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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

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

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

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

23 Jan 20

Another good performance despite the macro backdrop

Since listing in Aug 2017, Strix has consistently highlighted the resilience of its business through its ability to hit forecasts despite the uncertainty of trade wars, Brexit and slower consumer confidence. Today’s pre-close states it will again meet consensus profit expectations which is in the range of ZC’s estimates of £31.1m operating profit and £29.7m PBT. The controls business maintained its leading market share globally and in all regions with the market growing at a solid c. 4.5%. The Water division had a slower year growing at 6% but, as expected, performance improved in H2. Net debt of £26.3m is better than forecast due to a combination lower capex and better working capital. The shares have not participated in the Q4 rally partly because of the strong performance during the year (c. 38%). However, the valuation still looks compelling at 12.5x current year forecasts for a such a resilient business. The yield of 4.1% remains attractive with the company confirming it will increase the FY19 dividend by 10% to 7.7p

Companies: Strix Group

22 Jan 20

Somero Enterprises

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

Companies: Somero Enterprises

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

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

20 Jan 20

A doubly-strong finish to 2019

Kape has today published a trading update for its 2019 year. The group, in addition to the November acquisition of PIA, has revealed a strong close to the year, with Adjusted EBITDA slightly ahead of expectations. We make no changes to our revenue and EBITDA forecastsfor 2020, which remain within the range of guidance provided, but take significant comfort from the fact that Kape has now delivered both strong organic outperformance and a transformational acquisition in recent months.

Companies: Kape Technologies

23 Jan 20

The Industrial Revelation

UK industrial trends improves in Jan, South Korean GDP rises at fastest pace since Q3 17, Japan's exports miss but chip-making bounces in Dec

Companies: HEAD HTG JHD OXIG RSW GHH

23 Jan 20

Success over peak delivers substantial uplift in profit margins

The work to improve operational performance and gross margin continued to deliver results over the all-important 2-month peak trading period, with sales growth accompanied by significant gross margin improvement. As operating efficiencies are also beginning to be delivered too, management now expects full year profits to be at least in line with expectations. In addition, the capacity solutions being implemented at its 3 existing DCs will provide the necessary headroom to achieve its medium term growth plans without the need for further significant investment. This, and the enhanced level of profitability, means management can focus on driving new growth orientated projects during FY21. Having fixed the mechanics, 2020 is shaping up to be a good year for the group. Our fair value estimate is now 432p

Companies: Gear4music

22 Jan 20

LIBERUM: NewRiver* - A resilient operating performance shows not all retail is the same

NewRiver's Q3 update confirms a resilient operating performance in a tough market overall, which should provide reassurance. Retail occupancy increased through Q3 to 96.1%, with lettings agreed 3% ahead of ERV.

Companies: Newriver Reit

23 Jan 20

FYJan20 impacted by supply constraints, causing delays

SMRT has today provided a year-end trading update, stating that sales and EBITDA will be below our previous expectations. We therefore revise FY20E sales from £11.4m to £6.3m and EBITDA from £-1.2m to £-6.2m. We also adjust FY21E sales from £15.9mm to £14.0m. While this is undoubtedly disappointing news, it is worth stressing three key points: 1) the downgrade has been caused by hardware supply chain constraints (rather than falling demand for SMRT’s products) 2) the impacted business has not fallen away, but is rather now expected to be delivered in H1FY21 and 3) SwipedOn – which alone could be worth more than the group’s current market cap – is said to be trading strongly.

Companies: Smartspace Software

24 Jan 20

European Assets Trust - Long-term capital growth and income

European Assets Trust (EAT) aims to generate long-term capital growth through investing in quoted small- to medium-sized companies in Europe, excluding the UK. Over the past 10 years, EAT’s NAV total return (TR) has generated an annualised return of 12.9%. The board has a high payout policy and a 17.2% increase in the declared FY20 dividend results in a forward yield of 6.6%. Previously dual-listed in Amsterdam and London, EAT completed its legal migration to the UK in March 2019. The board believes a premium listing on the London Stock Exchange and becoming a constituent of the FTSE SmallCap and FTSE All-Share indices could broaden EAT’s appeal and help close the trust’s NAV discount over time.

Companies: European Assets Trust

24 Jan 20

Q3 not a pretty sight

The group reported an even worse than expected set of Q3 results, leading to the decision to hold off on the previous annual and midterm objectives. There was significant weakness in cognac and the situation was no better for Liqueurs & Spirits. China remains the negative hot spot, and we don’t see any improvement in the short-term.

Companies: Remy Cointreau

24 Jan 20

Low-carbon strategy becomes clearer

The latest investments in solar have put Galp a step ahead of its peers on the energy transition front. The lack of reaction from the markets highlights the perilous task of the oil & gas industry: switching from oil to renewables means accepting lower returns for a sustainable business.

Companies: Galp Energia SGPS

24 Jan 20

Palovarotene hits a dead-end

As results of a futility analysis indicate that palovarotene’s phase III trial could miss the primary endpoint, Ipsen has suspended the studies associated with the drug. This is another blow after a partial hold on the same drug in December 2019. As we remove the sales numbers of palovarotene, which was considered to be one of the key growth drivers for the mid-term, from our model, our target price resets lower.

Companies: Ipsen

24 Jan 20

BioPharma Credit - High investment volume in H219

BioPharma Credit (BPCR) offers investors access to a diverse portfolio of secured debt instruments for life science companies. During 2019, BPCR was able to deploy more than US$500m and was thus able to reduce the large cash position accumulated as a result of the share issue in late 2018 and prepayment of the Tesaro note in January 2019. New investments include the largest deal so far with Sarepta Therapeutics, where BPCR provided funding of up to US$350m (of which half was initially drawn). We estimate that BPCR’s current loan portfolio has an attractive average coupon rate of c 9% (of which c 50% is at a fixed rate). On drawdown of outstanding commitments, arrangement fees and additional coupons will provide full cover of the annual dividend.

Companies: Biopharma Credit

24 Jan 20

Immotion plans fundraising following deal with Las Vegas resort

24 Jan 20

Norman Broadbent returns to full-year profitability after turnaround

24 Jan 20

Helvetia acquires 70% of the Spanish insurer Caser

• Post the acquisition Helvetia ranks no. 7 in non-life and no. 13 in life business • The acquisition of Caser is EPS accretive for Helvetia • Helvetia intends to finance two thirds of the €780m acquisition of Caser by issuing hybrid bonds and one third by issuing new shares

Companies: Helvetia Holding

24 Jan 20

Continued pressure on margins...

... and higher negative ‘one-offs’ weighted on profitability. Flavour’s top-line came in below our expectations due to modest growth in North America and EAME. After a strong start in H1, the division’s profitability fell in H2. At group level, the ongoing negative effects for GBS and acquisition-related costs had their full effect in 2019. The numbers were also short of consensus.

Companies: Givaudan

24 Jan 20

Management issues a sales and profit warning for 2020

There have been several examples in recent years showing that management teams inexperienced in the US market tend to make the same mistakes. Whether we are talking of thyssenkrupp (new steel processing plants constructed without the necessary clients) or voestalpine (a new direct iron ore plant was built in Texas at much higher than anticipated costs) and now Nokian Renkaat. The latter is incurring higher than expected costs in Dayton, Tennessee.

Companies: Nokian Renkaat Oyj

24 Jan 20

Q4: strong Q4, shadowed by potential profitability growth in 2020

Ericsson disappointed the market today. Despite a strong Q4 performance, the profitability outlook has been lowered by the investment Ericsson is undertaking in order to grow both its product offer and client base. We will be downgrading our gross margin assumption for 2020 but we maintain our recommendation as in our view Ericsson is well placed on the market to acquire significant market share, which will then pay off in term of profitability.

Companies: Telefonaktiebolaget LM Ericsson

24 Jan 20

Appointments that make sense

The entrance of EQT Public Value into the capital of Storebrand seems to be welcomed by investors. The fund is likely to be a catalyst for external growth operations for an insurer that operates in highly concentrated markets.

Companies: STOREBRAND

24 Jan 20

SP Angel . Morning View

Pan African Resources (PAF LN) – Six month production on course to meet guidance level

Companies: Pan African Resources

24 Jan 20

Executive interview - Ilika

24 Jan 20

Race for cash

To reach its target of generating free cash flows of €28.32bn in 2016-20, AXA is selling businesses with reduced scale which consists of heavy-capital Life books. Bloomberg has reported that, in addition to Central and Eastern European activities that are under review, the Middle Eastern operations are also being reconsidered. Even if the two businesses are sold, the insurer will still be far from its targets. This gives credence to the hypothesis an asset management arm disposal.

Companies: Axa