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18 Feb 20

LIBERUM: Sylvania Platinum* - Dislocation from record prices

Sylvania Platinum is trading at extremely cheap levels, just 0.9x adjusted EV/EBITDA on spot. The market clearly feels nervous about the rapid rise in the underlying commodities, palladium and rhodium.

Companies: Sylvania Platinum

20 Feb 20

The Industrial Revelation

US housing starts & building permits beat estimates, Spectris sees challenging H1, GE reportedly in talks with Airbus on new A330 engine as 737 Max hurts cashflow

Companies: CGS HAYD HEAD HILS JHD RNO SCPA TWD TRI ZTF SOM GHH

21 Feb 20

Cenkos Securities - Costs adjusted to protect profitability

2019 was a difficult year for UK equity capital markets activity, and Cenkos demonstrated the strength of its flexible business model and the client relationships sustained by its staff, achieving full year profitability despite one-off restructuring costs. Lower fixed costs will benefit future earnings and Cenkos reports a positive start to 2020 with a strong pipeline. Conservatively, we have reduced our revenue/earnings assumptions for this year, but improved market/investor confidence could generate significant upside.

Companies: Cenkos Securities

25 Feb 20

Interims – strong H1 offsets challenging macro backdrop

Interim results to 31 December were 2% ahead of the 9 January trading statement, with revenues rising 33% to £5.1m, resulting in a pre-tax loss of £0.3m and period-end cash of £0.4m. Against a challenging retail background, these are strong results, with revenues also up 17% in the first seven weeks of H2. However, with key trading months (Mar-June) still to come, we have taken a more conservative stance with Roots revenues cut to reflect challenges to the bran, which should partially offset by the launch of Nuthing into the hair removal category. In doing so, InnovaDerma should thereby diversify its product concentration risk further. We reduce FY 2020 sales by 7% and PBT by 9%, reflecting weaker Roots expectations. Consequently, we lower our target price to 180p (-10%), which implies an adjusted FY 2020 P/E of c.19x and EV/EBIT of 13.2x, falling to 16.0x and 10.8x, respectively, underpinned by EPS growth of 19% in FY 2021.

Companies: Innovaderma

26 Feb 20

Positioned for further growth

Augean has reported substantial progress in FY2019 with adjusted PBT up by 68% to £19.2m. The statement highlights a strong start to trading in 2020 and a robust pipeline of activity that leaves the Board confident in Augean’s prospects for FY2020E. Net debt has risen materially to £17.8m after the payment of £40.4m (including accrued interest) to the HMRC in respect of disputed Landfill Tax assessments that continues to be robustly challenged by management. The HMRC payment now allows the focus to move to the strategic development of the Group and removes an issue of concern for investors. There is a FCF yield of over 9% and a return to net cash is expected by year end. At this early stage in FY2020E we make no change to our earnings forecasts.

Companies: Augean

20 Feb 20

Lowered costs and impairments guidance at the rescue

The group released a mixed set of quarterly results, characterised by a fall in the tangible book value and a reduced capital usage. Management’s guidance for this is reassuring: the group is expected to meet expectations thanks to stronger cost control and lower cost of risk.

Companies: Lloyds Banking Group

24 Feb 20

WHI First Light: Judges Scientific (JDG)

Judges Scientific, a group involved in the buy and build of scientific instrument businesses, has released a reassuring trading update this morning with respect to FY2020E in the wake of possible global commercial threats caused by the COVID-19 epidemic.

Companies: Judges Scientific

26 Feb 20

Arden Tech SoundBytes

FCA admits to data breach, Salesforce Co-CEO Keith Block resigns, Pony.Ai Raises $462m In Toyota-Led funding

Companies: CALL TRAK KAPE

24 Feb 20

Interims underpin FY outlook

Tristel reported interim results that were c.7% above the trading update at its AGM on 17 December with adjusted pre-tax profit of £3.0m (+25%) driven by a 22% (22% CER) increase in revenues. Stripping out the impact of recent acquisitions, underlying growth was still a robust 13%. Despite the strong first half and potential for a “COVID-19 bonus” in H2, we are not making any changes yet, recognising instead that current FY forecasts are underpinned. We are however, increasing our target price to 375p, cognisant of the upside potential that international growth offers as well as quality and momentum of growth. On current forecasts, this would imply a prospective 3.5% free cashflow yield.

Companies: Tristel

26 Feb 20

Mixture of strong and weak activity in 2019

Burford recently released its first-ever trading statement, covering cash activity in 2019. Group-wide commitments set a new record of $1.57bn, a 24% increase. Overall deployments were almost flat compared with 2018, at £1.07bn. In both, the Sovereign Wealth Fund (SWF) and fund arrangements increased their share. It was, however, a quiet second half for realisations on-balance sheet in the core litigation finance business. 2019 profits will be lower than in 2018, with Burford indicating that net realised gains will be ca.$20m-$30m lower than in 2018 and net unrealised gains ca.$50m-$70m lower.

Companies: Burford Capital

19 Feb 20

LIBERUM: CEO Video: Jaco Prinsloo, Sylvania Platinum*

In these five short videos incoming Sylvania Platinum CEO, Jaco Prinsloo discusses his recent appointment as CEO, the challenges for everyone regarding the power situation in South Africa, dump material life spans and spot prices, the current palladium and rhodium markets and his preferred use of surplus cash. Click below to watch the videos.

Companies: Sylvania Platinum

19 Feb 20

Kape Technologies

Reiterating the Buy case

Companies: Kape Technologies

21 Feb 20

The Industrial Revelation

UK CBI manufacturing orders beat estimates for Feb; Taiwan revises down export growth in Feb due to coronavirus; Japan manufacturing PMI falls

Companies: HEAD HILS JHD OXIG RSW RNO SCPA ZTF SOM GHH

24 Feb 20

Long term data in retinitis Pigmentosa shows sustained improvements

New longer term Phase I/IIa data for the hRPC therapy programme in Retinitis Pigmentosa (RP) is encouraging, showing a sustained improvement in visual acuity in patients up to 12 months. We make the point that a 12 month 14.3 letter improvement vs baseline and 7.3 letter improvement vs. untreated eye is clinical meaningful within this patient population, although their baseline measurements and severity of patients at time of treatment remains publically unknown. Positively, the long-term data also shows that the improvement vs untreated eye remains broadly consistent over the 12-month period. ReNeuron has also announced trial protocol changes (detailed below) in order to better characterise the ongoing efficacy signal and generate enough data to progress the hRPC therapy programme into a single regulatory approval enabling Phase III clinical trial. We look forward to further updates from the hRPC programme throughout 2020

Companies: Reneuron Group

25 Feb 20

WHI Morning Comment: WEY Education (WEY)

Topline beat, healthy progress all round, reiterate views WEY's update this morning reflects progress which is well-balanced between the two businesses and shows how the increased focus seen since the start of FY19 is paying off. With a new FY20 sales total of c.£7.5m flagged by the company (WHI forecast: £6.7m) organic growth of 25% was achieved across the InterHigh online school and in Academy 21, twice the forecast rate. A leading supplier of live online education the company is well-placed to benefit from growing demand for this product. While sales are well ahead of expectation, the company is at pains to lay out its investment strategy for the business on the back of these better than expected revenues – to continue to generate strong growth by investing in educational quality and in marketing. Senior hires in both of these fields remain key, and while we make no changes to our earnings forecasts, we view the longer term prospects as increasingly underpinned by the enlarged and robust platform. WEY offers excellent value for parents coupled with a focus on quality and delivery. C.£5m of net cash helps in turn to underpin our 30p-plus fair value assessment.

Companies: Wey Education

27 Feb 20

Investments pushed up growth...and net debt

A strong set of FY19 figures, especially thanks to strong comparables. We note that organic investments had begun to bear fruit, although the company doesn’t expect to see the relevant impacts until 2021. In the mean time, it is actually debt that is going up.

Companies: Ebro Foods

27 Feb 20

Dividend slashed despite a huge FCF

K+N’s release was mixed. Seafreight stood at a good level, while the demand in airfreight continued to slump, notably in key European industries and the perishables business. While the FCF jumped 140% to CHF1.1bn, management slashed the dividend by 33% to CHF4.0 per share. An acquisition in Asia seems to be pending. K+N’s shares may continue to be affected by the Coronavirus outbreak.

Companies: Kuehne und Nagel International

27 Feb 20

Aberdeen Latin American Income Fund - Income without compromising on capital growth

Aberdeen Latin American Income Fund (ALAI) offers exposure to Latin American equities and government debt. It is managed by Aberdeen Standard Investments’ (ASI’s) global emerging markets equities and emerging market debt teams. While 2019 was a difficult year in terms of economic growth, the markets performed strongly, underlining the resilience of the region. The managers remain ‘cautiously optimistic’ on the outlook for Latin America, led by the largest economies Brazil and Mexico, which are supported by lower interest rates and stable inflation, while there is also a positive government reform agenda in Brazil. ALAI is continuing to deliver on its income objective without compromising on its capital growth potential. It has meaningful revenue reserves and the fund offers an attractive 5.1% yield.

Companies: Aberdeen Latin American Income Fund

27 Feb 20

Powering through

Drax reported a set of FY19 results which were in line with expectations. EBITDA increased by +64% to £410m and EPS tripled to 29.9p (5% higher than the consensus at 28.4p). The proposed dividend is in line with expectations (15.9p). The main contributor to this growth was the Production division (+52% in H2) on the back of a slight positive volume effect (pellet production was up by 4%) and a reduction in the costs of production by 3%.

Companies: Drax Group

27 Feb 20

Reiterated soft warning on best-case scenario

The profit warning for 2020 does not come as a surprise. Management continues to believe that 2020 will enjoy some bottom-line expansion. However, this is based on a best-case scenario.

Companies: Standard Chartered

27 Feb 20

Rentokil enters into FY20 with confidence

Rentokil remained on a solid footing in FY19, and once again outpaced its mid-term targets. Besides the healthy Pest Control and Hygiene businesses, the recovery in the Protect & Enhance segment was a shot in the arm. While management anticipates the Coronavirus will inflict some pain in Q1 FY20, it remains confident about a strong show in FY20. All the mid-term targets have been reiterated.

Companies: Rentokil Initial

27 Feb 20

Is Monsanto axing Bayer?

We do not believe that Bayer’s full-year results nor the increase glyphosate-related lawsuits (06/20/2020: 48,600; >10% qoq; >4x yoy) are being focused upon. We believe the possible consequences are becoming more and more visible. According to Bloomberg, experts expect the cases could exceed 100,000 and, according to plaintiff’s lawyer, Monsanto’s bankruptcy is ‘on the table’. If the latter becomes reality, this would have material implications for Bayer. The announced retirement of long-term Chairman Werner Wenning could be a signal.

Companies: Bayer

27 Feb 20

Better-than-expected 2020 FCF guidance

Safran reported FY19 results broadly in line with expectations, except on FCF which came in 4.5% above consensus. Management expects revenues to decline in 2020 due to the 737 Max production halt, while FCF is expected to be higher than in 2019, which is clearly above our expectations, that we will smooth over 2020-22.

Companies: Safran

27 Feb 20

FY19 results resonating FY18 order book uptick

Eiffage has published its results which were in line with our estimates. Revenues increased by 9.4% (+7.7% lfl) with contracting activities growing by 8.8% lfl and concessions by 2.9% lfl. The highlight was the Infrastructure business, with 37.1% growth in civil engineering works (buoyed by the work on the Grand Paris Express). A significant improvement in the margins wasn’t observed. We anticipate a slower growth in revenues but a margin improvement in 2020. Eiffage proposed a dividend payment of €2.80/share.

Companies: Eiffage

27 Feb 20

Weak Q4, soft but realistic FY20 EBITDA guidance

A poor Q4, which strongly missed expectations on EBITDA (-5.5% vs. -1.9% expected). While FY20 guidance (2-5% EBITDA growth) appears soft, we believe that it is actually more reasonable following the H2 FY19 troubles which are likely to be exacerbated by the Coronavirus in the first half. Now trading at a discount to peers, we are just waiting for some visible improvements.

Companies: AB INBEV

27 Feb 20

Q4: mixed results

2019 has been filled with many commercial successes as proven by a book-to-bill at 1.69x. Yet, this has not stopped the stock price from sliding, as the company struggles with lower margins and lower oil prices. However, we note that operating cash flows are guided upwards against a lower EBITDA, increasing de facto the cash conversion from EBITDA, another issue TechnipFMC has been dealing with.

Companies: TechnipFMC PLC

27 Feb 20

Rio Tinto 2019 full year results highlights from chief executive

Rio Tinto announces FY dividend of US$6.2 billion, including record final ordinary dividend of US$3.7 billion.

Companies: Rio TintoRio Tinto

27 Feb 20

Strong closure to FY19; new CEO is instilling confidence

Carrefour’s strong closure to FY19 and further improvement in the cost savings plan are positive developments. We remain optimistic on the potential of Mr Bompard in turning around the operations, especially in Europe. The company needs to be more aggressive in achieving the e-com target of €4.2bn by 2022 (vs €1.3bn in 2019). Positive opinion maintained on the stock.

Companies: Carrefour

27 Feb 20

The Law Debenture Corporation - Step change in dividend supported by IPS income

The Law Debenture Corporation (LWDB) saw a NAV total return of 17.9% (cum-fair) in FY19, with its share price total return of 24.5% comfortably outstripping the broad UK stock market. As well as a c 25% increase in portfolio income, LWDB’s independent professional services (IPS) businesses saw another year of good growth, providing important support for a step change in the annual dividend payment (+37.6%, with the final dividend up 50%, and moving to quarterly dividends from FY20). Portfolio managers James Henderson and Laura Foll continue to find attractive investment opportunities, particularly among unloved UK domestic stocks, while CEO Denis Jackson sees growth potential across the IPS businesses as a result of increased market focus on environmental, social and governance (ESG) issues.

Companies: Law Debenture Corporation