Most popular equity research this week | 12-16 Dec

Exceptional execution

boohoo.com (BOO) | Panmure Gordon, 14 December

"Boohoo has released an unexpected trading update this morning which upgrades guidance and announces the acquisition of PrettyLittleThing. The company is clearly operating in a retail sweet spot and its high-quality management team are demonstrating exceptional execution. We reiterate our buy recommendation on the shares and increase our PT from 114p to 170p..."

Upgrades + acquisition growth now mostly priced in

boohoo.com (BOO) | N+1 Singer, 15 December

"With another increase in sales growth and EBITDA margin guidance, Boohoo has established a clear track record of profitable growth and a flexible approach to expanding digitally. Investment supports future growth and risk to outer year forecasts still appears to be to the upside. Low near-term profit margins at PLT and the possibility it needs its own warehouse mean FY18-FY19 accretion falls below expectations. PLT offers significant potential medium to long term though. After updating our bull case sensitivity we feel the valuation now mostly factors in near term upside risk and maintaining a BUY stance now feels a tad aggressive after the rally. We move to Hold..." 

Strong trading leads to fifth upgrade of the year, acquisition of PrettyLittleThing

boohoo.com (BOO) | Zeus Capital, 14 December

"boohoo has continued to trade strongly since the interim results on 27th September and through the Black Friday weekend and key peak season period. As a result, management have increased FY17 guidance for sales growth to between 38-42%, against previous guidance of between 30-35%. Improved operating leverage in the business leads to an increase in EBITDA margin guidance to between 11-12% against previous guidance of c.11%. In addition, boohoo has announced the acquisition of 66% of PrettyLittleThing (PLT) for a cash consideration of £3.3m. PLT is expected to grow sales by at least 150% to c.£42.5m in the year to February 2017, implying that boohoo is paying a sales multiple of just c.0.1x vs a peer average of 2.0x. Applying boohoo’s sales multiple of 4.4x to PLT translates to a value of 11p..."

Fovio strategy shift opens equity opportunity

Seeing Machines (SEE) | finnCap, 13 December

"In a change of plan, the Board is raising £17m (a £15m placing and £2m open offer) from equity investors to fund and benefit fully from the automotive OEM rollout of its leading-edge technology. This will ensure existing investors retain full ownership and control of the IP..."

Interims – UK still trading well

Abbey Plc (ABBY) | Arden Partners, 12 December

"Interims reflected continued good trading conditions in the UK offset by a strong FX translation headwind of 13.7%, given that Abbey reports in Euros. Overall, Abbey completed 252 sales in the first half (2015: 294), split UK 219; Ireland 15; Czech Republic 18 (2015: UK 264; Ireland 15; Czech Republic 15). Reported revenues declined 21% to €88.3m and reported PBT declined 26.7% to €21.76m. The interim dividend has been increased from 6c to 7c..."

Temporary headwinds starting to ease

Molins (MLIN) | Equity Development, 12 December

"Profit warnings are never pleasant, albeit some are far less painful than others. You see that, when caused by transitory, rather than permanent factors, the damage tends to be milder and more short-lived. This is the situation that we think Molins finds itself today, after Q4 trading was said to have been “materially” affected by delayed orders and lower gross margins, due to extended customer procurement cycles and “unfavourable sales mix”. Here, we suspect that some of the deferrals might have also been triggered by macro uncertainties, such as the November US Presidential elections. That said, as the ‘economic fog’ lifts, client capex budgets are returning to normal, generating much improved activity levels, particularly in Packaging Machinery (PM). In fact, so much so that the Board now expects to close 2016 with a “significantly higher” backlog than enjoyed 12 months ago (~£25m 1st Jan’16)..."

Strong FY 2016 results, strategic acquisition

Idox (IDOX) | Progressive Equity Research, 14 December

"Idox has reported FY 2016 results in line with our forecasts and consistent with the November trading update. Double digit growth in revenue (+23%) and adjusted profits (Adj EBITDA +18%) were confirmed. The company has also announced a strategic acquisition; Idox is entering the Healthcare segment via 6PM Holdings plc, a leading provider of healthcare solutions, to be acquired for a total EV of c£35m. Following the announcements, we upgrade FY 2017E revenue and EBITDA by 11% and 12% respectively..."

Increased special dividend

GVC Holdings (GVC) | Edison, 15 December

"GVC has released a positive pre-close update, indicating that results will be at the upper end of market expectations, and has upped the planned 2016 special dividend by 49%, from 10c to 14.9c/share. This confirms excellent momentum in the business, with revenue synergies beginning to augment the bwin cost synergies. We have increased our FY16 EBITDA estimate by £2.4m to £204.5m. Management is delivering on its ambitious targets, yet the 2017e EV/EBITDA is now only 9.2x..."

Specialist manufacturing opening new doors

Abzena LTD (ABZA) | Hardman & Co, 13 December

"Abzena is an integrated group offering a broad range of services and technologies to improve the chances of discovering and developing effective biopharmaceutical drugs. With strong footprints in both the US and UK, the company provides a fee-for-service offering with the aim of embedding its technology – ‘Abzena Inside’ – into commercial products, on which it will derive a long-term royalty stream. Abzena’s integrated services can now be used from the early stages of drug discovery right through to manufacturing for Phase II clinical trials, making the company an attractive development partner..."

Good growth delivered and anticipated

Norcros Plc (NXR) | Edison, 12 December

"H117 results contained a mix of individual trading performances which, in aggregate, delivered double-digit percentage y-o-y progress. Balancing business momentum, internal development actions and overall market conditions, we continue to expect good PBT growth and for this to translate to further share price strength in due course..."