement signed

Immunicum has announced that it has signed a collaboration and supply agreement with Pfizer and Merck KGaA, Darmstadt, Germany for the checkpoint inhibitor (CPI) Bavencio to be used in combination with ilixadencel in the Phase Ib/II ILIAD study. Bavencio (avelumab) is marketed by Pfizer and Merck KGaA, and approved in the US and EU. The availability of Bavencio at no cost to Immunicum in the ILIAD study potentially opens up European study sites, which will be aided by the recent share issues.

Companies: IMMUNICUM

19 Nov 18

Executive Interview – True Leaf

19 Nov 18

ICG-Longbow Senior Secured UK Property Debt Investments Ltd - Exploiting a niche in UK real estate debt

ICG-Longbow Senior Secured UK Property Debt Investments (LBOW) offers investors exposure to the UK real estate debt market, mainly through investments in senior secured whole loans. LBOW’s investment strategy is supported by the team’s deep expertise in both debt and UK real estate, enabling it to continue to pay a high stable dividend by investing in higher LTV loans, while controlling the risk through extensive analysis of the underlying properties’ cash flow generation potential, as well as the borrower’s business plan. The investment strategy should be assisted by the relatively favourable rental growth prospects in parts of the regional UK real estate market.

Companies: ICG Longbow Snr Sec UK Prop Dt Inv

19 Nov 18

Cenkos: Kromek Group Plc - New OEM contract

A new baggage screening contract with an existing OEM customer further reinforces revenue visibility for 2019E. Kromek is maintaining its trajectory towards cash flow breakeven next year. This reflects the increasing maturity of its marketplace which is at odds with the share price, trading at the bottom of its range for the year. Buy.

Companies: Kromek Group

19 Nov 18

Cenkos: Mercantile Ports & Logistics Ltd - Releasing Revenue

Mercantile Ports & Logistics (MPL) has announce a £27.75m conditional fund raise. The raise is expected to fund the project to completion and we issue forecasts inferring that MPL will achieve profitability in FY19E. After significant investment in developing a competitive advantage, through the elimination of regulatory risk and commencement of operations, we believe that investors stand to benefit from increasing cash flows into the future. MPL trades on an FY20E EV/Sales of 1.8x, which we believe offers value for its prospects. We reinstate our Buy recommendation.

Companies: Mercantile Ports & Logistics