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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

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

13 May 19

FY18 ahead of expectations

CentralNic has delivered a solid set of FY18 results this morning that are 3.8% ahead of our forecasts and up 66% YoY at the adj. EBITDA level (excluding the one off domain name sales business discontinued in 2017). This has been a transformative year for the group following a number of acquisitions including KeyDrive which effectively doubled the size of the group and significantly improved earnings quality. Recurring revenues are now at 90% and cash conversion in 2018A approaching 100%, highlighting this quality. We leave trading assumptions unchanged for 2019E and 2020E but update our working capital assumptions to reflect the cash outperformance and negative working capital cycle in the business. We now expect net debt at the end of 2019E of £2.9m growing to £3.0m in 2020E. At the current share price, the group trades on a 2019E EV/EBITDA of 5.9x and a P/E of 11.7x with a FCF yield of 7.6% based on 2019E forecasts.

Companies: Centralnic Group

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

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

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

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

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

13 May 19

Cenkos: Angling Direct Plc - Exceptional Growth

FY19A has been a transformational year for Angling Direct as they continue to grow their business both in the UK and abroad. This set of strong numbers solidifies their position as the retailer of choice for anglers. We believe the Group has a sustainable competitive advantage through the loyalty of its niche customer base and is now able to improve margins through cost led initiatives and its increased pricing power. Buy

Companies: Angling Direct

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

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

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

19 May 19

Dredging blast continues, modest growth for consumer assets

Bleak forecasts for Boskalis in 2019; oil prices above $60 support Vopak’s and SBM Offshore’s activities. Optical retail, heading for modest growth, reaffirmed its guidance.

Companies: HAL Trust

19 May 19

In good shape

The good performance in the food retail and the full consolidation of Sonae Sierra are improving the holding company’s top-line and profitability, the discount to NAV retracted to 18.9% but remains attractive.

Companies: Sonae SGPS

18 May 19

Senard and Bolloré join Nissan’s Supervisory Board

After the arrest of former CEO Carlos Ghosn in late 2018 in Japan, the Alliance has been in turmoil. Only now has a very first decision been taken by appointing an entirely new Supervisory Board.

Companies: Renault

17 May 19

Reassuring trading performance

easyJet published an encouraging set of H1 19 results, in line with consensus expectations. As expected, the lower air fares resulting from fierce industry competition and a higher cost environment deepened the operating loss in the first half. However, despite the continuing challenging trading environment and macro-economic uncertainties in Europe, the FY19 guidance remains unchanged.

Companies: easyJet

17 May 19

A weak start to the year

US sanctions were withdrawn in late January 2019. Yet, Rusal’s Q1 results – VAP sales and profitability – were materially weak. While operational normality should be gradually restored, the current market environment poses new (near-term) challenges. Fortunately, the Russian aluminium major seems well-equipped to withstand these headwinds and hence, remains an attractive, though still risky, sector bet.

Companies: UNITED CO RUSAL

17 May 19

Strong subscription growth in line with expectations

In H1 18/19, organic revenue growth (+6.2%) was attributable to the continuing strong development of subscriptions (+27.7%) which more than offset lower maintenance and support revenue (-10%) and the decrease in SSRS revenue (-11.8%) due to lower licence revenue. The organic operating margin decreased by 1.6pt to 23.2% of revenue taking into account higher investment to accelerate growth and a higher bonus provision in line with the business development. Lastly, 2019 guidance is globally unchanged.

Companies: The Sage Group

17 May 19

Bitesize briefing - The relationship between capex intensity, opex and valuation

17 May 19

Strong closing of FY18 sales and higher margin dilution from online

Richemont has reported better sales but lower than expected margins in FY18. Comparable sales were up 8%, boosted by the acceleration of watchmakers and the stronger wholesale network. America and Asia have grown by double-digit rates. The operating margin was down 280bp to 13.9% due to higher profit dilution from the online business.

Companies: Compagnie Financiere Richemont

17 May 19

Deutsche Rohstoff - US onshore organic growth

Deutsche Rohstoff’s (DRAG) organic investments, c $145m in FY17 and FY18, helped deliver more than 100% growth in FY18 revenues to €109.1m (€53.7m in FY17). Year-on-year sales growth was supported by a material increase in oil and gas production, which almost doubled to 9.4kboed (from 5.1kboed in FY17), combined with higher price realisations. EBITDA rose more than 250% to €97.9m (€36.1m in FY17), while net income (after minority interests) rose to €13.9m (€7.7m in FY17). DRAG’s key focus remains on its US oil and gas interests, with c $70m of organic and internally funded investment planned in 2019. As a result, DRAG guides to EBITDA in the €25–35m range in FY19 and €55–65m in FY20, reflecting recent divestments and underlying growth from Cub Creek Energy.

Companies: Deutsche Rohstoff

17 May 19

Osirium Technologies - Moving beyond PAM

Osirium reported FY18 revenues and operating loss slightly ahead of our forecasts. Although bookings intake was lower than expected in H218, the increase in proofs of concept underway and the number of customers using PxM Express support accelerating bookings growth in FY19. By broadening the product offering with the recently launched secure IT process automation solution, Opus, and the soon to be launched endpoint privilege management (EPM) solution, Osirium is growing its addressable market and creating upsell opportunities for its ‘land and expand’ strategy.

Companies: Osirium Technologies

17 May 19

ASIT biotech - No surprises in FY18 annual report

ASIT biotech published its preliminary FY18 results in early April, including the cash position at the end of March 2019, and issued its FY18 report in May. The release of the balance of the FY18 financial statements resulted in no surprises, while the completion of the dosing phase of the Phase III study implies a safe and well-tolerated short-course allergy product.

17 May 19

Brazilian networks ensure growth after adverse weather conditions for renewables

EDP released a pretty good set of Q1 results. Network EBITDA increased 11%, supported by the Brazilian activities, while the rise in electricity prices partially offset unfavourable weather conditions, recurring EBITDA from renewables was down 6%. The group was able to reduce its opex by 2%. Positive view confirmed.

Companies: EDP - Energias de Portugal

17 May 19

CyanConnode - Shareholder Meeting - 16th May 2019

17 May 19

Q1 trading statement does not reveal any hard facts

Nearly all of Porsche SE’s profit is the result of the at-equity contribution from VW plus the negative results from its tiny investments in other operations. In addition, the company itself shows small operating expenses including personnel costs.

Companies: PORSCHE AUTOMOBIL HLDG-PRF

17 May 19

Q1 19 results: a mixed bag

- Q1 19 results were decent on the P&L front - Volumes, prices and savings have helped - However, cash consumption thus net debt still a worry - Management reaffirmed no issue to take place in FY19 - We are less confident and any market downturn would leave no other choice - In short: not bad but still some way to go

Companies: Vallourec