Most popular equity research this week | 26-30 June

Featured: Machinations - Graphene report and ways to invest

By finnCap

600 Group | Acal | Accsys Technologies | Aggregated Micro Power | Alumasc Group | Anglo-Eastern Plantations | Avingtrans | Capital Drilling | Carclo | Fenner | Flowtech Fluidpower | GLOBAL INVACOM | Gooch & Housego | Hardide | Hayward Tyler | Iofina | M.P. Evans | R.E.A | Redt Energy | Renold | Robinson | Somero | Surface Transforms | Trifast | Van Elle | Zambeef

"We recently hosted our annual Industrial Technology dinner with 14 companies, many of which are active in the materials science arena; having focused previously on composite materials in the aerospace sector, in this edition of Machinations we focus on graphene, with its unique and potentially game-changing qualities and potential applications. Investments in this area remain fairly early stage, but could potentially reap huge rewards. Graphene is well represented in the UK small-cap market by several players."

Purplebricks Group (PURP)
Results elicit revenue upgrade | Zeus Capital, 29 June
Gold Access

"Purplebricks UK, Australia and USA have beaten our expectations for FY17. Following new management guidance, our UK revenue forecast rises 11% to £80m and our FY19e revenue forecast rises 6% to £110m. This revenue growth follows an increase in LPEs, which requires an increase in recruitment, training and infrastructure costs, as well as increase in marketing spend. For FY18e our forecast EBIT before marketing costs and SBP rises £2.6m to £33.3m and our adj EBITDA ex share based payments falls £0.7m to £15.0m. As Purplebricks Australia is progressing slightly ahead of management’s plan, we leave our forecasts which are ahead of guidance unchanged. Our forecasts continue to assume over £40m P&L investment Purplebricks USA over the next two years. We leave this forecast unchanged."

RhythmOne (RTHM)
Moving into the acquisition rhythm | Panmure Gordon, 27 June
Gold Access

"RTHM has announced a $22m consolidation deal which looks bang on strategy (adding data expertise and strong advertiser relationships, driving more volume through the platform, paying only 0.28x revenues). In addition, Ted Hastings will succeed Brian Mukherjee as CEO with effect from July, and the group has confirmed that H1 trading is on track. Our new estimates imply significant EPS accretion (c30%) from year 2 onwards, and we lift our Target Price from 75p to 93p. The acquisition – and the change of CEO – both highlight the ongoing consolidation opportunity for RTHM, and we reiterate our Buy rating."

Fastjet (FJET)
Cashflow breakeven expected in Q4’17 | Equity Development, 30 June
Free Access

"Trying to catch a falling knife’ can be a painful game. Better to wait until the bloodletting has finished - and if the fundamentals are still sound - start dipping one’s toe into the waters. This way the risks tend to be less, but the upside still material. To us, fastjet appears to have reached this point. In fact, after nearly 12 months of radical surgery under the leadership of CEO Nico Bezuidenhout, we now feel sufficiently confident to reinstate our valuation - pitched at 24p/share, based on a blend of 2021 multiples (see later) and discounted back at 15%."

Blue Prism (PRSM)
Interim Results ahead of expectations upgrades to revenues | Whitman Howard, 27 June
Gold Access

"K3 recently announced a Placing and Open Offer at 140p to raise £8.5 million before expenses. The Placing is subject to shareholder approval. The proceeds will be used to strengthen the Group’s balance sheet and provide additional working capital to give the management team flexibility as it makes strategic decisions (a further review of Group resources and operations was announced in May). The fundraising is also key to securing certain amendments to the terms of the Group’s existing facility agreement with K3’s lenders. Several Board changes have been announced and K3 will recruit a new Chairman. The trading comment in the announcement anticipates an operating loss of between £0.4 million and £2.4 million. We reintroduce estimates for FY 2017E (a 17 month period) and 2018E which reflect the change to a November year end. Meanwhile, management again underlines the positive momentum in the profitable business units..."

Burford Capital (BUR)
Forecasts updated; reiterate BUY| Liberum, 28 June
Gold Access

"We materially increase our forecasts to account for the recent Petersen sales on the secondary market and for the retail bond raise, which should facilitate a step up in 2018 new lending. Burford has outperformed, up 57% ytd." 

Quantum Pharma (QP)

Underlying upgrade as group continues its strategic progress | N+1 Singer, 26 June
Gold Access

"Following the strategic review of the Medication Adherence division announced with the finals on 3 May, the group has sold Biodose Services, the largest business within this division. Quantum will now be focussed entirely on the higher margin Specials and Niche Pharma divisions which increases the group’s quality of earnings, continues its move under the new management team towards a simpler, leaner business strategy and positions Quantum as a pure pharma group. We strip the Biodose Services modest contribution from our numbers, but this is largely offset for FY18 & FY19 by an upgrade to the Niche division as a result of today’s positive trading commentary. Going forward we think the recent re-rating of the company, which is moving steadily from turnaround to growth, should continue, assuming further positive underlying momentum at the update scheduled for 9 August."

IG Design Group (IGR)
Party time | Edison, 27 June
Free Access

"Another strong set of results from IG Design Group show the positive impact of its strategy of investment and innovation in design and delivery. Last year’s acquisition of Lang in the US has added product and customers, while the European operations are gaining additional benefit from the growth of their clients. A particularly strong cash performance has moved the balance sheet cash positive at the year-end, well ahead of schedule. The dividend has been raised from 2.5p in FY16 to a proposed 4.5p, with further rises on the cards underpinned by our raised FY18 and new FY19 estimates." 

Imperial Brands (IMB)
Delivering Quality | Whitman Howard, 28 June
Gold Access

"Imperial Brands’ (IMB LN, BUY, T/P 5100p) hosted an investor webinar yesterday, 27th June. Alison Cooper, CEO chaired the webinar with Amal Pramanik focusing on portfolio opportunity and Marcus Diemer on portfolio strategy. The emphasis of the webinar was the acceleration of the principal growth brands, where the company targets 1%-4% revenue growth in FY2018. The webinar also included a deep dive into brand migration and rationalisation. Overall, we perceive the updates to be positive."