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17 May 19

LIBERUM: Staffline* - Unscheduled statement: estimates reduced

We are reducing 2019 and 2020 FD EPS by 46% and 17%. We increase FY net debt from £52m to £85m (net debt /EBITDA of 3.0x) for FY 2019.

Companies: Staffline Group

14 May 19

Cenkos: Duke Royalty Ltd - Capitalising on more favourable terms

Duke has agreed modifications to the terms of three royalty agreements from the Capital Step acquisition. The effect is to unlock a minimum of £3.7m in additional revenues over the next 5 years. As a result, Capital Step's future revenue is expected to increase by 25%+ at no additional cost. This realises a key synergy from the Capital Step deal.

Companies: Duke Royalty

17 May 19

Interim results – another beat

H1 Revenue is ahead of our not long ago increased expectation driving a better profit result. Cash is also £10m ahead. The business has good momentum and despite the ever present spectre of Brexit there is still significant scope for us to prudently raise revenue, EBITDA and EPS estimates. Acquisitions integrations and performances are on plan and the online advertising technology changes in place to benefit. The shares have re-rated again in line with the changing fundamentals. We see a path to 20x EBITDA leaving significant upside potential without the need for further upgrades.

Companies: Future

15 May 19

Strategic acquisition expands software strategy

Elektron Technology has announced the acquisition of Next Control Systems Ltd (“Next”), a leader in high-end service based temperature monitoring in healthcare and life-sciences with customers including the NHS. The net £8.8m (gross: £10.5m) cash acquisition adds significant scale to the technology segment, and is strategically important for Checkit, diversifying the customer base, offering access to new verticals, and extending Checkit’s service range with complementary IP. The transaction was undertaken at a net multiple of 6.6x EV/EBITDA, and adds over £10m of revenues, 57% of which are annual repeating (Next FY’18 sales: £10.7m; Checkit: £0.5m). The deal is earnings accretive from the acquisition date, with Next having generated £1.2m of operating profit during FY’18 (December YE). The acquisition announcement has been issued alongside a Q1 trading update highlighting strong 17% y/y revenue growth for the group. Whilst management expect sales growth to moderate in Q2, H1 sales are still expected to be “significantly ahead of last year’s comparable”. As a function of the acquisition, we raise our FY’20 group revenue forecast by 18% to incorporate 8.5 months of Next, with adjusted operating profit rising 13% (ex. restructuring costs).

Companies: Elektron Technology

15 May 19

Strong H1 performance, underlying upgrade

Sanderson has delivered interim results in line with the 15 April update, with group revenue increasing 18% and adjusted operating profit up 34%. While there is still a note of caution in the outlook, good revenue visibility and healthy sales prospects underpin management’s confidence in further progress in H2. We have revisited our forecasts to reflect further improvement in underlying performance, the acquisition of Gould Hall and potential IFRS 15 impact. This results in unchanged earnings expectations in FY19 and 2% enhancement in FY20/FY21. A FY 2019 EV/EBITDA of 10.2x and P/E of 14.2x suggests further upside given positive underlying momentum.

Companies: Sanderson Group

15 May 19

Taking Checkit to the ‘Next’ level

Disruption may be the most over-hyped word in the Tech lexicon, yet it is reshaping almost every walk of life. Even routine tasks - from cleaning restaurants, hospitals, food factories and public toilets, to maintaining schools, shops and leisure facilities - have been transformed by the ‘digital revolution’.

Companies: Elektron Technology

17 May 19

Upgrades to forecasts, release of FY22E numbers

Following FY19A results last week, we upgrade FY20E and FY21E forecasts to reflect an increase in business momentum. We increase FY20E revenues by 3.0% to £48.6m, and adjusted PBT 6.7% to £5.6m. For FY21E we nudge up revenues by 1.3% albeit keep earnings broadly flat. Our newly released FY22E forecasts expect £62.3m of revenues and £7.2m Adj. PBT. We increase our PT to 520p from 460p (set by DCF) on updated forecasts, yet remain Neutral.

Companies: Keystone Law

03 May 19

Burford Capital - Time to Top Up

We believe recent share price weakness presents an opportunity to enter the market leading litigation funder at an attractive valuation. Current market concerns surrounding an overstated ROIC and aggressive fair value accounting are unfounded, in our view. We reiterate our Buy rating and 2,300p price target.

Companies: Burford Capital

21 May 19

Upbeat H1 & in line with FY19 estimates

One of the most reliable gauges of a company’s ‘competitive moat’, is (not surprisingly) the amount of money it generates. Not solely profits, but the return on invested capital after adjusting for financial gearing. On this measure Watkin Jones ranks as the industry’s #1 player (see below), delivering an anticipated FY19 unlevered Return on Equity of 44.2%.

Companies: Watkin Jones

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

20 May 19

Earnings accretive acquisition

CentralNic has announced this morning the acquisition of TPP Wholesale, the leading Australian and New Zealand domain name and hosting reseller business for a consideration of $24m AUD, subject to financing. This acquisition is a good example of CNIC’s strategy to acquire high recurring revenue businesses, with potential synergies that exist in new markets. We leave forecasts unchanged for now, preferring to wait until the financing condition is satisfied, but management have stated that they believe this transaction will be immediately earnings accretive for 2019E with double digit earnings accretion in 2020E. This is the group’s third acquisition in 12 months as they continue to execute their consolidation strategy.

Companies: Centralnic Group

20 May 19

Cenkos: Collagen Solutions Plc - Strategic investor vote of confidence

Collagen Solutions has announced it has received a strategic investment of £4.2m from the private US company, Rosen's Diversified Inc (RDI). The company will increase the raise to ~£6.0m through a proposed equity placing and open offer. The associated shares will be issued at a price of 5.0p. We believe this investment supports the growth we see developing in the company and significantly de-risks the near-term cash position. Following the recent positive trading statement, we have upgraded our FY19E forecasts and introduce new numbers out to FY21E. The momentum we see in the company supports our forecasts and Buy recommendation.

Companies: Collagen Solutions

15 May 19

LIBERUM: Crest Nicholson* - Resilient trading

Crest Nicholson has announced that trading has been resilient in the six months to April 2019, with a reservation rate of 0.78 units per site per week, which is the same as achieved a year ago. The statement also shows that management has delivered on the strategy of turning land assets more quickly, which is demonstrated by a £41m reduction in net debt compared to last year as well as an acceleration in revenues from land sales, JV and commercial activity.

Companies: Crest Nicholson

16 May 19

Cenkos: RA International Group Plc - Delivering contract wins

This morning, RA International announced that it has been awarded a new contract by a large humanitarian client in Central Africa. Under the terms of the contract, RA International will construct accommodation facilities for peacekeeping troops in up to 10 locations around the country. The one year US$10.7m contract commences in June 2019. Recent contract wins should have added substantially to the contracted revenue backlog, now above US$150m in our estimation. RA remains well positioned to secure further significant longer duration contracts with both existing and a broader base of new customers, including several Western governments, mining and oil & gas companies.

Companies: RA International

20 May 19

Cenkos: Falcon Oil & Gas Ltd - Full Steam Ahead

Falcon Oil & Gas is an international oil and gas company focussed on the acquisition, exploration and appraisal of unconventional oil and gas assets. Falcon has a 30% interest in three exploration permits in the Beetaloo Sub-basin, in the Northern Territories (NT), Australia - covering 4.6million gross acres and estimated to contain 496 trillion cubic feet (TCF) of original gas in place (OGIP) within the Middle Velkerri B dry gas shale play. As part of a transformational farm out to Origin Energy in 2014, the Company carries up to A$113m (US$80m) for the costs of the upcoming Stage 2 and 3 work programme to drill and hydraulically fracture stimulate four further horizontal wells and evaluate the potential of the Kyalla and Velkerri liquid plays before confirming commercial production flow rates in the most prospective play(s). On Friday, the Company conditionally raised gross proceeds of cUS$9m (c£7m) to primarily fund Falcon's share of the next cUS$100m of capital expenditure on the Beetaloo work programme and its ongoing G&A. By the end of the Stage 3 work programme, a total of US$300m would have been spent by Falcon and its partners in determining the commerciality of the Beetaloo. Through its transformational farm-out deals with Hess and Origin, we estimate Falcon's share of this gross cost to be approximately US$15m, or 5% of the total capex to date for its 30% working interest. Prior to development we would expect Falcon to monetise its interest and exit the play. Given the multi-TCF potential, strategic location and multiple commercialisation options, we believe Falcon offers early entry to a world-class play with potential upside far greater than any of its peers. We initiate coverage with a price target of 41p and a BUY recommendation.

Companies: Falcon Oil & Gas

22 May 19

LIBERUM: Shaftesbury* - Quality streets

First half results confirmed another period of good rental growth, supporting earnings growth on stable capital values. Occupier demand and tenant trading remains good.

Companies: Shaftesbury

21 May 19

SolGold - Positive PEA Study Results

21 May 19

Minds + Machines Group Limited - .luxe project update

21 May 19

Sirius Real Estate - 2019 Capital Markets Day Highlights

21 May 19

LIBERUM: Harworth* - Good start to FY19

Harworth has had a good start to 2019, with progress made on planning, land sales and replenishing the pipeline. Planning applications are on track and 60% of budgeted sales for the year have already been agreed or completed, aiding confidence in our unchanged forecasts for double-digit returns.

Companies: Harworth Group

21 May 19

LIBERUM: Topps Tiles* - H1 in line, upside risk could emerge

Topps Tiles’ H1 is in line with adjusted PBT of £8.0m, representing growth of 11.1% year-on-year. Current trading continues to show a positive trend, with LFL sales growth of 1.2%, although it was likely closer to 2.0%, removing the impact of a later Easter.

Companies: Topps Tiles

21 May 19

LIBERUM: Shaftesbury* - Good income growth on resilient capital values

First half results confirm good income growth on stable capital values. H1 NAV was flat at 995p in line with our forecast, with rental value growth in the wholly owned portfolio diluted by valuation weakness in the Longmartin JV.

Companies: Shaftesbury

21 May 19

LIBERUM: HomeServe* - Underlying PBT unch. despite increased investment

FY results a little ahead of expectations, with 12% FD EPS growth. We maintain our FY 2020 EBIT despite greater investment in Home Experts and increase FD EPS by 4% due to lower expected tax. We increase our high FY net debt estimate but expect net debt at the lower end of the 1.0-2.0x net debt/EBITDA target range.

Companies: Homeserve

21 May 19

Assura plc - Full Year Results

21 May 19

Shaftesbury - Half Year Results 2019 video interview

21 May 19

LIBERUM: The AA* - We believe innovation will gradually be rewarded in the financials

The AA innovation day focused on the products and services that The AA will launch over the next 18 months. The ambition is to provide a valuable ecosystem that can be used by AA members and non-members.

Companies: AA

21 May 19

Entertainment One (ETO) FY19 results interview

21 May 19

Positive AGM trading update

Epwin Group, the manufacturer of low maintenance building products for the RMI, new build and social housing sectors, has released a brief trading update ahead of its AGM to be held later today. Trading in the initial months of FY19 has been encouraging, benefitting from new customer wins and contribution from recent acquisitions. The severity of the headwinds faced by Epwin, predominantly in the form of cost input pressures, over the last couple of years should not be underestimated. However, the outlook is brighter than it has been for some time with input cost headwinds moderating and price increases beginning to gain traction, alongside improving operational efficiencies from the significant actions taken by management. We see potential for margin expansion beyond that which is currently factored into our forecasts over the next few years. At last night’s close, the shares trade on an FY19 P/E of 7.8x with a prospective dividend yield of 6.5%. The potential for a re-rating remains, on 10.0x current year forecasts, still a discount to its peers, Epwin would trade at 105p, c.30% upside to the current price, and yield 5.0%.

Companies: Epwin Group

21 May 19

Forecast upgrades

GYG has released a trading update this morning confirming that they have seen a positive uplift in trading at the start of the year and expect full year results to be ahead of current market expectations. The core refit business has seen continued improvements in the trading environment in the first four months of the year and further progress in the New Build segment has also contributed positively to the group’s performance. We are upgrading our forecasts as a result, and now expect adj. EBITDA in 2019E of €3.3m (vs. €3.0m previously) with adj. PBT of €1.6m (vs. €1.3m previously). In our view, this is an encouraging update and is further evidence that the trading environment in refit continues to improve as demand begins to normalise. Even on upgraded forecasts, our 2021E expectations remain 21% below the 2017 outturn at the adjusted PBT level highlighting the extent of a geared recovery on offer.

Companies: GYG

21 May 19

Morning Note – 21 May 2019

Amino Technologies (AMO): Corp First multi-tenant deployment of AminoTV | NAHL (NAH): Corp Continued good strategic progress | Savannah Resources (SAV): Corp 2018 annual results | Shoe Zone (SHOE): Corp H1 in line; strong strategic progress continues apace

Companies: AMO SAV SHOE NAH