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Companies: PRSM, BOO, CLL, CMS, CONN, DSCV, EVRH, FCRM, BOOT, LOK, LRM, PPH, PURP, RNWH, SVCA, SXX, STAF, TRMR, ULVR, UTW, VANL, WATR, WYG
Taptica International (TAP)
47% YoY H1 earnings growth with cash to match | finnCap, 26 Sept
"In H1 Taptica has enjoyed yet another strong period of trading, showing 27% organic growth in sales and the inherent operational gearing ensuring 47% growth in underlying earnings. Moreover, it has converted these earnings into cash, covering a dividend distribution, and the balance retained lifted net cash to over $32.6m in June. This cash will have been utilised in the subsequent H2 acquisitions of Adinnovation and Tremor Video’s DSP and we estimate current net debt of c.$15m. This is comfortably on track for our full-year expectations and will be augmented by the major acquisitions made in H2, which are earnings accretive in the near term and will expand and enhance the business over the longer term.
H1 revenue grew a striking 27% to $65.6m, driven by a 46% YoY growth in mobile business (now 91% of sales) while non-mobile continued to decline, falling 46%. Blended GM continues to rise from 34% in H1 2016, to 39% in H1 2017. This delivered 45% YoY GP growth to $25.8m. Overheads rose 44% YoY to $13.2m and with this gearing adj. PBT leapt 47% YoY to $12.7m, comfortably on track to meet our conservative FY forecasts."
Sirius Minerals (SXX)
Q3 update: construction commences in earnest | Liberum, 29 Sept
"Sirius quarterly project update highlights the mine remains on time and budget, although some of the work schedules have evolved in terms of timing and scope. The language around marketing and sales contracts has become incrementally more positive and some colour was given on the current phase of stage 2 financing discussions.
The design work of the diaphragm wall is now complete and d-walling equipment is being assembled on site. The scope of the d-walling has been expanded
with larger diameter and deeper foreshafts, removal of a series of roadways below the surface and also with more permanent fixtures (winders etc.) adding to the timeframe of this initial work. However, there is no net impact on project delivery timeframe as it largely consists of work previously allocated for post shaft construction being brought forward (I.e. Permanent winders being initially installed instead of temporary ones which would later be replaced)."
106% group growth delivered in H1, strong international growth driving more upgrades | Zeus Capital, 27 Sept
"Boohoo continues to exceed expectations, delivering H1 group revenue growth of 106% to £262.9m, with boohoo brand up 43% YoY (40% CER) and PLT delivering standout growth of 289%. The group continues to increase market share overseas. Growth in the USA was 160% (145% CER), and now represents 15% of total group sales, the largest market outside the UK. Rest of Europe saw growth of 89% (77% CER) while RoW grew 105% (89% CER). Sales in the UK doubled to £163.4m, representing 62% of total group sales, a reduction from 64% YoY. Nasty Gal is also growing strongly month-on-month and contributed £8.4m in revenue. We expect the business to continue to make significant investment in technology and infrastructure as well as the customer proposition and continue to drive long-term, profitable growth across all the brands. In-line with revised guidance, we upgrade our FY18 and FY19 revenue and EBITDA forecasts.
The Boohoo business has reported 5.8m active customers, up 29% YoY, with number of orders up 26% to 6.4m. Order frequency held at 2.11, while the conversion rate improved 20bps to 4.1%, AOV increased 7% to £39.92 and the number of items per basket increased 11% to 3.17. For PLT, active customers increased 150% to 2.0m, number of orders increased 222% to 2.9m and order frequency improved 19% to 2.22. The conversion rate increased 90bps to 4.3% while the AOV increased 25% to £37.95."
Purplebricks Group (PURP)
AGM trading update | Zeus Capital, 29 Sept
"Purplebrick’s AGM trading update confirms that it has made a “strong start” to the current financial year to 30 April 2018 and “trading in the UK and Australia remains on course to meet full-year guidance provided at the Final results in June: revenues of £80m for the UK and £12m for Australia”. Net cash at 30 August 2017 was £65m.
Interim results to 31 October, due on 13 December, should be impressive: UK – 19% growth in LPEs in the past 3 months - LPEs have increased to 640 (June 2017: 540); - Revenues probably “more than double the same period last year”; Australia – 30% growth in LPEs in the past 3 months - LPEs increased to 100 (June 2017: 77); - Revenues will be “many times ahead” of last year; US – “ahead of plan”, “encouraging initial response” - “Website visits and valuation booked exceeded both UK & Australia at the same period in their development”; - “First buy-side mandate soon after launch went live”.
Strong H1 and FY sales guidance partly offset by reinvestment | N+1 Singer, 27 Sept
"The interim results confirm another excellent half year for Boohoo, with EBITDA growth of 68% including only a modest contribution from PLT where growth rates remain very compelling and where FY guidance has been raised to +150%. Overall group sales guidance has been raised to +80% for FY18, which compares to our forecast of +75% (and similar for consensus). Note that overly conservative guidance of +60% had largely been ignored. Due to further reinvestment, though, and greater participation from PLT (lower profitability), the higher sales forecast may not yield upgrades today, or at the very most 5%. Pending further clarity on this and insight into important platform and warehousing changes we make no alterations to our target price and maintain a hold recommendation."
Blue Prism Group (PRSM)
Automating Intelligently | Whitman Howard, 25 Sept
"We remain extremely positive about the impact of software bots on productivity, job satisfaction and ROCE for businesses deploying them successfully. As a result, we believe this is already a substantial market which will grow rapidly for many years to come.
In this note, we examine the market drivers, the challenges and solutions on offer and start to identify some of the best-placed companies. We continue as buyers of Blue Prism and raise our price target to 1250p on the back of stronger long-term growth. We also identify AntWorks* and Thoughtonomy as accomplished and innovative newer entrants.
As the industry grows it is giving rise to a range of new competitors, many with new skills and approaches, but we believe more strongly than ever that the market is large enough to create a number of large (>$100m revenue), profitable players."
Creating the #1 Global Music Platform for Virtual Reality | Zeus Capital, 28 Sept
"Virtual Reality devices provide consumers with access to fully immersive 3D worlds, as well as the ability to interact within a virtual environment as if they are physically present, creating a new consumer proposition for video games, immersive entertainment, social interaction and virtual teleconferencing. Mark Zuckerberg was recently quoted as saying that “Virtual Reality will be the world’s next major computing platform”. VR devices are currently being produced by leading technology companies such as Facebook, Google, HTC, Microsoft, Samsung and Sony PlayStation, and over the last four years, over $15bn has been invested in the development of VR technology, with a further investment of $50bn expected between now and 2025.
EVR’s wholly owned subsidiary, MelodyVR, is a global music platform that has created the world’s largest library of original VR music content. It is the only VR music service to be licensed by music rights holders including the world’s three major record labels, Warner Music, Universal Music and Sony Music Entertainment. The agreements with these record labels provide crucial access to the world’s top-tier artists and license the company for the creation and distribution of VR content providing a mutually beneficial structure for the monetisation content that MelodyVR creates."
Confidence & Supply | Whitman Howard, 25 Sept
"Unilever (ULVR LN, HOLD, T/P 4350p) CFO Graeme Pitkethly hosted sell-side analyst roundtables in London, Friday 22nd September and expressed confidence that margins will increase from their current level, 16.4% (FY2016 restated underlying operating margin which is before restructuring costs). We believe there should be ample scope for them to do so – a view supported by chief comparators.
Unilever is due to release Q3 sales data on 19th October. No trading update was given at the roundtable. But the relatively easy sales comparisons with 2016 H2 were noted. Last year, USG was 3.2% in Q3 and 2.2% in Q4. First half 2017 USG was 3.0%. Overall volume may be expected to strengthen in H2, partly offset by weaker pricing.
Confidence that margins should increase seems sensible. The extent to which this might come from radical changes to supply chain and more outsourcing is unclear. But we note that Unilever’s 16.4% underlying operating margin in 2016 was beneath both the 17.6% average for US food peers General Mills, Kellogg, Kraft-Heinz and PepsiCo and the 19.4% achieved by HPC peers Clorox, Estee Lauder, Kimberley Clark and P&G."
by finnCap, 26 Sept
4Imprint Group | Acal | Henry Boot | Cello Group | Communisis | Connect Group | Fulcrum Utility Services | Lok'n Store Group | PPHE Hotel Group | Renew | Servoca | Staffline Group | Utilitywise | Water Intelligence | Van Elle | WYG
"Topic of the quarter: Since our first quarterly at the end of 2015, 12 of the 59 companies we included in our valuation tables have been bid for. Given those tables were simply designed to show the range of companies present within the sector, not a hit-list of undervalued opportunities, the fact that 20% of them have been taken over is worth looking at in more detail.
At a time when warnings and share price collapses from the likes of Interserve, Carillion, MITIE, DX and Capita and Serco have dominated newsflow, it should be remembered that the sector is broad and highly varied both in terms of business model and performance. If the troubles of a minority of the sector drag down wider valuations then the evidence is that there is an army of potential bidders (reinforced by the weakness of sterling) ready to take advantage.
The sector has outperformed the wider market by 4.7% in the year to date. Larger companies outperformed by 10.1%, driven by the bid for Berendsen, and smaller companies by 3.7%. The best-performing sub-sectors were Distributors (relative +21.7%) and Recruiters (+20.3%). Logistics was the worst-performing sub-sector, driven by a continued poor performance by DX and Connect."
Lombard Risk Management (LRM)
Positioned for strong growth and cash profitability | N+1 Singer, 25 Sept
"Lombard Risk is a niche provider of regulatory reporting and collateral management software with a strong position in a fast-growing market. It is halfway through a two-year plan that has already delivered a step change in revenue performance, accelerated the delivery of key new products and resulted in the creation of a world-class development centre in Birmingham. Objectives for the current year include further development initiatives, transitioning development capabilities into the Birmingham office and cash profitability.
We expect comfortable double-digit annual revenue growth and a return to cash profitability over the next few years. This will be delivered by new product sales, partnership successes and cost management. In our view, the current valuation fails to reflect this positive outlook, good revenue visibility and reducing earnings risk. We initiate coverage with a Buy and 16p target price."