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20 Jan 20

Rapid growth confirmed

Kape have announced a full year trading update confirming the expected strong growth in top-line and adjusted EBITDA. Kape’s sales growth accelerated sequentially to 19% h/h in H2 (H1: 7%), supported by continued growth in the Group’s core Digital Privacy segment. Full year revenues of c.$66m (N1S: $68.9m) were achieved after some reallocation of marketing investment towards Digital Privacy (sales recognised over time), which has in turn led to an improvement in revenue visibility for future periods. Adjusted EBITDA is now expected to be ahead of expectations: ($14.5m; N1S: $13.9m) as a result of a higher than expected proportion of Digital Privacy sales. Management guidance targets revenue growth of 85% and adjusted EBITDA growth of >150% in FY’20E (inc acquisition of PIA), in-line with expectations, and we make no changes to forecasts at this time. FY’20E OpFCF yield is forecast at 5%, ahead of comparative high-growth peers.

Companies: Kape Technologies

15 Jan 20

Games Workshop Group - ‘Record sales and profit’ again

Games Workshop’s (GAW) interim results are ahead of expectations. The highest rates of revenue growth were achieved in the channels with the highest operating margins, ie Trade (40% margin) and Online (64% margin). This has produced a strong improvement in free cash flow generation and ROCE has improved from 96% to 111%. We upgrade our forecasts for FY20 and FY21 by a further 3% following the 9% upgrade in November. Our DCF-based valuation increases by 11% to 5,748p.

Companies: Games Workshop Group

22 Jan 20

Q4 ahead of expectations, boosting cash and dividend

The FY update highlights a stronger Q4 than expected, with a rebound in US sales after a weak H1 and initial SkyScreed sales. This results in an uplift in revenue, profit, and cash guidance for the year, thereby also boosting the underlying and supplemental dividend. This results in an eye-catching current year yield of 7.3% and undemanding P/E of 9.4x. We maintain our 380p price target, which offers good upside potential.

Companies: Somero Enterprises

20 Jan 20

Kape Technologies

Strong trading update; Buy

Companies: Kape Technologies

20 Jan 20

Cenkos: Seeing Machines Ltd -- The DMS challenge palpable at CES2020

Interior and Occupant Monitoring was a notable theme of CES2020 with around fifteen different concepts demonstrated, up from three in 2019. However, these did not outnumber Driver Monitoring System (DMS) demonstrations and did little to deflect from the openly discussed challenge of sourcing and designing reliable primary safety DMS at appropriate costs for the automotive mass market. This task is being exasperated by a confluence of factors including vehicle design complexity and regulatory time pressure, and especially in the absence of knowing what technical specifications are required to meet the forthcoming Euro-NCAP and EC certification standards. We view the many demonstrations of IMS/OMS and emotional analysis as a distraction from the DMS challenge and, in this respect, our primary thesis for Seeing Machines remains unchanged following what we saw at CES2020: We believe Seeing Machines remains on track to win the largest market share of the DMS safety system market. We maintain our Buy recommendation and 12p DCF derived price target which is based on a 16% discount rate.

Companies: Seeing Machines

16 Jan 20

CloudCall

FY trading update: In rude health; Buy

Companies: Cloudcall Group

20 Jan 20

The Industrial Revelation

US factory output rises in Dec better than expected, Schlumberger sees continued weakness in North America, Fastenal saw a continued slowdown in Q4

Companies: HEAD HILS HTG JHD RNO SCPA TRI ZTF SOM

16 Jan 20

LIBERUM: Judges Scientific* - FY19E EPS beat

We increase our FY19E EPS by 4.7% to reflect an encouraging FY trading update from Judges. Our FY20E forecasts remain cautiously set and we think that the risks are to the upside as the year progresses.

Companies: Judges Scientific

20 Jan 20

Hurricane Energy - Updated drilling campaign for 2020–21

In December 2019, Hurricane Energy provided a trading and operational update on its activities, announcing a strong ongoing performance of the Lancaster early production system (EPS), with well tests supporting guidance of 20,000bopd for FY20 (before operational downtime). Hurricane was also granted a five-year extension to its P1368 licence, covering Lancaster and Lincoln, which resulted in changes to its near-term work programme. One or more sub-vertical wells will be drilled on both Lincoln (in 2020) and Lancaster (in 2021) to determine the maximum vertical extent of each reservoir. Hurricane estimated FY19 revenue of c $165m and year-end unrestricted cash of c $150m, relatively in line with our estimates for the year. Our risked valuation stands at 109.9p/share (from 102.8p/share) as we roll forward our NAV, adjust our short-term oil price assumptions and update forecasts to reflect Lancaster EPS performance and the 2020–21 work programme.

Companies: Hurricane Energy

20 Jan 20

LIBERUM: AFH Financial Group* - Impressive growth and positive outlook

In FY19 AFH delivered 8% organic net flows and revenues are up 47% yoy. The revenue model change in Protection responds to investor concerns and leads to significantly increased cash conversion.

Companies: AFH Financial Group

15 Jan 20

Cenkos: 1pm plc -- Sustainable business in difficult markets

1pm's interim results are robust but slightly weaker than expected with revenues of £15.6m (-2% YoY) and adj EBIT of £3.2m (-21%). Originations growth remained healthy through difficult macro conditions, with the hybrid model allowing 1pm to generate income without taking on unnecessary risk. Consequently, in combination with the costs in running a long-term sustainable business, 1pm is encountering some profit headwinds. We have updated our forecasts accordingly. The shares remain materially undervalued on most metrics.

Companies: 1PM

21 Jan 20

Metronomic growth

dotdigital’s trading update to December reveals sales and adj. PBT growth in line with N+1 (and consensus) forecasts, while period-end net-cash of £22.5m infers >100% cash conversion. The company’s growth drivers remain consistent: geographical and ARPU expansion – here we flag 18% and 51% US and APAC growth respectively, meanwhile ARPU expanded 14% to £999/user/month. We expect ARPU to improve further, as more customers use the omnichannel functionality offered within the Engagement Cloud. Equally, international expansion should also remain a core theme, as here, DOTD’s low level of penetration in sizable markets provides a multiyear growth opportunity in our view. No changes to forecasts.

Companies: Dotdigital Group

15 Jan 20

LIBERUM: Frontier Developments* - Successful PZ launch underpins F/Cs

Frontier has provided a trading update for H1 FY20 which shows revenues up nearly 30% sequentially and confirms the very successful launch of fourth franchise Planet Zoo. Further, Management highlight that all four of Frontier’s game franchises performed well, as expected, over the Christmas period which supports FY forecasts. The next 12 months will see a major paid-for release for Elite Dangerous, the console launch of Planet Coaster as well as a well-planned and increasingly optimised PDLC schedule for JWE and PZ. We retain our Target Price of £18 and our view that Frontier is a core holding in a UK SMID fund.

Companies: Frontier Developments

22 Jan 20

Somero Enterprises

FY19 trading update – significant upgrades to 2019 from better than-expected H2

Companies: Somero Enterprises

15 Jan 20

Q4 2019 Operations Update

Central Asia Metals (CAML LN) announced strong full year production numbers beating our estimates on full year copper and zinc production while lead production was in line with our estimates. Q4 2019 copper production of 3.1kt was down 7% YoY and 22% QoQ following a strong Q3 2019 resulting in full year output of 13.8kt, down 2% YoY with Kounrad now in its new operational phase. Zinc output of 5.7kt was down 2% YoY and 8% QoQ as zinc grades were modestly lower at 3.23% versus a full year average of 3.29% offsetting increased throughput. However, given a strong 9mo19 performance full year zinc output of 22.98kt was up 2% YoY and 2% ahead of our estimate at the top of the guidance range. Q4 2019 lead output of 7.48kt was up 1% YoY and 2% QoQ owing to stronger grades and recoveries resulting in full year output of 29.2kt which was in line with our forecast.

Companies: Central Asia Metals

22 Jan 20

InMed Pharmaceuticals - Developing cannabinol (CBN)

InMed has announced that the cannabinoid that is the basis for both its epidermolysis bullosa (EB) and glaucoma programs is cannabinol (CBN). This puts InMed in an attractive position (especially from an intellectual property perspective) as other medical cannabis programs are focused on either tetrahydrocannabinol (THC) and/or cannabidiol (CBD) for a variety of indications. Importantly, from a regulatory perspective, CBN is believed to have either slight or no psychoactivity, but it does have a number of beneficial effects including reducing inflammation and intraocular pressure (IOP).

Companies: INMED PHARMACEUTICALS

22 Jan 20

Targovax - Positive signals from Phase I/II mesothelioma trial

Today, Targovax reported randomised data from the Phase I/II study (n=31) in unresectable malignant pleural mesothelioma. The results confirmed a good ONCOS-102 safety profile. The key clinical response endpoint mPFS was 8.4 months (active arm) vs 6.8 months (control) and above the historical control of 5.7–7.3 months. mPFS results are still early, with many patients not included in the analysis (additional data will serve as a potential catalyst later in 2020). Overall, as we described in our last note, mesothelioma is one of the most difficult cancers to treat, with classic chemotherapy still being the standard of care. While the size of the study limited the analysis for statistical significance (the trial was not designed to check for a statistically significant clinical effect), the mPFS results and the fact that clinical outcomes correlate with a cancer-specific immune response are clearly positive signals. Targovax has presented preliminary plans for the next trial. Our valuation is under review, while we analyse the details of the trial results.

22 Jan 20

Record - Positive AUME flows and performance fees

Record’s Q320 update was positive, with a 4% inflow of assets under management equivalent (AUME) and the crystallisation of a performance fee in the period. AUME flows have now been positive since Q120, totalling $4.5bn (+8%) over nine months. The performance fees in this quarter follow on from a material contribution during FY19, reflecting value added for clients. Record continues to innovate and invest to counter competitive pressure, which has contributed to broadly stable management fee rates.

Companies: Record

22 Jan 20

Bitesize briefing: Oil discoveries in Suriname and Guyana

22 Jan 20

BB Healthcare steadfast after rollercoaster 2019 for healthcare investment sector

22 Jan 20

Baker Steel Resources Trust offer investors a UK tungsten opportunity

22 Jan 20

Baker Steel Resources Trust offers investors a UK tungsten opportunity

22 Jan 20

Another €0.6bn of ‘one-offs’ burdened preliminary 2019 EBIT

Dieselgate and the Takata airbag problem resulted in provisions of some €3.5bn in H1 19 and management is now arguing that another €0.3bn were needed for the portfolio optimisation of Vans in Q4 19. Finally, €0.3bn of restructuring costs were added to Mobility which is the consequence of terminating the car sharing offer in North America and several European cities as it has been unprofitable.

Companies: Daimler

22 Jan 20

Resilient Q4 supports FY 2019 outlook

Leading brick and masonry products manufacturer Forterra has confirmed it expects to deliver underlying PBT in the FY to December 2019E in line with expectations, after a resilient performance in Q4 against continued political and economic uncertainty in the UK. It now expects the challenging market conditions experienced in H2 2019 to “gradually improve” but anticipates that performance in H1 2020E will be below the level achieved in H1 2019. We have taken a conservative stance to our FY 2020E estimates, but believe the fundamentals remain strong, supported by housing and infrastructure.

Companies: Forterra

22 Jan 20

ANGLE aiming for FDA approval of Parsortix in third quarter

22 Jan 20

ANGLE aiming for FDA approval of Parsortix in third quarter

22 Jan 20

Oil & Gas Daily Flow

Nostrum Oil & Gas (NOG LN): Still up for sale with little appetite | SDX Energy (SDX LN): 30% increase in 2020 production guidance | United Oil & Gas (UOG LN): Production at Abu Sennan continues to ramp up | Vaalco Energy (EGY LN): Production offshore Gabon edges further – 6,000bopd net

Companies: NOG SDX UOG EGY

22 Jan 20

Herantis Pharma - 2019 progress made; next up, CDNF data

Herantis Pharma progressed on multiple levels in 2019. With the main study of the Phase I/II cerebral dopamine neurotrophic factor (CDNF) study now complete in Parkinson’s disease (PD) (top-line safety and efficacy data are expected in Q120), positive trial data could validate the research efforts and enable future partnering opportunities. Advances have been made on the development of a non-invasive next-generation CDNF (xCDNF); three lead candidates have progressed into lead optimisation stage. The Phase II Adenovirus gene therapy for the treatment of LymphEdema (AdeLE) study evaluating Lymfactin in breast cancer-associated lymphedema (BCAL) has fully recruited (data expected H121). In H219 Herantis successfully completed a share offering (€4.17m gross raised) and a secondary listing on NASDAQ Stockholm. We value Herantis at €60.8m.