Check out what's been happening in the world of Equity Research this week...
In the news
Trump's budget and speech to congress were the big news stories this week, along with the House of Lords voting down the Brexit bill due to lack of protection for European residents.
Trump wants to dramatically cut foreign aid and the EPA's budget to increasing funding for the military. No doubt, this will have an impact on construction, engineering, and aerospace stocks exposed to the US market. Intercede Group is one of the early casualties, with its shares falling 27% today.
In the markets
It was a busy week in the markets, and here are some of the highlights:
- Ministers might intervene in the Sky Murdoch takeover. Culture Secretary Karen Bradley reportedly has "concerns" about the merger.
- The UK's service sector is "losing momentum" and economic growth is showing signs of a slowdown. The sector eased to a five-month low in February.
- The FTSE 100 hit record highs this week, briefly passing 7,380
- LSE says it is 'working hard' on exchange merger
- And the big news of the week: Snap's life as a listed company kicked off in dramatic style on Wednesday, rocketing +40% shortly after opening.
Strong H1 performance, delivering on strategic initiatives and confident outlook for H2
MySale Group Plc (MYSL) | Zeus Capital, 1 March
"Today’s interim results confirm strong first half trading for MySale, with improved financial and operational performance delivering growth. Group revenue increased 7% to A$136.7m, while higher margin online revenue, now representing c.93% of the total group, experienced a strong rate of growth of 19% to A$127.1m. Gross profit grew 17% to A$38.4m, underpinned by a 260bp improvement in gross margin to 28.1%. Management remains focussed on efficient and effective marketing strategies, with increased emphasis on customer re-engagement and retention..."
Strength & tenor of FY16 results supportive of premium rating
Nichols (NICL) | N+1 Singer, 2 March
"FY16 results make positive reading reflecting the strength of a diversified model. Management has once again successfully executed strategic and growth initiatives to deliver strong sales and double-digit EPS growth. The 14.5% DPS uplift is a positive signal about prospects. In FY17 NICL will face higher cost pressures but has mitigating levers and good trading momentum to create further value. We keep our FY17/18 PBT forecasts unchanged but lift EPS by 1.4%/2.5% and see fair value at 1800p..."
Small FY17 positive profit surprise; Investing for growth in FY18-19
Gear 4 Music (G4M) | Panmure Gordon, 3 March
"Today’s FY17 year-end trading update delivers a marginal but nevertheless pleasing positive profit surprise relative to our PBT expectations which had been raised by 20% just less than 2 months ago. This new positive profit surprise is driven principally by strong cost control despite significant ongoing investment into G4M’s infrastructure ahead of future growth, whilst G4M’s sales continued their strong growth in both the UK and Europe/RoW in the seasonally quiet January and February. As flagged previously, the company’s ethos of investing in infrastructure ahead of future growth will be a key feature particularly in FY18 but also beyond. We note therefore that two such pivotal..."
Strong FY, operating leverage to drive 2017-2019 gains
Jimmy Choo Plc (CHOO) | Liberum, 2 March
"Jimmy Choo has announced strong FY results. EBIT grew by 17% to £38.7m, 2% ahead of our forecast on sales up 15%. We expect strong leverage over the next three years, with EBIT to grow well ahead of sales as the company sees the full benefits of recent IT and distribution investment and the store refurbishment programme passes its inflexion point..."
Hardman & Co Monthly: March 2017
Sector Note | Hardman & Co, 1 March
"Most major pharmaceutical companies have reported results for 2016 during the last few weeks, providing the opportunity to update our industry statistics. For an industry that requires a long investment cycle, decisions made many years ago have consequences on current financial performance. Being able to look at performance over 20 years highlights how strategic decisions have panned out..."
Building on strong foundations
W. H. Ireland Group (WHI) | Equity Development, 27 February
"A strengthened balance sheet and the growth in funds managed for clients are the foundations for a recovery in WHI’s fortunes after a traumatic period for Small Cap stockbrokers..."
New initiatives and corporate targets
Utilitywise Plc (UTW) | Edison, 3 March
"UTW has developed a range of new strategic initiatives and set itself demanding targets for future growth. The plan will be implemented in the period FY18-21 and evidence of progress towards the targets will be required before any valuation uplift associated with this new growth trajectory is likely to be awarded. However, the current rating remains modest and we suggest it does not yet reflect the current prospects..."
Gear 4 Music (G4M) | Edison, 3 March
"Gear4music (G4M) has ended the year with 58% revenue growth, slightly ahead of expectations, and has also guided to profit performance marginally ahead. Driven by European sales growth, this shows continuing development of its international presence, as does the opening of (now) two distribution centres on the mainland. Sales growth is now building against strong growth last year, and the strategic argument for medium-term investment continues to strengthen..."