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12 Jun 19

LIBERUM: Ramsdens Holdings* - Hits targets. Optimising new stores.

FY results hit expectations, with all segments growing. For earnings to rise even after that summer hitting the FX business which is 38% of profits, is an achievement.

Companies: Ramsdens

12 Jun 19

Turbo-charged growth at a modest price

“If it ain't broke, don't fix it” is synonymous with corporate life. However ‘laurel resting’ is not in Elektron’s lexicon, even after producing a 10-fold rise in the stock price over the past 5 years. No instead, the firm’s DNA is based on ‘continuous improvement’ and maximising shareholder returns, as characterised by this morning’s bumper results and encouraging outlook.

Companies: Elektron Technology

13 Jun 19

Significant momentum being generated

Volex had already signalled trading was ahead of expectations but with adjusted PBT increasing from US$9.6m to US$20.2m against initial expectations of US$18.3m, these results confirm the momentum generated by Volex. In addition, the cash balance of US$20.6m beat our estimate of US$15.7m and management now expects to reinstate the dividend in FY20. Trading on a FY20 PE rating of 9.6x, a FCF yield of 7.7% and offering a potential dividend yield of 2.3%, we reiterate our buy recommendation. We have also increased our price target from 130p to 140p to reflect increased contributions from the higher margin Cable Assembly division. Even then, at 140p the FY20 PE rating is still only 13x. Thus, with significant growth, net cash, a single digit rating and the expectation of a dividend, Volex offers substantial upside and remains undervalued.

Companies: Volex

12 Jun 19

LIBERUM: Frontier Developments* - Launch of publishing partnership strategy

Frontier yesterday announced their first publishing partnership as part of the outlined strategy to accelerate the game release cycle and substantially grow the repeating revenue base. These deals add strategic, and in the medium-term financial upside, with the indication being there are more to come.

Companies: Frontier Developments

13 Jun 19

AGM update detail

Sopheon continues to broaden its offering within enterprise clients, extending the applicability of Accolade outside its R&D stronghold, and towards the strategic direction-setting of entire organisations. Progress has been strong, and the good pipeline gives confidence that, although visibility of contracted orders is roughly flat on last year, the forecast sales growth should be delivered with the typical H1/H2 seasonality. We make no changes to estimates.

Companies: Sopheon

13 Jun 19

Cenkos: Seeing Machines Ltd - Fleet momentum in New Zealand

Seeing Machines has announced that its New Zealand distributor AutoSense has signed four new deals with commercial fleets across the country for Seeing Machines' Guardian fleet retrofit product. The distributor has been seeing significant momentum across the country to install the Group's fleet solution and the deals cover a total of more than 1,400 units with TIL Logistics Group (a publicly listed company and one of New Zealand's leading domestic freight and logistics companies) and three other major transport operators. AutoSense has renewed distribution terms with Seeing Machines and intends to treble its current installed base by the end of 2019.

Companies: Seeing Machines

13 Jun 19

Rating has not caught up with recovery

Volex has delivered a strong recovery in earnings over the last three years, with adjusted PBT increasing from $5.3m in FY16 to $20.2m in FY19. The strategy is on track to deliver further material improvements in growth and profitability, supported by a strong balance sheet. Management confidence in prospects is reflected in its guidance of the likely reinstatement of a dividend in FY20. We believe momentum is accelerating, but has yet to be recognised in the group’s valuation multiples (EV/EBITDA 5.4x FY20, P/E 10.0x), which sit towards the bottom of the sector. The shares have potential for significant upside both from continued recovery in profits and cash and from re-rating. We initiate with a 140p intrinsic valuation.

Companies: Volex

11 Jun 19

LBVR opportunity crystallising

Oxford Metrics’ interim results show continued strong revenue growth and cash generation, leaving the group well placed to meet our full year expectations. Vicon was the star of the show in the period, with growth in traditional markets augmented by new applications such as Location Based Virtual Reality (LBVR). Yotta continues to win new clients and increase its addressable market, but sales lead times remain protracted, and we have adjusted the make-up of our forecasts to reflect this. The group outlook is encouraging with Vicon’s qualified sales pipeline 11% higher than this time last year, and the board is confident of achieving its 2021 growth targets.

Companies: Oxford Metrics

17 Jun 19

LIBERUM: Staffline* - Pathway to stability and avoidance of resuspension

Underlying results are in line with expectations and planned to be published on the 27th June, preventing re-suspension. The HMRC provision has been increased by £7.2m from £7.9m to £15.1m.

Companies: Staffline Group

12 Jun 19

A Solid Start to FY20

Boohoo Group has announced a solid start to FY20 in its Q1 trading statement released this morning. Revenue for the Group is up an impressive 39% YOY to £254.3m, ahead of ZC expectations (+32%) and market consensus (+35%), and against strong Q1 FY19 comparatives (+52%). There was growth across all brands and regions, with the Group continuing to take market share. This positive performance reflects the relevance and strength of the Group’s proposition, further evidenced by it topping the UK Hitwise rankings for the first time in May. Margin performance remains solid, with Group gross margin broadly stable YOY at 55.0% (Q1 FY19: 55.2%). The group was cash flow positive in the quarter with net cash on the balance sheet of £194m at the period end versus £191m at FY19 year end and £151m a year ago. Full year guidance is unchanged at this early stage of the year and we make no change to our forecasts this morning, although see upside risk to our numbers should the momentum seen in the initial three months of FY20 continue. We believe the boohoo Group offers an attractive opportunity to invest in a fast-growing ecommerce business that is both profitable and cash generative. Trading on an FY20 PER of 47.6x, falling to 37.9x in FY21, we believe this rating is justified given the Group’s strong and consistent track record of profitable growth.

Companies: Boohoo.Com

11 Jun 19

Bolt-on acquisition of Booth Industries

Avingtrans has acquired the trade and certain assets of Booth Industries for £1.8m from the administrators for Redhall Group. Booth designs and manufactures performance certified steel doors for applications such as blast and fire protection, for markets including rail, nuclear and oil & gas. The acquisition brings complementary new expertise to Avingtrans, along with end market and customer overlap, and will be integrated into Avingtrans’ Process Solutions and Rotating Equipment (PSRE) division. Booth generated revenues of c.£11.7m and PBT of c.£0.3m in the year to September 2018, implying modest historic acquisition multiples of c.0.2x sales and c.6.0x EBIT. We have made no changes to our estimates to reflect the acquisition ahead of the FY19 year end trading update. However we would not expect Booth to have any significant impact on FY20 PBT, while management focuses on its integration into PSRE and restoring the business’ profitability. Our forecasts put the shares on undemanding EV/EBITDA multiples of 8.6x FY19 and 7.1x FY20, offering good upside as the group continues to deliver growth and build value.

Companies: Avingtrans

12 Jun 19

Confirmation of strong FY’19

FY’19 results confirmed positive performance from all three businesses. Group sales grew 13%, whilst Bulgin delivered strong operating margin momentum (Bulgin +350bps) leading to FY’19 PBT up 77% (5% ahead of expectations). We have upgraded FY’20E forecast Adj FD EPS by 4%, and introduce FY’21E forecasts targeting growth of 50% (underlying: 14%) in sales, and 87% (underlying: 62%) in adjusted operating profit versus FY19. We have increased our SOTP implied valuation range to 68p – 76p including Next (from 62p – 65p), offering strong upside potential.

Companies: Elektron Technology

12 Jun 19

CloudCall - Significant new CRM integration & partnership

CloudCall has announced a significant new integration this morning, with The Access Group’s CRM system called ‘Profile’. We believe this is a positive development and anticipate an upbeat response from the market in early trading. Leveraging the group’s ‘Unify’ architecture, the integration will both expand CloudCall’s potential market by the 500+ companies (with c.15,000 active users) that have deployed Profile and allow the group to benefit from marketing support from Access.

Companies: Cloudcall Group

17 Jun 19

LIBERUM: Futura Medical* - Initiation - High probability of success, low valuation

The multi-billion dollar market for erectile dysfunction (ED) therapies continues to be dominated by PDE-5 inhibitors, despite a slow onset of action and negative side-effects. We believe Futura’s MED2005 addresses these issues and expect positive P3 data in December.

Companies: Futura Medical

12 Jun 19

Everything pointing in the right direction

Eckoh’s FY’19 results confirm a strong year, with high levels of new business win activity providing a strong platform for growth in FY’20 and beyond. US Secure Payments remains the star of the show (and offers the greatest long term potential), but we are encouraged to see growth return to both divisions within the group. The outlook is positive, with strong sales pipelines in both the UK and the US and over 90% visibility over FY’20 revenue. The shares trade on a FCF yield of 4.8% rising to 6.6% in FY’21. We continue to be excited about the group’s growth prospects, which combined with the high level of recurring revenue makes the shares highly attractive.

Companies: Eckoh

18 Jun 19

Jupiter US Smaller Companies - Market volatility providing more opportunities

Jupiter US Smaller Companies (JUS) is continuing to deliver improved investment performance following a tightening up of its investment process in October 2017. The trust has outperformed its small-cap equity benchmark over the last one and three years in both NAV and share price terms. Increased stock market volatility in recent months has presented manager Robert Siddles with an increasing array of attractive investment opportunities across a range of industries; although this has increased portfolio turnover, the manager continues to invest with a long-term view, aiming to generate capital growth while preserving capital during periods of stock market weakness.

Companies: Jupiter Us Smaller Companies

18 Jun 19

BB Biotech - Concentrated portfolio offering true differentiation

BB Biotech (BION) has continued the process of refocusing its portfolio on innovative smaller and mid-cap stocks, selling out of bigger names such as Novo Nordisk and Regeneron, and taking new positions in smaller stocks at the cutting edge of genetic medicine. The Switzerland-based fund retains a highly concentrated portfolio of c 30–35 stocks (and five to eight core holdings make up more than half of total assets), but has a broad spread of clinical indications and development stages. Lead Manager Daniel Koller says that focusing the portfolio away from the big index names allows BION to remain relevant to investors who may hold such stocks directly. The fund has a high distribution policy (funded out of capital returns) and currently yields 4.6%.

Companies: BB BIOTECH

18 Jun 19

Cenkos: Marlowe Plc - FY19A results

Marlowe has released a strong set of results for FY19A, reflecting a successful year for the group. Eight acquisitions were completed, which together have significantly strengthened the group's service offering, and which are already yielding synergies. Buy.

Companies: Marlowe

18 Jun 19

TR European Growth Trust - Finding small-cap value opportunities

TR European Growth Trust (TRG) has seen its share price de-rate substantially over the past 18 months, from a c 3% premium to NAV to a c 15% discount, following a period in which its small-cap value style of investing has been out of favour with investors. However, its NAV has risen c 13% year to date, with lead manager Ollie Beckett taking advantage of depressed valuations in smaller European companies whose growth potential he believes is underappreciated by the wider market. The portfolio is diverse, with c 140 holdings broadly spread by country and industry sector. TRG has a more value-oriented investment approach than its peers and is more exposed to stocks at the lower end of the market capitalisation spectrum, which have greater potential to grow exponentially. The largest positions rarely exceed c 2%, which limits stock-specific risk, while a well-covered c 2.5% dividend yield provides support for total returns in periods of market volatility.

Companies: TR European Growth Trust

18 Jun 19

Oryzon Genomics - Positive signals from first ALICE trial dataset

On 14 June 2019, Oryzon presented dose-finding data from the Phase II ALICE trial at the 24th Congress of the European Hematology Association (EHA-2019) in Amsterdam. The single-arm, open-label study enrolled newly diagnosed, elderly acute myeloid leukaemia (AML) patients and investigated iadademstat in combination with standard of care chemotherapy drug azacitidine. In addition to dose finding data, initial efficacy was also investigated. Overall, findings in this trial confirm the data seen in the first-in-man Phase I study Oryzon completed in late 2016 and support further investigation of an azacitidine/iadademstat combination in the second efficacy part of the ALICE trial.

Companies: Oryzon Genomics

18 Jun 19

Morning Note – 18 June 2019

Companies: CTP CHAR CLSU FDEV KBT PTRO

18 Jun 19

Castleton Technology - Prelims

Castleton’s prelims report performance in line with the trading update: EBITDA of £6.3m (vs £6.3mE) from revenue of £26.4m (vs £26.5mE), with operating cash conversion of 97%, and free cash flow of £4.8m. With the maiden dividend reaffirming the board’s confidence in cash flow and net debt approaching breakeven, the balance sheet retains capacity for acquisitions to complement 7.3% organic growth achieved in FY19, and expected to persist into FY20 and FY21. EBITDA margin expansion from 24% (FY19) to 26.5% (FY21) is expected to derive from continuing improvement in cross sales, and the integration of the now unified Software and Managed Services divisions. With operating fundamentals consistently positive and improving, we lift our target price to 140p (125p), representing a 16.4x EV/EBITDA multiple and 4.5% target free cash flow yield.

Companies: Castleton Technology

18 Jun 19

LIBERUM: Elegant Hotels* - Refinancing of debt facilities confirmed

As discussed at the time of the recent interims, the Group’s debt facilities have been refinanced. The terms remain similar to that of the previous facilities though the remaining repayment period of the term loans has been extended from 10 years to 15 years.

Companies: Elegant Hotels Group

18 Jun 19

Verditek - Interview with Paragraf CEO, Simon Thomas

18 Jun 19

Verditek - Interview with Verditek Chairman, Lord David Willetts

18 Jun 19

(Almost) Daily Market News Update

The Empire Manufacturing Index of the Federal Reserve Bank of New York was expected to decline from last month’s reading, but the actual number was dramatically worse than expected. At a reading of -8.6 points it suffered the largest one-month drop ever and sank into negative territory (indicating more pessimists than optimists) for the first time since October 2016. Particularly noticeable was the decline in new orders, which dropped from +9.7 the previous month to -12.0, indicating a significant weakness in the pipeline of manufacturing companies in the New York region. The development of the Empire Manufacturing Indicator is clearly bad, but it seems as if this month is an outlier to the otherwise solid data coming out of the country, so we tend to take a wait-and-see approach to this data point before rushing to conclusions.

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18 Jun 19

Castleton Technology (CTP) full year results to 31st March 2019

18 Jun 19

Strong product, proven process, adding scale

LoopUp has developed a software-as-a-service product for remote business meetings which combines advanced technology with extreme simplicity and ease of use. The group is seeing good traction with enterprise customers, and its process-centric and team-based sales approach lends itself to rapid scaling. The acquisition of MeetingZone in 2018 added very significant scale and brought synergy opportunities. With strong gross margins and powerful growth metrics, the group has material expansion plans for the short to medium term and should be able to deliver material dividends to investors in the long run.

Companies: Loopup Group

18 Jun 19

De-leveraging the balance sheet

Oxford BioMedica (OXB) is a specialist, advanced therapy, viral-vector biopharma company. It offers vector manufacturing and development services, while developing proprietary drug candidates, with its LentiVector® platform. 2018 saw significant growth in gross income, primarily through licensing deals, to deliver OXB’s first underlying operating profit. OXB is, however, carrying a significant loan of $55m, which is relatively expensive with an interest rate of 9% plus US LIBOR, and also exposes it to forex risk. Equity financing of £53.5m from Novo Holdings A/S has been agreed, allowing repayment of the loan and securing a strategic partner.

Companies: Oxford Biomedica

18 Jun 19

Organic growth is accelerating, and quickly

There are few principles in life that work consistently through ‘thick and thin’. One of the most important (& usually hardest to find) for investors is purchasing ‘quality growth stocks at attractive prices’. Enter ClearStar, who this morning (ahead of its AGM) said that LFL sales had climbed 14% in the first 5 months of 2019.

Companies: CLEARSTAR