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10 Dec 19

Are these unprecedented results a major opportunity?

Futura Medical has reported the results of the pivotal Phase III study (FM57) for its lead compound, MED2005. Whilst all doses achieved all primary endpoints against baseline (p<0.001) at 12 weeks, there was no differentiation between any active arms and placebo. The placebo arm consisted of the DermaSys formulation and these results suggest that this proprietary gel has an effect comparable to the active arms at all three glyceryl trinitrate doses (0.2%, 0.4%, and 0.6%). This data is clinically relevant and suggests that DermaSys alone may be effective in treating Erectile Dysfunction (ED). Clearly the data needs to be digested before licensing discussions with possible partners continue. Equally, the commercial opportunity, especially the OTC potential, will need to be assessed. Until we have greater visibility, we suspend our valuation and forecasts; for context our model valued Futura Medical at £127m (62p a share).

Companies: Futura Medical

10 Dec 19

Renewed banking facilities and HMRC payment

Augean has announced the renewal and extension of the Group’s banking facilities and also that it has paid all outstanding and disputed HMRC Landfill Tax assessments totalling £40.4m, including accrued interest. Management reaffirms it will continue to robustly challenge all HMRC assessments based on legal advice that the Group has correctly collected and paid appropriate landfill tax. The HMRC payment allows management to focus on the strategic development of the Group and provides investors with a much cleaner basis for valuation.

Companies: Augean

06 Dec 19

Cenkos: Duke Royalty Ltd -- Scaling of the portfolio delivering riches

Duke delivered significant YoY growth in H1/20A results, as earlier efforts to broaden the royalty portfolio came through this year. This strong growth will continue with recent debt & equity raises forward funding investments to income levels of £15m by FY21E. Met with an enhanced, but now stabilised cost base, operational leverage should drive continued strong adj EBIT growth (to £13m, at a c85% margin) and further DPS rises.

Companies: Duke Royalty

10 Dec 19

Short term caution, medium term confidence

Zytronic’s FY19 results (to September) are in line with expectations, confirming a customary improvement in H2 activity. As highlighted previously, a decline in Gaming volumes was the key driver of a 10% decline in Group revenue during the year. There is some near term caution in the statement with trading in the first two months behind the prior year. Our FY20 PBT forecast reduces by 29% as a result. Nevertheless, the pipeline is substantially higher than last year, underpinning medium term confidence. The dividend will no doubt be a focus for investors. This was maintained at 22.8p for the full year (11.8% yield), and the future policy is under consideration by the Board. On our revised forecasts, the shares are trading on 14.5x P/E with £13m net cash.

Companies: Zytronic

04 Dec 19

CloudCall

New partnership with TargetRecruit; Positive

Companies: Cloudcall Group

11 Dec 19

Pipeline remains robust with growing SaaS content

Sopheon’s trading update confirms that some of its customers are delaying decisions on contracts because of uncertainty prevailing in their own markets and businesses. At the time of the interim results, Sopheon’s management expected a return to a stronger second half weighting for the full year numbers. That is still the case and the Group continues to highlight the strength of the new business pipeline and a higher proportion of SaaS (Software as a Service) opportunities. Nevertheless, the anticipated signings of a number of opportunities have now slipped into 2020. With revenue visibility currently at $28 million, we conservatively move our current year revenue estimate down 13% to $29 million with a knock-on effect on EBITDA (down 29%). We also assume that buying cycles remain extended during FY 2020E and therefore take a prudent view on our numbers for that year as well with revenue and Adj. EBITDA estimates reducing by 10% and 40% respectively.

Companies: Sopheon

05 Dec 19

LIBERUM: PayPoint* - Growth drivers becoming more powerful

The H1 20 results were ahead. PBT fell 5% yoy to £24.0m and FD EPS fell 5% to 28.5p due to the non-repeat of the VAT credit in H1 19, although both were 7% ahead of our estimates.

Companies: Paypoint

05 Dec 19

Solid State - Record trading in H120

Solid State delivered an 11% pro forma increase in group revenues and a 60% jump in adjusted profit before tax during H120. While some of this increase was attributable to factors such as favourable forex, which management expects will reverse in H220, the group is showing a sustainable benefit from the acquisition of Pacer in November 2018 and a drive to higher margin added-value activities in the Manufacturing division. Management is confident of meeting consensus expectations for the year, which are broadly unchanged since the September upgrade. The shares continue to trade at a substantial discount to peers for prospective P/E.

Companies: Solid State

10 Dec 19

LIBERUM: Futura Medical* - Unexpected P3 result means shift in strategy but potential approval timelines likely unchanged

Futura announced P3 results from its FM57 study testing MED2005 in 3 doses (0.2%, 0.4% and 0.6%). None of the doses showed superiority in improving erectile dysfunction outcomes vs. placebo.

Companies: Futura Medical

10 Dec 19

Focused on building Laundry market presence

Photo-Me’s H1 results are solid with sales up +3.3% (-1.4% underlying), adj. PBT up +6.7% and FCF up +24.9%. Continental Europe led this growth through the acquisition of Sempa, the continued roll-out of Laundry and a better-than-expected photobooth performance in France. This was partly offset by challenges in the photobooth market in the UK. We expect these trends to continue, make no major changes to our full year forecasts and continue to highlight the 10% dividend yield (the interim dividend was held as expected) and the £25m net cash balance.

Companies: Photo-Me International

04 Dec 19

Cenkos: IXICO Plc -- Revenues growing and profitable

IXICO has reported a strong financial performance for FY19A built on continued commercial focus and a strengthened organisation. Revenues of £7.6m were up 40% and gross margin was up 600bps versus FY18A and the company delivered its first year of profitability since IPO. EBITDA of £0.5m was strongly ahead of our forecast (+£0.1m) and delivered an EBITDA margin of 6%. We have maintained our revenue growth expectations of 20% for FY20E and FY21E but have upgraded our profit expectations given the strong reported performance. We maintain our Buy recommendation.

Companies: IXICO

09 Dec 19

Reassurance on the FY 2019E outcome

In our view, today’s trading update from Amino reassures on the FY 19E financial outcome. Management expects to report trading performance in line with market expectations and strong operating cash flow delivery. The release confirms that 24i has been successfully integrated into the group, and we see the announcement of a contract win for the supply of an endto-end (“E2E”) video solution to Youfone as a further positive – it represents the first joint customer announcement from the “new” Amino group.

Companies: Amino Technologies

21 Oct 19

Quarterly Research Outlook Autumn 2019

Following continued delays of a Brexit agreement, few sectors within the UK market have remained attractive to investors despite low valuations. One sector which has continued to outperform despite the political drama has been the UK video gaming sector (henceforth UK gaming), which we are fans of. We believe a combination of sector-leading growth, strong cash conversion and timely cyclical positioning support our positive view on the UK video gaming sector.

Companies: ABBY AMS ANX ARS ATYM AVON BLVN PIER BUR CGS CAML CDM CSRT TIDE CYAN DTG DEMG ELM EMR FPO FDEV GTLY GENL GHH GRI GEEC GKP HMI HAYD HEAD HILS HTG HUR IBPO IOG INDI JHD JOG KAPE KEYS KWS KCT KGH LAM LIT LOK MACF MANO MOD OXIG PCA PANR APP ESRE PHC PMO RBW RMM RBGP REDD RSW RNO ROR SUS SCPA SEN SHG SOLG SOM SUMO TM17 INCE TWD TRAK TRI VNET VTC ZOO ZTF

09 Dec 19

Allenby Capital TMT Update - 09.12.19 (CCT.L, BIRD.L, GFIN.L)

The Character Group plc* (CCT.L, 360p/£80.2m) | Blackbird plc* (BIRD.L, 15p/£42.8m) |Gfinity plc* (GFIN.L, 3.90p/£18.5m)

Companies: CCT BIRD GFIN

10 Dec 19

Strong bounce back in PBT delivered in H2

Driver delivered PBT of £3.0m in FY19 (FY18: £3.8m). Whilst this is a decrease on the prior year, the Group delivered a strong improvement in half on half earnings, with PBT of £2.2m in H2 vs. £0.8m in H1. This improvement was primarily a result of cost savings throughout the second half which should benefit FY20. Importantly, the positive momentum in H2 has continued into the new financial year, with two months of strong trading already achieved. We maintain our FY20 PBT forecast at £3.7m and we would expect a more even H1/H2 weighting. We also introduce an FY21 forecast, which implies continued earnings growth. The balance sheet remains strong (net cash of £5.4m) and, with a promising business pipeline, we expect a return to growth in FY20.

Companies: Driver Group

11 Dec 19

Trading update: understand the accounting

NSF has issued a trading update highlighting a 4%-5% reduction in consensus estimates due to softer trading in 3Q (primarily lower loan volumes in guarantor loans, a market which has been affected by adverse press coverage) and a 6%-8% reduction associated with a step change in provisioning policy. The latter highlights yet again the importance of understanding the assumptions in provisioning. For the same arrears, a higher assumed probability of downside has increased provisions. This reflects the known cyclicality inherent in IFRS9. A downgrade is unwelcome, but it does not reflect current customer deterioration, only the Board’s cautious approach. After today’s reduction’s, we still forecast 2021 adjusted profits at 2x the level of 2018.

Companies: Non-Standard Finance

11 Dec 19

Interim Results & Acquisition of RCD

DWF has released solid H1 results and appears to be making good progress on achieving its strategic objectives set out at IPO. The Group has also announced the acquisition of leading Spanish law firm RCD, its largest M&A transaction to date. Our underlying forecast assumptions are unchanged today, albeit with the UK Insurance business making up for the softness seen in Commercial Services. We will revise numbers to reflect the announced acquisition on completion of the deal but based on conservative assumptions expect it could add c.6% to FY21 EPS. On an FY1 PE of 11.0x and a prospective dividend yield of 6.3% we see current levels as an attractive entry point.

Companies: DWF Group

11 Dec 19

The Industrial Revelation

UK GDP flat in October with construction miss but manufacturing beat, US small business optimism improves in Nov, German sentiment ahead of expectations for Dec

Companies: Castings

11 Dec 19

DWF Group

Interims support FY expectations, acquisition

Companies: DWF Group

11 Dec 19

Cenkos: Falcon Oil & Gas Ltd -- Horizontal Drilling Commences

This morning, Falcon Oil & Gas, along with its JV partner Origin Energy, announced that drilling had commenced on the horizontal section of the Kyalla 117 N2-1H appraisal well, situated in the Beetaloo Sub-Basin, Australia. The 1,000-2,000m horizontal well is being drilled in the Lower Kyalla shale at a depth of c1,800m TVD. We expect the horizontal section of the well to take between 20-25 days to drill. Following its completion, the well will be fracture stimulated and put on a 90-day extended production test, with results expected in Q2/20. We reiterate our BUY recommendation and our 41p price target.

Companies: Falcon Oil & Gas

11 Dec 19

On the road towards mainstream adoption

Rarely has Britain ever invented such world-beating technology as that developed by Kromek. Indeed its next generation radiation detectors are disrupting 3 major verticals - Medical Imaging (eg BMD & SPECT), Nuclear Detection (D3S) and Security Screening (Airport baggage/bottles) – each worth >$100m pa.

Companies: Kromek Group

11 Dec 19

Morning Comment

Journeo is a specialist provider of both on and off-vehicle tailored solutions to the transport community. Yesterday, the company announced that it had successfully completed a £1.2m placing at 50p via an ABB, as well as providing an in line trading update. Furthermore, Journeo reported that it has secured c.£9m of new business in Q4 2019 for delivery in 2020 and beyond, providing excellent visibility for the year ahead. On the back of these announcements, for the time being we make no changes to our revenue and PBT expectations, whilst we reflect an anticipated reduction in FY 2019E year-end net debt and increased number of shares following the placing. Trading on a FY 2020E PER of 14.5x falling to just 5.7x in FY 2021E, we believe that there is scope for a re-rating as further contract wins are secured and progress delivered. Reflecting the dilution from the placing, our estimate of fair value stands at 75p.

Companies: Journeo

11 Dec 19

Morning Note – 11 December 2019

Companies: AMO SPE PTRO

11 Dec 19

Cenkos: Kromek Group Plc -- Major increase in output expected

Recent investment in capital equipment has increased Kromek's CZT production capability seven-fold. Contracted medical imaging output will ramp up in H2E and revenue visibility for FY20E stands at over 90%. Kromek is on track for organic growth of +27% this year. We adjust our working capital assumptions to reflect a slightly slower cash recovery but momentum in the business and all time low share price support a Buy.

Companies: Kromek Group

11 Dec 19

24i opens on Broadway

Amino’s 24i subsidiary has launched a new suite of applications and Subscription Video on Demand (“SVoD”) services for US-based video streaming service BroadwayHD. The release contains no financial details as to the value for Amino and we make no changes to forecasts. Nevertheless, we believe BroadwayHD is a useful reference client win. Following the joint Amino/24i Youfone announcement, in our view the BroadwayHD launch demonstrates the momentum in the combined business and highlights the transformational nature of the 24i acquisition.

Companies: Amino Technologies

11 Dec 19

Pipeline remains robust with growing SaaS content

Companies: Sopheon

11 Dec 19

LIBERUM: Non-Standard Finance - Non-Standard Value

Despite there being no increase in customer arrears, the Q3 trading update brought operating downgrades, higher provisioning and lower growth targets. And yet, and yet, what value…at 4x earnings, 1x tangible book, 18% yield, even with a 9% cost of funding. With some changes in the share register you can see why this has happened, but also why, just as quickly, it could go the other way.

Companies: Non-Standard Finance

10 Dec 19

The Industrial Revelation

German exports unexpectedly rise in Oct; Taiwan Nov exports beats expectations; Valeo believes China auto market has bottomed

Companies: Castings

10 Dec 19

NQ Minerals' David Lenigas updates as it looks to nearly double mining capacity at Hellyer

10 Dec 19

Destiny Pharma - Eyes on the Phase IIb prize

With the US Phase IIb study results now expected around mid-2020, we have examined the study design and our expectations for the results. Separately, we have looked beyond the current study and indication to the application of Destiny Pharma’s products in infections associated with biofilms. Our valuation is £70.2m, or 160p per share.

Companies: Destiny Pharma