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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

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

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

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

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

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

14 May 19

Well positioned for growth

Beeks Financial Cloud Group (“Beeks”) provides scalable, cloudbased ultra-low latency connectivity and infrastructure services for the automated trading of all key financial asset classes. Founded in 2010, in our view the business has a strong track record of growth and profitability and enjoys a solid financial position with high levels of recurring revenue and positive monthly cash generation. This has all been delivered while investing in the platform - the benefits of which have been demonstrated in the impressive revenue growth reported over recent periods. The experienced management team has positioned the Group well to benefit from the growth in its chosen markets.

Companies: Beeks Financial Cloud

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

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

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

14 May 19

Is the dividend cut a buy signal?

Vodafone has released its annual results. Although there was not much new on the operational side, the dividend was cut to €0.09, as was unfortunately expected (but it was probably the right thing to do). This corresponds to 6% of yesterday’s stock price (vs 10% previously). The major telcos, offering a 4.5-5.5% yield, lend it some upside if the market has confidence, like us, in the sustainability of the dividend. We maitain our Buy on the stock.

Companies: Vodafone 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

14 May 19

Understanding the deepest discounts

At Hardman and Co, we try to answer the questions of why to invest in a company and what the risks are in doing so. For many investors, simply having a deep discount to NAV is a good enough answer to the first question. However, investors need to appreciate the risks and, in particular, the reasons why the shares are at a discount. Having understood those risks, investors need to be convinced that there is a catalyst for change on the part of the manager and how long (if at all) it will take for market sentiment to reflect this in a lower discount. In this report, we examine the companies with the largest discounts and review those very issues.

Companies: ADAM BC12 BGHL CGI HAN JZCP LMS MPO MVI MHN NSI NAS OCI PSHD RSE SIHL TFG TPOU UTL VIN ELTA ELX

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

21 May 19

Morning Note – 21 May 2019

Companies: AMO SAV SHOE NAH

21 May 19

Vietnam Enterprise Investments - Long-established expertise in Vietnam

Vietnam Enterprise Investments (VEIL) was launched in 1995 and is the largest closed-ended fund focused on Vietnam. In July 2017, it became a member of the FTSE 250. VEIL aims to generate long-term capital growth by following a bottom-up approach, unconstrained by the benchmark, to find high quality companies that are attractively valued. Although the fund’s NAV total return has lagged the VN Index over one year, VEIL has a strong longer-term performance track record, delivering annualised NAV growth of c 26% and 20% over three and five years respectively. The manager believes sustained economic growth in Vietnam offers exciting long-term investment opportunities and valuations are now more reasonable following a sharp correction in the VN Index in 2018.

Companies: Vietnam Enterprise Investments

21 May 19

Nynomic - Expanding photonics platform

The acquisition of LayTec helped drive revenue growth slightly ahead of the German sensors and measurement market during FY18, though Spectral Engines is not yet profitable, resulting in static EBIT margins. LayTec takes the group into a new, high growth industry vertical while Spectral Engines adds B2C activity.

Companies: m.u.t.

21 May 19

Entertainment One - Content creation and ownership

Entertainment One’s full year results showed strong growth in underlying EBITDA, +21%, broadly in line with market and our estimates. The Family & Brands division is benefiting from the higher margins from advertising and streaming video on demand (AVOD and SVOD), with underlying EBITDA up 28%. Film, TV & Music’s performance reflects the completion of the transition in film and the shift in mix toward TV, with an improvement in underlying EBITDA margin from 11.6% to 14.6%. Our revised forecasts show the positive impact of the recent Audio Network acquisition (and the boost from IFRS16), diluted at the EPS level by the additional shares.

Companies: Entertainment One

21 May 19

PowerHouse Energy Group - Contracts for feedstock supply and power sales

PowerHouse Energy’s exclusive development partner Waste2Tricity (W2T) has signed a Memorandum of Understanding (MoU) with recycling company Advanced Sustainable Developments (ASD). ASD intends to open a PET plastics recycling facility at Peel Environmental’s Protos energy hub in Cheshire, which is where W2T intends to locate the first commercial scale waste-to-energy DMG system from PowerHouse. Under the terms of the MoU, the electricity generated by the DMG system will be fed into a private grid on the Protos site and supplied at a discount to current power market prices to ASD. In addition, ASD has agreed to supply the DMG unit with unrecyclable plastic for use as feedstock, paying a price for disposal that is significantly below current landfill prices.

Companies: Powerhouse Energy Group

21 May 19

Henderson International Income Trust - New growth plans for overseas income specialist

Henderson International Income Trust (HINT) has been proposed as the default rollover vehicle in the forthcoming planned liquidation of the Establishment Investment Trust, further cementing its position as a trust with a commitment to achieving the benefits of scale (its assets have grown sevenfold since launch in 2011). It has also recently locked in €30m of long-term borrowing with a low interest rate of 2.43%, which may allow the manager, Ben Lofthouse, to be more adventurous with gearing in his search for income and growth from sustainably financed non-UK companies trading at unwarranted discounts. HINT’s NAV has recovered well from the Q418 market sell-off, and the shares currently yield 3.4%.

Companies: Henderson International Income Trust

21 May 19

Good finish to the year

Experian maintained its strong organic revenue growth momentum in FY18/19. FX headwinds, however, impacted both the reported top-line and profitability. We expect the strong demand of the company’s recently launched products to last, at least in the near term. Positive data regulation in Brazil should also lend some support, in our opinion. We will revise our target price upwards.

Companies: Experian

21 May 19

Q1 slightly disappointing in Brazil but good on the Domestic Fixed side

An expected release, reflecting the resilience of the group in a competitive Italian mobile market, a correct ongoing ultrafast broadband deployment on the fixed side and a slightly disappointing performance in Brazil.

Companies: Telecom Italia

21 May 19

The Life business boosts the performance of the multi-line insurer

The operating result increased by 49.5% to €468m, boosted by the Netherlands Life division (57.2% of the group operating earnings). The Life business in Japan recorded rapid growth thanks to a jump in COLI products’ sales. €310m of costs reduction were achieved while the target is set at €400m by 2020. The Solvency II ratio stood at 213% and the cash position at the Holding was €2,048m. A good performance in Q1 and the start to the year was clearly promising.

Companies: NN 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