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11 Jan 19

Solid finish to 2018

Sopheon has issued a brief trading update which says that revenues for the year ended 31 December 2018 will be ‘comfortably in line’ with market expectations which were upgraded following its Q3 2018 trading update. Early indications are that EBITDA and pre-tax profits will show stronger outperformance. Since its Q3 trading update, Sopheon has highlighted new contract wins with two multinational businesses. These, and previous contracts, further underline the benefits of the Accolade platform’s successful deployment in new areas as well as in its traditional sales arenas resulting in its adoption in an increasingly wide range of applications. With a more detailed update on the full year performance expected later in January, we leave our estimates unchanged for now but note the continuing positive momentum in the Group.

Companies: Sopheon

11 Jan 19

THE MONTHLY January 2019

The Hardman & Co Healthcare Index (HHI) has been running since 2009. Its main function is to highlight the attractions of life sciences investments over the long term. 2018 was a difficult year; however, the index still outperformed its comparative London indices, falling 10.0% to 393.2, compared with -13.0% and - 18.2% for the Allshare index and the AIM index, respectively. Furthermore, several (17) companies in our index increased their capital base – 15 of our 50 constituents raised new funds, two issued shares as part consideration for acquisitions, and two had share buybacks – all factors that influence the performance of the index. Even allowing for both capital increases and share buybacks, the 12.5% fall in the index still represented a modest outperformance compared with the decline in the Allshare index. With active industry consolidation, shareholder returns remain attractive.

Companies: OPM AVO AGY APH ARBB AVCT BUR CLIG DNL DPP GTLY GDR HAYD KOOV MCL MUR NSF OXB PCA PHP REDX SCE SIXH TRX TON VAL VTA

16 Jan 19

Cenkos: Seeing Machines Ltd - Half year trading update

Seeing Machines has announced a trading update for its half year ended 31 December 2018 where the Board's expectation for FY2019 remains unchanged ie for revenues approximately in line with FY2018 of A$30.7m. The Automotive sector continues to dominate the news with Seeing Machines noting that it is currently in six RFQs worth A$140m, with decisions expected by the end of the financial year. This could double the minimum projected revenues from existing OEM awards. Seeing Machines also expects another 3-4 automotive RFQs going live this financial year demonstrating the strong momentum in the sector following regulatory drivers such as Euro-NCAP.

Companies: Seeing Machines

16 Jan 19

Trading ahead of expectations, 5% EPS upgrade

The company has announced a positive trading update signalling a stronger than expected H2, with sales and EBITDA moderately ahead and cash more meaningfully ahead of expectations. We upgrade our 2018 EPS forecast by 4.9% and raise 2019 by 4.6%, confirming robust trading continues. The company has also announced a small bolt-on acquisition of Line Dragon for $2.0m, which looks an ideal close fit. The shares have significantly derated and the trading update confirms robust trading continues, thus providing a strong buying opportunity. The 7% dividend yield and single digit P/E in 2019 highlight strong value – this quality stock is one of our favourites.

Companies: Somero Enterprises

14 Jan 19

Cenkos: Seeing Machines Ltd - DMS goes mainstream at CES 2019

More than twenty-five companies exhibited Driver Monitoring System technology at CES2019, around four times the number at CES2018, demonstrating how the technology is increasingly seen as indispensable by the auto industry. Out of the ten Tier 1 suppliers, only three seemed ready for near term production (Aptiv, Veoneer – confirming start of production by October 2019 - and Denso), with most targeting vehicles from 2022 and beyond. Whilst Seeing Machines currently has a leading position, with the only systems deemed reliable enough for motorway speed semi-autonomous functionality, the DMS market is clearly attractive, and Seeing Machines will need to continue to invest strongly to maintain its leading position and win a sizable share of the market.

Companies: Seeing Machines

03 Jan 19

Next $1.6bn of investments to boost returns

Burford has announced access to almost $1bn of new capital, which, combined with its balance sheet, gives a new and financially attractive structure for how the next $1.6bn of litigation finance investments will be made. The most significant part of this is a new strategic capital relationship with a sovereign wealth fund (SWF). The SWF and Burford have committed a $1bn pool of capital, with the former supplying $667m. Burford will supply the remaining one-third of the capital, but receive 60% of the investment profits. In addition, 50% of the new investments made will be allocated to the pool over the next four years, or until the pool is invested.

Companies: Burford Capital

14 Jan 19

UK Housebuilding Sector in 2018

‘From the deserts of East Ham to the gardens of Cottenham’, the UK Housebuilding Sector was whacked to the tune of 27% in 2018; and not one share price (out of 18) rose on the London Stock Exchange.

Companies: BWY CRST BDEV WJG PSN RDW TW/ MCS CSP TEF BKG ABBY GLE

11 Jan 19

Taking AIM

Altitude has initiated an accelerated bookbuild to acquire AI Mastermind (AIM), channel partner for Altitude’s white label ChannlPro solution (AIMPro), and largest promotional product distributor member group in the US. The acquisition is to be funded by a £7.0m fund raising at 68p (assumed), including £3.2m for working capital purposes. Customers of AIM members spend an estimated $1.7bn per year in a US market worth $23bn, with only c.11% of transactions online – AIMPro creates an end-to-end solution for distributors to online sales, in addition to order flow management and a CRM, with Altitude benefiting from a percentage share of gross transaction revenue (GTR), from suppliers. The acquisition will improve gross margin from AIMPro, offer the opportunity for enhanced tiered AIM member fees, and allow Altitude to drive AIM expansion directly, to the benefit of the group. Target price under review pending conclusion of the ABB (formerly 105p).

Companies: Altitude Group

17 Jan 19

Small Cap Feast

Circassia Pharma (CIR.L) - specialty pharmaceutical company focused on respiratory disease transferring from the Main Market. No funds being raised. Due 4 Feb. Greenfields Petroleum (TSX-V:GNF) production focused company with operated assets in Azerbaijan seeking AIM dual listing including $60m private placement. Mkt cap $12.6m CAD. Expected late January 2019.

Companies: ORCP IOF FOX TEG XLM TAP FST SNG ARE SRB

15 Jan 19

Revenue +44%, Gross margin +170bps, FY19 Guidance upgraded

The boohoo Group has announced a 44% YOY increase in revenue for the four months to 31 December 2018 and upgraded full year revenue guidance for FY19. Trading over the key Christmas period has seen growth across all divisions and regions, bucking the trend of downbeat trading results seen across the wider retail sector. Of particular note, is this top-line progress has been delivered alongside a +170 basis-point expansion in Group gross margin YOY to 54.2%, at a time when heavy discounting has seen many of its peers’ profitability decline. This impressive gross margin performance YTD reflects the strengths of boohoo’s brand led model, giving it the ability to be more aggressive in its price positioning as and when the market demands. We believe the Group’s well invested model creates significant potential for further operational leverage as it builds towards its ambitious £3bn mediumterm revenue target. The business is backed by a solid balance sheet with net cash of £189m at 31 December 2018, reflecting the strongly cash generative nature of the Group. The shares currently trade on an FY19 PE of 48.1x, falling to 41.1x in FY20. When taking into account forecast earnings growth the shares trade on 2.1x, a notable discount to ASOS and Zalando.

Companies: Boohoo.Com

15 Jan 19

Top line on song for further growth

Gear4music’s recent FY2019 profit warning prompted a stark share price reaction. However, there was no let-up in sales growth. As intended, Christmas market share improved at Gear4music and top-line expectations remain intact. Moreover, gross margins should end the year making progress on FY2018. There are good reasons to be positive, which now include valuation.

Companies: Gear4music

14 Jan 19

Opportunity knocks

We are introducing our Best Ideas for 2019 and also review the performance of last year’s picks. We suggest ten solidly financed stocks with good business dynamics that ought to be considered for core portfolio holdings and six UK domestically focused stocks that our analysts believe should perform strongly in the event that uncertainties unwind. We also introduce a new style of research from N+1 Singer which presents a Company’s dynamics and metrics in a clear and concise manner and concentrates on the pivotal issues affecting that Company and an investment decision.

Companies: BCA CLIN CLG CBP DNLM EAH FDL FCRM FUTR GTLY INS GLE NICL SDL SPR TRI

15 Jan 19

LIBERUM: Frontier Developements* - Record first half / encouraging holiday season sales

As expected H1'19 was a record half for Frontier, with the highly successful launch of Jurassic World Evolution, their first licensed IP release, and as importantly, good contributions from Elite Dangerous and Planet Coaster. The company has had a positive start to H2, with holiday season promotions and new content, delivering strong unit sales across all three franchises, and importantly very encouraging player engagement KPIs.

Companies: Frontier Developments

14 Jan 19

XP Power - Revising forecasts to reflect weaker semis sector

As previously flagged, a drop in demand from XP’s semiconductor customers had a negative impact on Q4 revenues and orders. Conversely, demand from all other end-markets remained strong. With FY18 revenues likely to be 2% lower than we had expected, we have revised our forecasts to reflect this and expected weaker demand from the semiconductor sector in FY19. Despite the resulting 5% cut in EPS forecasts for FY19, the stock is trading at a discount to peers, with a superior dividend yield.

Companies: XP Power

16 Jan 19

Cenkos: 1pm Plc - Moving to the next stage of growth

1pm's H1/19A results reflect the first financial year since FY15A to not consolidate a new acquisition, following the successful completion of the buy & build strategy. The group is currently focused on organic delivery, witnessed in strong, broad-based YoY performance (adj EPS (FD) +16%) and positive indicators today on group integration and cross-selling. Demand from UK SMEs for this now multi-product offer remains strong despite the current macro-economic uncertainty, with material originations growth at stable rates. We continue to view the stock's current deep undervaluation as disconnected from the earnings accretive progress made over the past three and a half years.

Companies: 1PM

18 Jan 19

Secure Trust Bank - Reassuring update

Secure Trust Bank’s (STB’s) pre-close trading update was encouraging, indicating it expects to deliver results in line with management’s and the market’s expectations. The bank has proposed a stop on new mortgage origination, unhappy with current price pressure and loan to value metrics, but does not expect this to have a material impact on 2018 and 2019 numbers. The bank sees itself entering 2019 with positive business momentum and robust capital and is well placed to continue its selected growth strategy despite the current political uncertainty.

Companies: Secure Trust Bank

18 Jan 19

Robust Q3 FY18/19 performance

The Q3 results came in ahead of our expectations, gaining strength from the robust US performance. Also, the UK provided much-needed support to its topline, led by positive B2B growth and moderating B2C losses. LatAm and EMEA/Asia also remained positive. Moving forward, regulatory risk (dealing with data privacy laws) seems to be the only risk in the US, whereas in the UK, we maintain our cautious stance given Brexit-led uncertainty stretching further. We have revised our estimates upwards. No change in the stock recommendation.

Companies: Experian

18 Jan 19

Strong Q4 lifts investor confidence

Casino’s Q4 performance is commendable considering the apprehensions about lost sales from Yellow Vest protests in France. However, non-food remains a pain-point and its revival is vital for further margin improvement. We expect the positive momentum to continue in FY19, both in France as well as in Brazil. We reiterate our confidence in the food retailer – management should be able strengthen its omni-channel proposition and also de-leverage the company in the forecast years. No change in our stock recommendation.

Companies: Casino Guichard Perrachon

18 Jan 19

Better than expected

Wacker’s FY 18 profitability was negatively impacted by higher raw material prices (Polymers) and lower volumes and sales prices (Polysilicon) accompanied with the re-ramp up costs for the Charleston site. In addition to the difficult business environment, the compensation for the business interruption is still pending. All in all, Wacker’s preliminary figures exceeded our cautious expectations, but more information is needed to have a deeper dive into the figures.

Companies: Wacker Chemie

18 Jan 19

Kodal Minerals - Bougouni Lithium Project Update

18 Jan 19

The undesired shareholder

The group has confirmed its intention to kill two birds with one stone through the buy-back of shares held by the Treasury. From a shareholders’ standpoint, beyond the positive signal sent, we see limited share price support from the reduction in the State’s stake or of the excess equity.

Companies: Royal Bank Of Scotland Group

18 Jan 19

Executive interview – Custodian REIT

18 Jan 19

LIBERUM: Ryanair - Profit warning on weaker winter unit revenue

Ryanair has cut its FY net profit guidance by 9% (based on midpoints). Management now expects net profit for March 2019E to be between €1.0bn and €1.1bn.

Companies: Ryanair Holdings

18 Jan 19

Selvita - SEL120 to enter clinical development in 2019

The data readout from the SEL24 Phase I/II trial in relapsed/refractory AML and the second lead asset, SEL120, moving into clinical development next year are milestones in Selvita’s internal drug R&D. This should accelerate, as the company’s plans to focus on innovation were endorsed by shareholders during the fund-raise earlier in 2018. R&D progress across the earlier-stage pipeline has been reported in several publications in recent months. The Innovations Platform continues to receive support from Selvita’s rapidly growing drug discovery services business. Our valuation is PLN1.24bn or PLN77.6/share.

Companies: SELVITA

18 Jan 19

2018 deliveries were short of our projections

Including the Chinese joint-venture that was set up in 2017 (it operates Jinbei and Huasong light commercial vehicle brands), deliveries amounted to 3.88m, an increase of 3.2% compared to the 2017 number which excluded any joint-venture deliveries. Excluding this volume of 166k LCVs, deliveries fell by 1.2% to 3.72m in 2018. We had expected 3.9m units. This gap of almost 5% or around 180k units is not insignificant. Africa, the Middle East, India was the weak spot last year. Regional deliveries fell by 16% to 449k and, outside France, deliveries fell by 0.6% to 1.23m in Europe (the number was up by 2.4% to 690k in France). Finally, APAC was another weak spot with deliveries down by 16% to 164k when the joint-venture is excluded. Renault experienced some growth of 2% to 748k in Eurasia (i.e. Russia and surrounding countries) and strong growth in LatAm (+12% to 437k). Management sees the volume increasing slightly in 2019, but positive growth is not expected to start in H1.

Companies: Renault

18 Jan 19

Morning Note – 18 January 2019

Companies: Kazera Global

18 Jan 19

Cenkos: Eddie Stobart Logistics Plc - Strong revenue growth

Revenue growth has come in well ahead of expectations at an impressive 18% underlying and 35% including acquisitions. With more new business to digest than expected, margin has not recovered as quickly as we had hoped. Our 2017/18 EBIT forecast is trimmed from £59.6m to £57m, in line with consensus. Fully diluted EPS are expected to grow by the highteens. Because of macro uncertainties, we are aiming off with our Year 2 forecast, but still forecasting high-teens growth, underwritten in large part by contracts won over the last year. Thus, despite our trim there's plenty of growth on offer.

Companies: Eddie Stobart Logistics

18 Jan 19

LIBERUM: Miton Group* - Record annual netflows, markets in Q4 reduce EPS by 4%

The Q4 trading statement confirms a record year for net flows. AUM finished the year at £4,376m vs. £3,823m in 2017.

Companies: Miton Group

18 Jan 19

Trading ahead of expectations

Bonhill Group (Bonhill) has announced that it expects results for the 9 months to 31 December 2018 to be ahead of market expectations, driven by a record performance from InvestmentNews, which generated a 14% increase in revenues to c.US$19.1m in the year to 31 December 2018, of which c.£6.0m was post being acquired in August 2018. The UK-based events business doubled revenues YoY, driven by the continued success of the international ‘Women in..’ series. At this stage we have made no changes our forecasts but we have increased our TP to 107p (95p). We retain our Buy recommendation.

Companies: Bonhill Group

18 Jan 19

CMD: Capitalising on Momentum

CloudCall’s Capital Markets Day presentations featured a breakdown of 2019’s growth drivers, Q&A sessions with key channel partners Bullhorn and Microsoft, and a breakdown of the group’s SaaS metrics. Our key takeaways are on strength of the Bullhorn partnership, the scale of the opportunity with Microsoft and upsell potential from messaging features. We reiterate our Buy rating; CloudCall is one of our top picks for ’19.

Companies: Cloudcall Group