Featured Report:

3 UK stocks exposed to the shifting AdTech landscape

Digital advertising is a massive and increasingly important sector of the economy. It's currently estimated to be worth around $225bn (£173bn) per year and is growing at 15-20% annually. Despite this growth, the sector and companies that operate in it are facing increasing challenges from the duopoly of Facebook and Google, ad-fraud, ad-blocking, and a squeeze on funding... read more

Initiating with Buy, 520p TP but prefer Shell
BP (BP/) | Panmure Gordon, 17 May

Gold Access

"We forecast BP to grow Upstream production by 5.4% pa to 2021, boosted by the deals done at year end. That helps to nearly quadruple EPS, driving a sharp improvement in multiple ratings and returns. However, we see little scope to neutralise the scrip dilution before 2021. Translation of the targets BP has set under real world conditions is uncertain but there could be upside to our forecasts if they were to be delivered in full. We initiate on BP with a 520p per share Target Price and a Buy recommendation. However, we prefer Shell which has similar upside to our 2,500p per share Target Price, but should have more than double the cash yield from next year and has a more robust business mix to low oil prices..." 

Strong H1, trading in line
Zytronic (ZYT) | N+1 Singer, 10 May

Gold Access

"The interim results again showed strong PBT growth (44%) helped by the ongoing trend of an improving product mix as well as a relatively more favourable currency impact. We retain our profit forecasts but see potential for upside if positive trading momentum continues. The balance sheet again continues to strengthen with net cash up to £12.5m and the interim dividend was increased by 10% to 3.80p. With underlying trading remaining positive, we continue to feel that an FY17 P/E rating of 15.6x is inexpensive for a growing technology business with a very strong balance sheet and a dividend yield approaching 4%..."

AGM statement prompts forecast upgrade

Fevertree Drinks (FEVR) | Whitman Howard, 15 May

Gold Access

"Fever Tree (FEVR LN, HOLD, T/P 1700p) announced in its AGM statement that this year’s financial performance should be comfortably ahead of current market expectations. We adjust our numbers accordingly to raise our 2017 revenue number from £118m to £128m and fully diluted EPS from 25.2p to 28.0p. We raise our price target from 1250p to 1700p, which is roughly where the shares currently trade..." 

Trading volatile but no change to forecasts
Safestyle UK (SFE) | Zeus Capital, 18 May

Gold Access

"Weaker trading in the last few weeks means the first half performance will not be as strong as we had envisaged at the time of the FY16 results (23rd March). However, FY17 forecasts remain unchanged with management guiding that the FY performance will be in line with expectations. Forecasts already assumed a degree of H2 weighting, due to tough comps in H1, but today’s statement suggests that this will be larger than expected. Earnings risk increases as a result but Safestyle has a track record of meeting market expectations and has levers in terms of pricing, conversion, financing and productivity to drive profitability. Irrespective of the wider market, it is expected that Safestyle will continue to take market share from the other national operators. The share price has performed well and at last night’s close of 324p is trading close to the all-time high. This values the business at 15.4x current year earnings with the shares yielding 3.6%. In addition, with the capex programme relating to the new factory coming to end in FY17 further special dividends could be expected going forward..."

A new string to the bow
Keywords Studios (KWS) | Edison, 18 May

Free Access

"Keyword’s acquisition of GameSim for $4.76m marks the company’s long planned entry into engineering. We expect follow-on acquisitions as it replicates its strategy of building a service line through consolidating the fragmented games outsourcer market. As with the company’s Art service line, GameSim’s teams work closely with the core engineering teams of its games developer customers, creating cross-selling opportunities and deeper relationships with customers. Incorporating GameSim, together with the earlier $0.9m acquisition of XLOC, we upgrade FY17e EPS by 3%..." 

Market dominance brings the cash
Jackpotjoy (JPJ) | Edison, 16 May

Free Access

"Driven by the market-leading Jackpotjoy division, Q1 gaming revenues rose 11% to £71.4m with an EBITDA margin of 40.9% and underlying cash conversion of c 100%. Q2 trading has started well across all divisions. Adjusted net debt/EBITDA of c 4.0x remains high, but Jackpotjoy plc (JPJ) is comfortably positioned to pay a major c £95m earnout in June and we expect significant deleverage from 2018. The market is pricing in a high degree of execution risk, with 2017 trading multiples of 6.9x EV/EBITDA and 6.1x P/E. Despite regulatory headwinds, we forecast continued strong underlying growth and we would expect a re-rating as debt repayments begin to drive value to equity..."

Earnings driven by strong fund momentum

Impax Asset Management (IPX) | Equity Development, 16 May

Free Access

"First half earnings were 23% up on the second half of FY16 (100% ahead of H1’16). That reflects six consecutive quarters of strong growth in assets under management and advisory (AUM). Total net inflow was a record £870m in the first half, and the value of the group’s listed equity funds grew by £340m, or 8.2%. That combined is equivalent to a 27% increase in AUM to £5.7bn, while another very good month pushed that above £6.0bn by end April. The interim figure included $1bn for North America, an important medium term milestone..." 

Rising dough
Fulham Shore (FUL) | Hardman & Co, 15 May

Free Access

"Fulham Shore’s proven management team is expanding both its main brands, Franco Manca and The Real Greek, ahead of expectations. FY17 saw a 55% rise in restaurants open, to 45. We estimate 60 by end FY18, more than double the end FY16 figure. The authentic, good value, casual dining experience produces average ROCE at restaurant level of over 20%. Most openings are in Headline EBITDA profit from month one. The 3rd April trading update highlighted trading in line with (ambitious) expectations, which is in comparison to many other US and UK brands, which have found the past year difficult. Fulham Shore has clearly demonstrated robust, strong growth, expanding from London and out to provincial locations, with eventual potential for franchise, a third brand and international expansion..."