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19 Jun 17

Support Group

In light of the UK election, we highlight our favoured overseas earners, operators in defensive markets and those capable of taking market share, but our main topic is the structure of the UK employment market. The UK has the lowest unemployment rate since 1975 at 4.6%, and there are, consequently, fewer and fewer candidates to fill vacancies. This suggests recruitment companies may struggle to grow, but there are structural changes in the UK labour force that offer growth opportunities. Temporary labour continues to expand relative to the point in the economic cycle, its importance accelerating since 2008, and part-time labour has grown at twice the rate of full-time labour throughout both the last cycle and over the long term. There are, of course, specialist temporary recruiters, but the part-time market appears relatively untapped (at least by the quoted companies) despite being c.5x the size of the temporary segment in terms of numbers.

Companies: FOUR ACL BOOT CLL CMS CNCT FCRM LOK PPH RNWH SVCA STAF UTW WATR

19 Jun 17

Solid trading update

Filtronic, the designer and manufacturer of microwave electronics for the wireless telco market, announced last month (12th May) that trading was ahead of expectations and we raised our FY17 PBT forecasts by 36.5%. This morning Filtronic has issued a follow-up trading update, providing additional detail. The last 12 months were undoubtedly a watershed period for the business, with revenues jumping from £13.6m in FY16 to £35.4m in FY17 (driven by Filtronic Wireless). In terms of new news, cash flows were stronger than expected and the business ended with net cash of £2.6m (PG forecast £1.2m vs net debt of £0.3m May-16).

Companies: Filtronic

19 Jun 17

The acquisitions begin…

CareTech has announced in line interim results and the acquisition of an Adult Learning Disabilities business which adds circa £2.4m to EBITDA. Investment in management and infrastructure ahead of further scaling of the business tempers our upgrades but CareTech remains well positioned to take advantage of the consolidation in this expanding sector. We increase our target price to 470p (previously 458p) and reiterate of BUY recommendation.

Companies: CareTech

15 Jun 17

High growth healthcare/engineering stock trading >30% below SOTP valuation

You don’t have to be a ‘Silicon Valley’ tech startup to deliver double-digit top line growth. Carclo – an innovative designer and manufacturer (70% non-UK sales) of complex plastic parts, cables and premium LEDs (see below) to the healthcare and engineering sectors - has been doing exactly this for years.

Companies: Carclo

23 Jun 17

Acquisition of Hi-Power Limited

Flowtech has announced that it has acquired Hi-Power Limited, a distributor of hydraulic equipment components and systems design and build, serving the mobile and transport sectors across Eire and Northern Ireland. The acquisition strengthens the group’s Power Motion Control (PMC) division, deepens technical expertise and expands its core product offering, as well as establishing relationships with key European suppliers. This deal is the first acquisition since the Group’s £9.6m fund raise in March and comprises of an initial £1.9m consideration, representing 1.0x NAV, with a further £0.5m subject to an earn out over the 18 months to December 2018. We upgrade our forecasts for the Hi-Power acquisition with FY17 EPS +2.8%, reflecting six months trading contribution, and a 5.4% upgrade to FY18 EPS. On a PER of 10.4x the shares trade at a sizable 45% discount to sector peers. We expect the company to deploy its remaining financial firepower on further earningsaccretive deals, bringing into focus this valuation discrepancy. At current levels the shares also offer an attractive 4.3% dividend yield.

Companies: Flowtech Fluidpower

16 Jun 17

N+1 Singer - Severfield - Continuing to deliver on the strategy

Wednesday’s results confirmed a solid FY’17 outturn, with PBT (at £19.7m) in line with expectations and outperformance on net cash (at £33m vs. £30m forecast). After an encouraging meeting with management post the results we are confident that the outlook remains positive for Severfield and believe it is on its way to achieving its target to double PBT by FY’20 (from £13.2m in FY’16). While the UK order book stepped back to a more normal level in the year (at £229m vs. a peak of £315m in June ‘16 and a 5 year avg. of £211m), the bidding pipeline in the UK is strong with a good mix of prospective work. International opportunities are also strengthening, with further progress made in India in FY’17 and a recent Director appointment in Europe. Trading on an FY’18 P/E multiple of 13.9x we believe Severfield is attractively valued vs. peers.

Companies: Severfield

22 Jun 17

N+1 Singer - Uncovered Gems - Speed Dating Lunch - Another five sparkling gems

Last Friday we reprised our successful speed dating format with excellent presentations from the CEOs of Access Intelligence, Corero Network Security, LiDCO Group, OrganOx and Yu Group. Each company gave a ten minute overview of its business and the investment case and we had quick-fire Q&A from a group of fund managers. Below we summarise our thoughts on each company, with more details inside, plus we include the slides presented by each management team. We believe all five companies have excellent potential and are happy to arrange further contact. We also look forward to setting up our next speed dating event.

Companies: ACC CNS LID YU/

21 Jun 17

UCIT showcases performance

In May 2017, CLIG’s UCIT – The Emerging World Fund (EWF), a sub-fund of The World Markets Umbrella Fund plc - reached £104m in assets.

Companies: City Of London Investment Group

13 Jun 17

N+1 Singer - Burford Capital - Further secondary sale of Petersen v Argentina case interest

Burford Capital has sold a further 15% of its interest in the $3billion Petersen claim against Argentina for $66m. This follows the previous disposals amounting to 10% of the claim for $40m in December 2016 and March 2017, implying a 10% uplift in valuation (to $440m) since then. This latest disposal will produce a realised gain this year of some $63m, which we will incorporate in our estimate shortly. The company has provided some orderly market undertakings regarding further disposals, including a commitment to retain at least 50.1% of the claim through to its conclusion. Burford has now realised a total of $106m from an approximately $20m investment while still retaining a 75% economic interest in the final outcome.

Companies: Burford Capital

13 Jun 17

“A week is a long time in politics …. now and then”

It was true then and is even more so now: a week is indeed a long time in politics. Now, a minority government in the UK must start Brexit negotiations, which inevitably will have become a more complicated process. This, together with interest rate decisions in the US, UK and Japan this week should point to caution among investors. Yet despite some recent declines, indices remain close to their highs. In Share News & Views we have covered Carclo, Establishment Investment Trust*, Helios*, Northbridge* PCFG* and Tricorn*.

Companies: BMS CRPR ECSC EUSP FDM PCF PPIX QRT SNX SPRP SQS TCN TRI W7L

16 Jun 17

Framework agreement/target price increas

EU Supply (EUSP) has announced that is has signed a framework agreement with an existing customer for additional services to its CTM platform. This agreement has a total value of up to €3.6m over three/four years. At this stage, we have made no changes to any of our forecasts. However, with the order book likely to be increased and the high degree of recurring/repeat revenues we see risks on the upside to our sales forecasts. With the operational gearing of profits to sales we increase our DCF-derived TP to 25p (from 20p). Buy

Companies: Eu Supply

21 Jun 17

Q1 trading enough for some relief

Q1 trading is encouraging overall, with positive Costa LFL and robust Premier Inn RevPAR. FY18 consensus looks appropriately conservative, with no change expected at this early stage of the year. At c.10x FY18 EBITDA the valuation feels well poised, with upside from Costa initiatives likely to be capped by challenging UK consumer/high street dynamics. HOLD. Call 7:45am.

Companies: Whitbread

08 Jun 17

Confidence in ‘continued positive development’

Sopheon’s AGM statement notes that, during 2017, it has continued to advance its Accolade software platform, launching version 11.1 in February. The Group has recently been included in Gartner’s Magic Quadrant for Project Portfolio Management, a strong validation of its unique position in the enterprise portfolio management, enterprise initiative management, and product development markets. Full year revenue visibility is up, despite a robust prior year comparator. That combines with a strong pipeline to produce a confident statement from the Board on future delivery. We expect that the benefits of Sopheon’s products will continue to drive customer wins as the requirement to manage innovation becomes more fully recognised.

Companies: Sopheon

14 Jun 17

LIBERUM: Elegant Hotels - Looking ahead growth is appealing

Considering the macro concerns at the start of the year, the interim results are commendable. The business is in a stronger position now following four deals since IPO, and with investment into the existing estate rising, we see multiple reasons for optimism.

Companies: Elegant Hotels Group

20 Jun 17

Good momentum in fasteners

As already announced, record FY17 profits have exceeded management expectations and growth was delivered with a strong cash performance and a sharp rise in the dividend. We have increased our EPS estimates marginally for 2018 with restrained growth expectations. As Trifast continues to deliver on its strategy, the 10% rating discount to peers should moderate.

Companies: Trifast

23 Jun 17

€810m restructuring charges in Q2 17

Commerzbank said today that it is confident that an overall balance of interests agreement between employees and employers and a severance scheme agreement can be reached shortly. Therefore Commerzbank expects to book restructuring charges of approximately €810m in Q2 17, which compares to the originally planned €550m for 2017 and 2018 respectively. This provision would cover the full restructuring charges required to realise the personnel reductions for the implementation of the Commerzbank 4.0 strategy. Further charges are not expected. Including the above mentioned restructuring charges, Commerzbank expects a negative net result in Q1 17. Given weaker markets, the bank anticipates a lower operating result in the second quarter compared to the first quarter of 2017. The CET1 ratio is expected to be higher than 12.5% in the second quarter. Despite the higher restructuring charges, from today’s perspective Commerzbank does not expect to report a negative net result for financial year 2017. Commerzbank will publish its final figures for Q2 17 on 2 August 2017.

Companies: COMMERZBANK AG

23 Jun 17

Flowtech Fluidpower - Analyst interview, Zeus Capital

23 Jun 17

N+1 Singer - Morning Song 23-06-2017

Companies: MARS BLUR ABZA

23 Jun 17

N+1 Singer - blur Group - Update on financing, business plan and current trading

With blur’s cash at 31 May 2017 standing at $1.14m, the group conducted market soundings with new and existing potential cornerstone investors to see if it can secure additional funding. On conclusion of some of these initial discussions, the proposed investment terms included a number of onerous conditions which the board considered to be not in the best interest of shareholders. As such, it is currently evaluating alternative sources of near-term funding, which may or may not be forthcoming within four to six weeks. blur is continuing to execute on its enterprise customer strategy, remains engaged with a number of customers, continues to control costs with Q1 performance in line with expectations; however, it is clear that protecting/shoring up the equity value can only be achieved by securing additional funding.

Companies: Blur Group

23 Jun 17

N+1 Singer - Marston's - Updated forecasts & view

We are doing some house keeping on Marston’s forecasts post recent interims and corporate activity. The latter was accretive but given consumer / cost headwinds we have adopted a more prudent view on underlying assumptions. Net, we lower our FY17/FY18 EPS by 3%-5% respectively to bring us in line with consensus. Sentiment towards the sector is currently at a low-ebb, reflecting consumer spend uncertainties, ongoing terrorist related media coverage, sterling weakness and mixed sector newsflow. Given a sub 9x P/E, 6% DPS yield and 12% FCF yield we feel most of the uncertainty is priced in and the shares are oversold. We see upside risk as management continue to deliver solid operational performances and investors start factoring in an improving leverage trend. In the interim a market leading 6% dividend yield is compelling and a strong support for the stock at the current depressed levels. We stay at Buy with a revised 12m TP of 140p (vs 150p). The next news is a 42 week trading update on the 26th July. The LFL comp is 2.5% vs our full year working assumption of 1%. Peer Greene King report finals next Thurs 29th and we are expecting a mixed tenor.

Companies: Marston's

23 Jun 17

N+1 Singer - Abzena - Supported by capacity shortage and CDMO M&A

We have not made any material changes to estimates following in-line FY2017 results, released on 13th June. Our revised, 12-year DCF-based valuation implies an intrinsic value of 91p/share (from 84p), representing significant upside from the current share price. Our positive stance is further supported by a market capacity shortage in bioproduction and a high level of M&A activity in the CDMO space.

Companies: Abzena

23 Jun 17

Acquisition of Hi-Power Limited

Companies: Flowtech Fluidpower

23 Jun 17

Panmure Morning Note 23-06-2017

Last week we released a short note headed “Applying the brakes” in which we highlighted, amongst other issues, the threat of driverless cars to the motor insurers. This week the Queen’s Speech flagged a desire to have another go at whiplash reform but one that we believe will be doomed to failure like all previous attempts. The other bit of news is that the UK technical director of AXA UK has commented that by 2040 as much as 80% of the current motor insurance market will have ceased to exist. That it will contract seems pretty much a given but estimates do vary on the reduction of premium income. Our view is clear, with motor insurers at current giddy valuations, shareholders shouldn’t wait until it’s too late to sell the shares.

23 Jun 17

The Macro View

Japan’s manufacturing sector slows to a seven month low in June. | UK institutional investors arrest their post-referendum divestment of assets. | Week ahead to focus on consumer confidence and resilience of UK credit demand.

Macros: Economic DataHousing MarketEconomic DataHousing MarketEconomic DataHousing Market

23 Jun 17

Panmure Morning Note 23-06-2017

This morning AnimalCare has announced it has entered into a conditional share purchase agreement to acquire the entire issued share capital of Ecuphar NV, a European animal health company focused on the development and sale of veterinary pharmaceutical products that provide significant benefits to animal health in the companion animal, equine and production animal markets.

Companies: Animalcare Group

23 Jun 17

Food on the Growth Path

Greggs (GRG LN, N/R) senior management team of Roger Whiteside (CEO) and Richard Hutton (FD) presented to Whitman Howard’s UK equity salesforce yesterday. While Gregg’s differs from mainstream sandwich manufacturers because of its extensive retail network the central message for the Food on the Go/Food to Go was clearly positive. Greggs itself benefits from outlet expansion, discrete new product development and a clear commitment to product quality. Financially, the company appears well placed to deliver on further cost control and free cash flow generation.

Companies: Greggs

23 Jun 17

GMP FirstEnergy ― UK Energy morning research package

Trinity Exploration & production (TRIN LN) (not covered): Update in Trinidad | Delek Drilling selling stake in Tamar in Israel through offering | Weekly Crude Cut

Companies: Trinity Exploration & Production

23 Jun 17

Strategic and operational progress

FY17 was a year of continued delivery of the strategy and steady operational progress, with results in line with our expectations. Ongoing investment in digital technology to support product innovation and e-commerce has been at the centre of Park’s growth strategy over a number of years. The strategy has generated a solid record of sales, profits and dividend growth and with a number of new initiatives at an early stage, we expect this trend to continue. Park’s cash-generative business model supports growth and an attractive growing dividend with a debt-free balance sheet.

Companies: Park Group