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29 Oct 20

Successful raise adds to firepower

Kape has today announced the successful, heavily oversubscribed raise of $115.5m from a mix of new and existing shareholders. The raise has been undertaken at a share price of 150p/share representing an 2% discount to prior close, and exceeds the initially targeted raise of $100m. $72m of the proceeds will be utilised to buy-out issued and eliminate deferred shares due to legacy founders of Private Internet Access (‘PIA’) which was acquired in Nov’19. The remaining $43.5m will be held for acquisition and R&D investment. We note that PIA’s executive team (CEO, CTO and COO) who joined Kape alongside the acquisition last year are all remaining in the business, with PIA’s founders only nominally involved post acquisition. The benefits to Kape are three-fold: 1) the raise increases liquidity within the shareholder register; 2) Kape is acquiring founder shares at 145p/share, an 3% discount to the price of the raise; and 3) the beneficial tax structure created at acquisition shifts to Kape shareholders (as opposed to PIA founders) creating a c.$50m cash benefit to Kape recognised linearly over 15 years. Updated forecasts for FY’21E generate FCF of $28.2m, representing a 7% yield.

Companies: Kape Technologies Plc

21 Oct 20

SP Angel Healthcare Conditions- Novacyt (NCYT.L): Initiation of Research

Novacyt Initiation of Coverage: Through the rapid commercialisation of a COVID-19 test, Novacyt has transformed its financial position. Demand for the Group's COVID-19 test and other COVID-19 reagents are expected to make up the majority of revenue generated until FY22E, whereupon the Group is looking to drive long-term growth across its business via the development of high-margin clinical diagnostics and establish itself as a leader in infectious disease testing.

Companies: Novacyt SAS

27 Oct 20

Revolution Bars Group - Proposed CVA

The group has announced a proposed Company Voluntary Arrangement (“CVA”) in order to reduce the size of its Revolution Bar estate and rental cost base and improve profitability over the longer term. There is no impact on the Revolucion de Cuba brand. The initiative is one of several that management have introduced to counter the impact on trading of COVID-19 and will have the dual benefit of trimming the estate of underperforming sites and delivering a cash flow benefit of c.£2m p.a. The group’s balance sheet remains strong.

Companies: Revolution Bars Group Plc

21 Oct 20

Tremor - Strengthening momentum drives FY20 upgrades

Tremor has announced in today’s trading update that its platform has continued to gather further momentum since H1 20 results on 22 September, and it now expects FY20 revenue and EBITDA to be in the range of $340-360m for revenue and $30-36m for EBITDA. This leads us to upgrade our FY20 revenue forecasts by +6% to $350m from $330m, and upgrade our FY20 EBITDA by +32% to $33m from $25m at an incremental margin of 40%. This reflects that Tremor’s platform benefits from strong operational gearing that translates to EFCF, and we increase our FY20 net cash to $79m from $71m. This strengthening momentum for Tremor’s differentiated platform reflects that it is capitalising upon a rebound and shift in advertising spend through the success of the initiatives it launched in 2019 and the successful integration of Unruly, and we explain these factors in more depth from p9 of our 22 September report. Today’s announcement also marks the second upgrade to our Tremor forecasts since COVID-19 impacted the advertising market and Tremor in Q2, and this reflects that Tremor has adopted a prudent approach to its guidance. Applying a similar approach to our estimates, we conservatively do not change our FY21 forecasts, and this means that we continue to forecast FY21 organic revenue growth to $420m or +20% YoY, with organic EBITDA growth to $55m or +67% YoY. This conservative, strong FY21 organic growth means that Tremor looks substantially undervalued on 7x FY20 EV/EBITDA or 5x NTM, and a NTM EFCF yield of 6%; vs peers on 13-19x EV/EBITDA with NTM EBITDA growth of 18-47%, and EFCF yields of 1-2%.

Companies: Tremor International Ltd.

29 Oct 20

Augean - Resilient waste lines

While the pandemic continues to disrupt normal economic activity, the hazardous waste market has proved relatively resilient. Augean faces a shift in challenges in H220 as North Sea decommissioning activity declines and waste flows return towards more normal levels following H120 shutdowns. Encouragingly, cash flow remains strong and we anticipate a positive net cash balance at the year end.

Companies: Augean PLC

30 Oct 20

Fundraise provides future M&A firepower

Kape has announced that it has raised gross proceeds of $115.5 million through a significantly oversubscribed placing and retail offer of 59.2 million shares at 150p and will use $72 million of the proceeds to buy out the two major vendors of PIA, the transformational deal which the Group completed at the end of 2019. The remaining $43.5 million will be used to strengthen the Group’s balance sheet as it looks to select further acquisitions. There is an additional tax-related cash benefit of around $50 million over 15 years that is now available to Kape following this change to the PIA deal structure. This seems an intelligent way of removing any potential share overhang while also adding further to the group’s M&A firepower. Kape will cancel the shares which it acquires from the vendors and will not issue the vast majority of the deferred shares. With trading still robust and guidance unchanged, we make no alteration to our underlying business assumptions. Our EPS estimates reflect the changes to the shares in issue, both existing and prospective.

Companies: Kape Technologies Plc

26 Oct 20

Robust H1 update, Strong momentum into H2

Despite challenges in the early part of the period, Yourgene has delivered a robust H1 performance and enters H2 with strong momentum on a number of fronts. Key strategic milestones were achieved in the period, including the launch of the flagship IONA Nx NIPT product on the Illumina platform in September and the acquisition of Coastal Genomics and associated fundraise in August. Both are supportive of FY estimates, as are the launch of Yourgene's Covid services and products such as DPYD, which are generating strong momentum. We make no change to our forecasts at this stage.

Companies: Yourgene Health Plc

23 Oct 20

WHI Morning Comment: Avation (AVAP) - Full year results illustrate actions taken in such a challenging backdrop

Avation is a lessor of 46 commercial aircraft to a diversified airline client base. This morning, the group has released results for the 12-months to 30 June 2020, which illustrate the challenges faced by its customer base as a result of Covid-19, as well as the corrective actions taken by the Board that have resulted in profitability being maintained in the year as a whole. Loan repayment deferrals of c.$24.4m were obtained in the period, in comparison to $13.1m short-term rent deferrals being granted to airline customers and thus emphasising management's focus on liquidity during an unprecedented period for global airlines. Avation again reports that it is currently reviewing alternatives in relation to the 6.5% senior notes due in May 2021. Whilst at this point our forecasts remain under review, and near term challenges remain across the industry, we believe that demand for aircraft from lessors such as Avation will increase in time as a result of airlines being even more reliant upon aircraft leasing firms due to the retirement of older aircraft during 2020 in combination with much weaker balance sheets that are unable to support direct aircraft purchases.

Companies: Avation PLC

26 Oct 20

MED3000: FDA details the scope of confirmatory study

Futura Medical has reported details of its third meeting with the FDA that firmed up the format of the six-month confirmatory study. The new trial, known as FM71, will involve c 100 patients with erectile dysfunction (ED). Around c 20 will be in the US and the balance will be similar to those who took part in the FM57 Phase III trial. The primary endpoint is efficacy against baseline assessment. The important secondary endpoints relate to speed of onset of effect and adverse events. There is no placebo and a comparison arm, using 5mg tadalafil (Cialis), will employ the same endpoints and provide an appropriate reference frame for an overall MED3000 risk/benefit analysis.

Companies: Futura Medical plc

27 Oct 20

FY'20 results inline; updated forecasts post IPO

FY’20 results are slightly ahead of our expectations, and cap an excellent period with strong news flow. KidneyIntelX has now launched at Mount Sinai and is cleared to report results in all 50 US states. We continue to believe KidneyIntelX could represent the future standard-ofcare for early detection of chronic kidney disease progression and kidney failure in patients with Type II Diabetes, affecting an estimated 11m. Focus is now on building out the platform with expanded indicated uses, win national reimbursement and drive testing adoption. One significant catalyst ahead is Medicare coverage, which come as early as H1 2021 under new proposed rules. Whether or not this rule is finalised, the company is moving forward towards broader insurance payor coverage. In this note, we have refreshed our forecasts and valuation reflecting the deployment of IPO proceeds.

Companies: Renalytix AI Plc

28 Oct 20

Positive start to FY21

Hargreaves’ AGM statement confirms a positive start to FY21, building on the resilient FY20 performance. Trading is in line with expectations, the Industrial Services business has won a number of new contracts, and Hargreaves Land is said to be close to announcing the completion of its first plot sale at Blindwells. In our view, the shares are yet to reflect the earnings growth forecast for the next three years or the prospect of a 20p total dividend, which is expected to be paid first in FY22 as previously restricted HRMS profits are distributed. A further update on trading will be provided in early December, ahead of interims at the end of January.

Companies: Hargreaves Services plc

22 Oct 20

SDI Group - Positive trading update drives FY 2021 upgrade

A positive trading update from SDI Group justifies upgrading FY 2021 sales and adjusted EPS forecasts by 10% and 15%, respectively, broadly to the levels we were forecasting before the COVID-19 pandemic struck in early 2020. Contract wins for MPB Industries (flowmeters for ventilators) and Atik Cameras (supplying cameras for PCR DNA amplifiers) are expected to be fulfilled within FY 2021 and consequently we leave FY 2022 forecasts unchanged. We are encouraged by the news that the other businesses within the group are seeing order patterns returning towards normality. We upgrade our target price to 110p, at which level the stock trades on multiples that compare favourably to both the market and peer comparators. Our forecasts exclude the potential for further acquisitions as the company continues to execute on its buy and build strategy.

Companies: SDI Group plc

26 Oct 20

Robust H1, momentum rebuilding

An H1 update to September reveals a robust performance notwithstanding a challenging macro backdrop - sales (ex. Coral) are just “slightly lower” y/y, indeed if also excluding an intentional move away from hardware-based Support, we estimate core revenue grew c.+7%. This was underpinned by continued strong growth in US SecPay: +80% y/y, now ~32%/group sales, while in the UK, we estimate sales fell by c.-11%. Here, Covid impacted transactional sales (rather than any permanent loss of business) such that a future recovery is likely in our view. Despite the lower sales and GP, it‘s impressive to note profitability is expected to be in line with 1H20 (AOP: £3.4m) following tight cost management. Looking ahead, there’s reason to be optimistic, as in US SecPay, large enterprise tenders that were paused in H1, may resume in H2. Meanwhile in the UK – and despite the headline sales figure – business activity is already reassuringly strong: total new business won grew 8% y/y in H1, this includes the major £4m/6yr contract with Capita and TfL announced in August. In addition, closing net cash of £12.9m (£2m FCF) continues to offer strategic options. We reiterate that this a high quality company, with a robust and cash generative UK business, while leadership position in a nascent and fast growing US market.

Companies: Eckoh plc

29 Oct 20

Cenkos: TP Group Plc -- Completion of Disposal

TP Group (TPG) has announced that it has completed the disposal of its loss-making Manchester-based subsidiary (TPG Engineering Ltd) for a nominal sum of £1 to private equity firm Rcapital. This disposal will improve the group's margins, and allow it focus on its core markets. Given the uncertainty caused by the pandemic, we continue to withhold forecasts from the market, and our rating remains Under Review.

Companies: TP Group Plc

29 Oct 20

Aim market Update Q3 2020

AIM continued its strong fundraising performance in Q3 2020. By the end of September, the total funds raised year to date of £4,085m had already surpassed the £3,997m raised in the full year 2019. The main 2020 theme of a quiet IPO market being offset by a rampant further issues market continued through the third quarter. There was the usual summer slowdown in August but the £222m raised in that month was still 16% higher than the August 2019 total.

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30 Oct 20

Lack-lustre performance in Q3

Casino’s Q3 performance was a mixed bag; sales and profitability were healthy overall but French same-store sales were flattish. Low tourist numbers in July were followed by positive momentum in the subsequent months. We see more chinks in the armour, however, and Q4 is likely to be do or die in terms of both the operational performance and gross debt reduction. We plan to trim our estimates but will maintain our positive stance given the cheap valuation.

Companies: Casino, Guichard-Perrachon SA

30 Oct 20

Q3 20: Last year’s boon this year’s bummer

ACS registered a drop of 5.5% in sales over 9m but its EBITDA and net income were materially lower, by 17.1% and 37.9% respectively. Ex Abertis the net income was down by only 12.3%. As for the deal with Vinci, ACS plans to use the proceeds to strengthen its core greenfield infrastructure construction business in its core markets.

Companies: Actividades de Construccion y Servicios SA

30 Oct 20

Agnico Eagle Mines - Showing its metal in Q3

Relative to the prior quarter (Q220), Agnico Eagle Mines’ (AEM) production in Q3 increased by 48.8% to 492.7oz and its adjusted net income by 111.4%. While this may seem impressive enough, adjusted net income actually increased by 327.0%, to 78.1c/share, as the company leveraged a 76.0% quarterly increase in revenues against a 47.2% increase in production costs to result in an 8.2pp uplift in gross margins. AEM also benefited from a relatively low effective tax rate of 33.1% in Q3. As a consequence of both its performance in Q3 and the expectation of a similar one in Q4, the company increased its quarterly dividend by 75%, from 20c/share to 35c/share.

Companies: Agnico Eagle Mines Limited

30 Oct 20

Q3: Upstream bounces back

Being cash positive at such levels is a must and the results were above estimates with the E&P division up by $1bn qoq at $801m. A mixed picture for the other divisions, with integrated gas impacted by the price lag in LNG contracts and refining & chemicals suffering from depressed margins, while marketing again picked up and actually came in up yoy. The gearing was down to 22% vs 23.6%, thanks to cash generation and further capex cuts.

Companies: Total SE

30 Oct 20

Very resilient cash-flow generation

Millicom released a decent Q3 with, in particular, continued flat cash-flow generation. Management confirmed its goal of delivering mid-single-digit service revenue growth and mid-to-high single-digit EBITDA growth over the mid-term. The Board had decided not to pay a dividend in 2020. This will enhance Millicom’s 2020 cash-flow by $100m enabling the group to resume the execution of its plans once the pandemic passes: a share buy-back of $500m over 2021-23 and a dividend of SEK10 in respect of 2020.

Companies: Millicom International Cellular SA Swedish Depository Receipt

30 Oct 20

Q3 20: unimpressive online but retail is recovering strongly

William Hill announced soft sales numbers for the 12-week period ending 29 September. Revenue declined by 27%, driven by a 39% drop in retail revenue, the latter being hurt by pandemic-induced shop closures in addition to the closures from the triennial impact in Q4 19. An improved liquidity position was the one bright spot with the company well on course to achieve its year-end net debt/EBITDA target of 1-2x. Following the latest update, we will be lowering our FY20 estimates.

Companies: William Hill PLC

30 Oct 20

Fighting to remain at break-even

The COVID-19 outbreak has inflicted more pain on a group that was already in trouble. 2021 will in all likelihood prove another tough year, as confirmed by the management’s announcement of a new efficiency plan.

Companies: Banco de Sabadell SA

30 Oct 20

Recovery visible in Q4; cautious start guided for FY20/21

Although the Q4 sales numbers came in ahead of the management’s guidance, likely driven by the consumables business, they missed our expectations. No doubt the equipment-led business is taking time to recover due to a slim order pipeline. Given the high-margin nature of the consumables business, the operating margin improved sequentially although it was down yoy possibly due to continued investment in digitalization. Given the current trend of COVID infections, the management expects a slow start to FY20/21.

Companies: AFX AFX AFX CZMWF AFX

30 Oct 20

No big hiccups, but can this go on?

The new Clariant’s business model is relatively stable even in a pandemic setting. Margins were pretty stable at group level with mixed trends for the individual divisions. The strong reporting currency had some negative effects. The management guidance points to a weaker Q4, which looks reasonable in the light of recent news on the spread of the virus. The Q3 figures were weaker than our expectations but beat the consensus.

Companies: CLN 0QJS CLZNF CLN CLRN

30 Oct 20

Acquisition brings immediate cashflow

Gore Street has announced the acquisition of 81MW of operating energy storage projects taking its operating portfolio to 110MW and its total portfolio to 320MW. The five projects will be immediately cash generating and boost dividend cover ahead of other projects completing. In our view this materially de-risks the dividend whilst at the same time scaling up the company.

Companies: Gore Street Energy Storage Fund PLC

30 Oct 20

Speciality pharma to drive Q4

The slow recovery in vaccination rates and lower patient visits to physicians weighed on the top-line, although prudent cost management ensured margin expansion in Q3. While rising COVID cases could postpone the recovery in the vaccines segment, sturdy demand for the newer class of respiratory and HIV drugs should make up for the shortfall. A strengthening presence in the oncology and lupus space is also a positive. Favourable results from COVID-related trials could be a needle-mover in Q4.

Companies: GlaxoSmithKline plc

30 Oct 20

Amryt Pharma presents at the Proactive One2One virtual conference

30 Oct 20

Eager to resume dividend payments

The third-quarter results confirmed the top-line pressure but also the strong cost base flexibility and the improved asset quality projections. The capital position improved markedly and, if needed, the dividend accrual confirms the management’s commitment to resuming capital distribution as soon as possible.

Companies: CaixaBank SA