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11 Nov 19

LIBERUM: AFH Financial Group* - Organically growing and improved FCF

AFH continues to grow at an impressive rate compared to peers in a tough market environment. It has delivered 8% organic net flows and new business written is up 46% yoy.

Companies: AFH Financial Group

14 Nov 19

Evolving investment case - the next phase

While the FY20 interims are in-line, this does not tell the whole story with the investment case for Volex evolving away from the recovery mode of the last few years to a growth business which now focuses on cash generative, higher margin customers in new markets. The business is substantially de-risked with the top three customers now accounting for 25% of revenues – down from 47% in FY15 and when combined with a re-iteration of our PBT growth forecast of 47% for FY20, an upgrade to our expected net cash estimate from US$17m to US$23m at March 2020, a restored dividend and with it trading on a FY20 PE rating of just 10x, we re-iterate our buy recommendation with a price target of 160p.

Companies: Volex

11 Nov 19

LIBERUM: Sirius Minerals* - Cost savings at the crux of the new plan

Sirius’ announcement this morning has confirmed it will split the financing of the shafts and the remainder of the project, with the $600m shaft component targeted before April. We outlined the rationale for this strategy in September and ran through some of the maths, but today’s release implies scope for less dilution than expected, if it can be executed.

Companies: Sirius Minerals

14 Nov 19

Strong interim results

Volex has announced results for the 26 weeks to 29th September 2019 that reflect management’s focus on operational efficiency, cost control and margin analysis to drive business at acceptable margins. Adjusted PBT and EPS(FD) rose 69.3% and 48.3% respectively with benefit captured from targeted acquisitions. The Group has also returned to the dividend list with the payment of a 1p interim dividend, the first since 2013. On a calendarised basis the shares currently trade at a 34% PER and 36% EV/EBITDA discount to a comparable peer group for 2020. The Board has reiterated its confidence in delivering its full year expectations and in its ability to drive shareholder value.

Companies: Volex

14 Nov 19

Prelims: consistency and opportunity

EBITDA of £10.5m (£10.4mE) was delivered from revenue of £49.2m (£46.7mE) with net cash of £24.1m, (as revealed in August), comfortably ahead of our £21.5m year-end forecast. Newsflow in the period included three acquisitions, the securing of a five year framework agreement for deployment of TRACS Enterprise with a major Train Operating Group, and the successful transition of the CEO role to Chris Barnes. The Group continues to deliver the proven mix of self-funded acquisitions and organic growth, demonstrating comfortable delivery of forecasts reiterated at interims, and a very strong balance sheet giving capacity to deliver much more of the same. With the new CEO able to deliver operational efficiencies to a Group already well versed in delivering successful acquisitions, we look forward to the next part of Tracsis journey. Target 775p reiterated.

Companies: Tracsis

12 Nov 19

Cenkos: Seeing Machines Ltd -- EC safety regulations for DMS adopted

The European Council announced on Friday 8 November that it has adopted a regulation on the general safety of motor vehicles and the protection of vehicle occupants and vulnerable road users. This follows an agreement with the European Parliament in March 2019 and is part of the "Europe on the Move" package, launched by the European Commission in May 2018. These new regulations are to help transition towards a mobility system which is safe, clean and automated. Of relevance to Seeing Machines is the Regulation for the adoption of safety features that include advanced driver distraction warning systems and driver drowsiness and attention warning systems. These regulations will apply from May-2022 to all cars, vans, trucks and buses (including SUVs) and amend several existing safety regulations for EU-type approval.

Companies: Seeing Machines

15 Nov 19

FY’19 organic Media sales up 31% y/y

Future Plc’s FY results revealed the better than consensus growth noted in the trading update last week. Underlying group revenues grew 11% y/y, and 70% on a reported basis to reach £221.5m (FY’18: £130.1m), with organic Media revenue growth of 31% (reported: 134%) to £154.9m (FY’18: £66.3m). EBTIDA margins were 24.6% (FY’18: 15.9%) supported by increased scale and improving product mix. Regionally, US sales grew an organic 40% y/y with US ARPU still at a 38% discount to the UK (FY’18: 48%). EPS growth rose 95% y/y to 47.5p/share, whilst FCF rose >200% to £53.7m. Alongside FY results, management have announced the acquisition of Barcroft Studios (‘Barcroft’), a small independent studio that creates original video content for distribution across owned and operated social sites as well as mass media channels. Total consideration is £23.5m (9.4x LTM EBITDA), of which 40% will be satisfied in shares. Finally, management have also noted that, after a strong Q1, the Group now expects to be materially ahead of full year expectations. As joint broker to Future, we are restricted and can therefore provide factual comment only up to the conclusion of the General Meeting.

Companies: Future

13 Nov 19

Capital Markets Event

We attended the Frontier Development capital markets day for institutional investors and analysts at the group’s offices in Cambridge yesterday. Whilst there was no new material information provided at the event, various senior managers provided valuable insight into the high-level detail of planning and execution which goes into making a game. The current managerial set-up and capacity the group has in Cambridge, validates the recent move into third-party publishing which we highly favour.

Companies: Frontier Developments

15 Nov 19

LIBERUM: Frontier Developments* - Trading update, future games, CMD

Frontier has provided a trading update which highlights that the strong sales of recent launch Planet Zoo underpins FY20 forecasts and in the same statement provides a number of positive updates on existing and future games. The main takeaways for us are the strategically important expansion of Planet Coaster onto console (FY21), the confirmation of a major paid-for release for Elite Dangerous (FY21), and news of two major releases coming in FY22 including the licensed IP launch in FY22 which will be multi-platform. The update drives changes in some of our game release assumptions but we leave headline revenue and profit forecasts unchanged. We retain our Target Price of £18 and our view that Frontier is a core holding in a UK SMID fund.

Companies: Frontier Developments

18 Nov 19

Acquisition of Team Internet

CentralNic has announced the acquisition of Team Internet for a total consideration of $48m. The acquisition will be financed in part by a further €40m bond issue under identical terms to the €50m issue announced on 23 May 2019. Team Internet operates a ‘domain monetisation’ platform, allowing domain name owners to monetise dormant domains to generate recurring income to offset renewal fees and earn a profit. This provides a complimentary service to existing CNIC services: clients currently pay CentralNic subscription fees to register and renew domain names. Team Internet had revenues of $66.7m in the 12 months to June 2019, with EBITDA of $10.6m. We expect this transaction to have an immaterial impact to 2019E due to timing and be 43.8% accretive to 2020E earnings. Post completion, we estimate net debt:EBITDA will be 2.1x in 2020E falling to 1.6x in 2021E.

Companies: Centralnic Group

13 Nov 19

Full year results, first look

Avon Rubber has announced FY results comfortably ahead of consensus with the Group describing a transformational year in 2019 which sets it up well for the medium term. We see the Group as well positioned given its end markets and product development which should be attractive for investors but the recent stock run-up has been strong and valuation appears full. Neutral.

Companies: Avon Rubber

15 Nov 19

DCB for YouTube in the USA

Bango has announced the launch of Direct Carrier Billing (“DCB”) payment services for Google’s YouTube TV Service, with the initial launch via a “leading” but unnamed US Mobile Network Operator (“MNO”). With the ongoing growth in US Over The Top (“OTT) video services continuing to cannibalise the Cable TV operators, we believe DCB for YouTube TV is a strong offering in a large market. The release is light on detail as to the potential value to Bango, and we make no revisions to forecasts. Nevertheless, the launch represents a further win in an area of strategic focus for the group. It also confirms the integration of a major new merchant service into the Bango Platform.

Companies: Bango

13 Nov 19

Cenkos: Trinity Exploration & Production Plc - Q3 Results

Trinity recently released its Q3/19 operational update in which the Company continued to focus on maintaining base production, whilst increasing its low-cost, high margin production. Production averaged 2,816bopd in Q3/19, a 3% YoY increase (Q3/18 2,734bopd). Two of the four new onshore infill wells came onstream during the period, with a third well coming onstream post-period end, increasing base production to 3,017bopd during October, with an expected year-end exit production rate of c3,400bopd. Trinity continues to pioneer its SCADA (Supervisory Control and Data Acquisition) system to optimise producing wells, allowing the Company to increase production, reduce opex and add value. The focus for the remainder of 2019 will be on the completion of the H2/19 onshore drilling campaign; with the information learned to be used in preparation of further drilling during H1/20. With new wells coming onstream, and a low operating break-even we expect the Company's cash generation levels and balance sheet to further strengthen during Q4/19. We maintain our BUY recommendation but reduce our price target to 37p (from 40p) following the 2020 National Budget changes (see below) and the recent shift in the USD/GBP exchange rate.

Companies: Trinity Exploration & Production

14 Nov 19

Encouraging Mina do Barroso metallurgical testing

Encouraging and detailed metallurgical testwork results were reported from their advanced 100% owned open pit Mina do Barroso spodumene hard rock lithium project in Portugal. This involved the development of a new flow sheet and testing of a variety of mineral types, including different weathered types of spodumene ore from the various drilled deposits that form the project.

Companies: SAV BHP GLEN ASO ALBA CAML GWMO

18 Nov 19

Allenby Capital TMT Update - 18.11.19 (MIRA.L, TERN.L, CCT.L)

Mirada plc* (MIRA.L, 160p/£14.2m) | Tern plc* (TERN.L, 9.25p/£21.9m) | Character Group (The) plc* (CCT.L, 360p/£77m)

Companies: MIRA TERN CCT

18 Nov 19

Another profit warning

We understand k+s manoeuvres in an environment which can be impacted by many triggers, and we see the announcement of maintenance standstills cutting down volumes by another ~200kt as early scheduled stoppages. Compared to the previous year’s drought-related negative effects, this item might have been a bit more foreseeable. The most recent profit warning has not been perfectly managed, in our opinion. The reported Q3 figures gave a mixed pattern of met and missed expectations, which was true for our expectations as well as those of consensus.

Companies: K&S

18 Nov 19

Abacus Health Products - Selling CBD the right way

We are initiating coverage on Abacus Health Products, a consumer healthcare company that currently sells topical hemp-derived cannabidiol (CBD) in combination with active pharmaceutical ingredients that have known efficacy to treat indications such as pain, acne and itch. This allows Abacus to make specific medical claims about the efficacy of its products without having to claim that CBD itself is efficacious.

18 Nov 19

NQ Minerals' David Lenigas focused on restructuring debt and upping profits at Hellyer

18 Nov 19

Coho-1 well to double Touchstone Exploration's daily production alone

18 Nov 19

1Spatial - Mapping a future path

1Spatial has made significant financial and strategic progress over the last three years. The recent capital markets day provided the opportunity to articulate its longer-term ambitions. Its Location Master Data Management (LMDM) strategy aims to leverage the strengths of its 1Integrate platform and has the potential to accelerate growth and raise margins, in our view.

Companies: 1Spatial

18 Nov 19

InMed Pharmaceuticals - CTA filed on schedule

InMed Pharmaceuticals recently announced that it filed a Clinical Trial Application (CTA) in the Netherlands for INM-755, which is being developed for epidermolysis bullosa (EB). Approval of the CTA is expected around the end of November with the first trial (755-101-HV) expected to begin in December. This trial will test two strengths of INM-755 cream on the intact skin of 22 healthy volunteers. Following the completion of this trial, the company expects to initiate trial 755-102-HV, which would test INM-755 on eight healthy volunteers with small wounds.

Companies: INMED PHARMACEUTICALS

18 Nov 19

Wheaton Precious Metals - Q3 results and update

Despite relatively conservative precious metals price assumptions, underlying earnings for Q3 were within US$2.0m, or 2.7%, of our forecasts. Both Wheaton’s gold and silver divisions outperformed our production expectations. However, a 1.6Moz under-sale of silver relative to production resulted in an ‘inventory’ build and a deferment of sales. In addition, there was a 14.5% quarter-on-quarter increase in general & administrative expenses (albeit entirely attributable to differences in accrued performance share units’ costs), as a result of which underlying EPS was 16c (in line with consensus) compared with our forecast of 17c (which assumed no inventory and no stock-based general & administrative effects). Nevertheless, our FY19e EPS forecasts remain almost unchanged at 57c, while our FY20e forecasts exist within a wide range depending on the metal prices assumed, from 80c (at spot prices) to 130c (at our higher long-term prices) and, in particular, the gold/silver price ratio assumed.

18 Nov 19

Codere - Moving on from accounting irregularities

Q319 results were dominated by previously announced accounting irregularities in the Mexico, Panama and Colombia divisions. These have been confirmed as one off and confined to H119 but, as a direct result, management has lowered FY19 EBITDA guidance by c €10m to €250–255m (pre-IFRS 16). As a positive, the Spanish division is developing strongly, with encouraging momentum in online. Codere’s focus is now on refinancing the senior notes and rebuilding trust with the investment community. We have lowered our FY19 EBITDA by 8.7% and our FY20 EBITDA by 8.0%. The stock is very illiquid and trades at 4.2x EV/EBITDA for FY20e, which is at a deep discount to peers.

18 Nov 19

TXT e-solutions - Growing on all fronts

TXT e-solutions reported a strong performance in Q319, with double-digit organic revenue growth in both divisions boosted by the contribution from Assioma and TXT Risk. For 9M19, normalised operating profits doubled year-on-year with margin expansion of 230bp. We have raised our FY19 and FY20 EPS forecasts to reflect Q3 performance. Recent fintech acquisitions have been integrated and are helping to accelerate the growth and profitability of the Banking & Finance division. With a significant amount of cash remaining on the balance sheet, we expect the company to make further targeted acquisitions.

Companies: TXT e-solutions

18 Nov 19

Hellenic Petroleum - Improved environment, new strategy drive growth

Following a weak H119 due to an unfavourable trading environment for refineries, Hellenic’s profits picked up in Q3. We continue to expect strong growth in FY20 driven by higher refining margins, including the impact of IMO 2020. The strategic update presented at the investor day focused on the growth potential from efficiencies and new investments. We believe the strong cash flow supports both the healthy dividend and capex plan, and investments in the core refining business look particularly attractive.

Companies: HELLENIC PETROLEUM

18 Nov 19

Open Orphan - Contract signed with Carna Bioscience

18 Nov 19

ROBO Global team discuss its focus on innovation and key developments in AI

18 Nov 19

Strong Q3; full-year outlook maintained

Elecnor progressed well in Q3 FY19. Both the top-line and profitability improved, but the business exposure outside Spain continued to decline. However, the dominance of international orders in the company’s backlog suggests the mix should improve next year. For FY19, management has reiterated its outlook of growth in sales and net profit on a yoy basis.

Companies: Elecnor

18 Nov 19

Proactive Research analyst Ryan Long talks tin and the differing types of deposits

18 Nov 19

LIBERUM: PureTech Health - Karuna success a major positive

PureTech is a healthcare investment company with a broad portfolio of affiliate companies and a growing internal pipeline. Today one of their investments, a publicly quoted biotech called Karuna Therapeutics, announced the successful completion of its phase II trial for KarXT in schizophrenia.

Companies: Puretech Health