Check out this week's most popular equity research...
Companies: SPA, COS, GOOD, HRI, HUR, RKH, SEED, FAN, WJG
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Machinations: A time to take stock on 2016
Sector note | finnCap, 19 December
"This has been a year of political surprises. Not many would have predicted at the start of the year what occurred in 2016. Yet so much is still unresolved and geopolitical uncertainty continues to dog investment decisions. As such, purchasing managers may experience shocks and readjustments and therefore defer purchasing and investment decisions – this may result in a higher level of share price volatility in 2017.
GDP growth in Q3 bounced back after the Brexit vote, but appears to now be on the slide again, with GDP growth forecasts for 2017 recently cut to 1.1% by the IMF. UK industrial production has some headwinds in 2017; input price inflation, sluggish consumer markets, lacklustre US and EU GDP offset by greater export competiveness from weaker sterling..."
Forecast visibility increases further
Watkin Jones Plc (WJG) | Zeus Capital, 22 December
"The announcement that the Duncan House scheme in Stratford, London has been forward sold increases visibility on gross profit coming from the Student Accommodation division in FY17 up towards c. 70%. Whilst its contribution in the current year is relatively small its importance to FY18 and into FY19 increases significantly as the project is built out. Three planning consents have also been obtained two of which are on developments that hadn’t been secured at the time of the IPO. We leave forecasts unchanged but acknowledge that forecast risk continues to reduce in FY17 and importantly into FY18 as new sites are..."
1Spatial Plc (SPA) | N+1 Singer, 20 December
"1Spatial has issued a profit warning indicating it now expects to make a marginal adjusted EBITDA loss for the year to 31 Jan 2017 vs. our adjusted EBITDA forecast of £4.3m. The group has been transitioning the model to one of annualised revenues but also saw extension of sales cycles which means certain contracts are now expected to fall into 2017. It expects to end the financial year comfortably within its banking facilities. We are putting forecasts under review as we await further details of action plans to restore the group on a healthier footing. As part of today’s announcement, 1Spatial also announced the sale of Avisen (£0.1m..."
Upgrades on sixth acquisition since IPO
Volution Group Plc (FAN) | Liberum, 19 December
"We have upgraded EPS estimates by 2-3% after the acquisition of Breathing Buildings, its sixth since IPO. This brings an exciting and fast growing technology into the Group and deepens its presence in UK commercial ventilation..."
Good Energy Group Plc | (GOOD) | Arden Partners, 21 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..."
Disciplined approach to value creation
Fastforward Innovations Ltd (FFWD) | Equity Development, 22 December
"It is often said that 60% of all acquisitions lose money - a phenomenon known as “buyer’s curse”, whereby over-zealous bidders overpay for strategic assets. Not so FastForward, where we were encouraged to hear at yesterday’s interims that all 9 investee companies have either maintained or increased their valuation..."
Interims: Foundations laid for strategic growth
Collagen Solutions Plc (COS) | Hardman & Co, 21 December
"Collagen Solutions is a biomaterials company developing and manufacturing medical grade collagen components for use in medical devices, in vitro diagnostics, and regenerative medicine. New leadership has introduced a number of initiatives and is investing in global commercial infrastructure to build on its strong base business and to execute on a scalable growth strategy. Interim results confirm that the realigned strategy is starting to come through. Meanwhile, investment continues to be made in establishing a pipeline of finished devices..."
Rockhopper Exploration (RKH) | Edison, 21 December
"We expect 2017 to be a year of increasing clarity on the direction of the Falkland Island assets, and one in which Rockhopper (RKH) starts to make headway in its Mediterranean portfolio with a full year of stewardship of its Egyptian production and exploration assets. The 20 December update brings little new news on its core asset (Sea Lion), but provides for a higher cash figure than we had previously modelled (due to a higher than expected insurance settlement). Our thoughts on Sea Lion remain unchanged, leaving our core NAV unchanged at 74p/share..."
Hurricane Energy Plc (HUR) | Edison, 20 December
"Hurricane Energy has completed drilling of the 205/26b-A well (Lincoln). Log data and gas chromatography indicates a significant hydrocarbon column of at least 660m TVD, comparable to that of Lancaster. Oil down to (ODT) was observed at c 2,300m TVDSS, 520m below structural closure and 168m below the ODT in the 1995 Arco 205/21-1 well. In our last published RENAV, we included 8p/share of risked value for Lincoln, assuming a commercial chance of success (CCOS) of 15%. De-risking Lincoln (to 60% CCOS) but leaving mid-case volume at 250mmbbl (Hurricane management expects upside to this given the deeper..."
Herald Investment Trust (HRI) | QuotedData, 20 December
"Herald Investment Trust’s (HRI’s) manager believes recent portfolio activity (bids for Avesco and Mentor Graphics) shows that HRI’s NAV does not reflect the true valuations of the underlying companies, particularly when a trade buyer is looking to gain control. The UK is seeing considerable expansion from the major technology players (such as Amazon, Apple and Google). HRI’s manager thinks that this development is expanding the skillset of the sector and boosts the ecosystem that supports these tech giants. Small-cap technology, particularly in the UK, has been suffering from a marked lack of liquidity and HRI has seen an expansion..."
