Most popular equity research this week | 27-31 March

Featured Report: The Joy of Techs

By finnCap

Enterprise-focused niche applications of tech illustrate how, while trends appear to be fluctuating away from the current poster children of Fintech and the Internet of Things, in fact these developments are refining appropriate application of existing technologies...

Companies covered include: 7Digital, Amino Technologies, DotDigital, Imaginatik, Intercede, Iomart, Keyword Studios, Redcentric, Seeing Machines, Sopheon, Trakm8

Trend spotting
Strategy update | N+1 Singer, 31 March

Companies covered include: Genus, Northgate, Sinclair Pharma, Trifast, Xaar, Bodycote, Victrex, Gooch & Housego, Churchill China, Dechra Pharma, Instem, Hill & Smith Holdings, RPS Group, Low & Bonar, EKF Diagnostics, UDG Healthcare, Synthomer, MySale Group, Immobile, BCA Marketplace, Jupiter Fund Management, Kromek

"In our second edition of “Trend spotting” we note how in the last three weeks the defensive rotation trend has gathered pace and further evidence has emerged of the “relative fading” in the UK economy. However, we now see early signs of the “risk on” trend starting to reassert itself in equity markets and we look at small cap laggards plus European exposure as ways to play this..."

Cutting forecasts, but unit revenue trend encouraging
Flybe (FLYB) | Liberum, 29 March

"Flybe’s year-end trading update highlighted competitive conditions and operational challenges. Management now expects a small underlying pre-tax loss, compared with our previous forecast of a small profit. Additional IT costs and write-offs have also been flagged..."

Interim results lead to upgrades

Bioventix (BVXP) | finnCap, 27 March

"Bioventix reported a strong set of interim results with revenues increasing by 32% (c.12-17% at constant exchange rates (CER)), driven largely by the continued roll-out of its customers’ Vitamin D assay products. This, in turn, led to a 41% increase in pre-tax profits and a 40% increase in adjusted EPS; which is reflective of the operational gearing of the business. We are upgrading our adjusted EPS to 78.7p (+5%) and, consequently, are raising our target price to 1750p. At this price level, the shares would trade on a 22.4x FY 2018 P/E and an EV/EBITDA of 17x. We await confirmation of Siemen’s high sensitivity troponin assay launch, expected in FY 2018..."

Formal bid received at 330p

Shawbrook (SHAW) | Panmure Gordon, 31 March

"Pollen Street Capital and BC Partners have formally made a 330p offer (plus 2.7p final dividend) for Shawbrook (as indicated on 7th March 2017). The offer is subject to achieving more than 50% of acceptances. Pollen Street currently own 38.8% of Shawbrook and the joint private equity groups have received letters of intent in support of the offer which represent an additional 6%. A key objective of the offer is to give Shawbrook two committed long term shareholders with a four to six-year investment horizon. Depending on the level of shareholder support, Shawbrook may remain listed or return to private ownership. We continue to believe that the PE offer significantly undervalues Shawbrook which has been rejected by management. With Shawbrook trading on 2017E PE and P/TBV of 9.0 and 1.8 for RoTE of 22% we maintain our BUY recommendation..."

Funkin good progress

Barr (A.G.) (BAG) | Whitman Howard, 28 March

"A.G.Barr’s (BAG LN, HOLD, T/P 600p) preliminary full year FY2017 results were in line with both market and our own expectations at EBIT level. The company reported FY adjusted EBIT to be £43.1m compared with £43.0m consensus (source: Bloomberg) and our own £41.9m expectation. Pre-tax profit was £42.4m compared with £39.6m in FY2016 and matched consensus. Adjusted EPS rose to 30.6p from 29.5p last year. We had been looking for 29.0p, which was in line with the market’s view..."

Delivering commercial gene-therapy vector

Oxford Biomedica (OXB) | Hardman & Co, 31 March

"OXB is a specialist gene and cell therapy viral-vector biopharmaceutical company. It offers vector manufacturing and development services, whilst retaining its own proprietary therapeutic candidates. Above service-fees, OXB will receive royalties on commercial products developed with its LentiVector® platform: extensive IP, facilities, and know-how for production and development of lentiviral vectors to generate gene-based therapies. OXB intends to out-license its five clinical candidates and to continue investment in R&D. Bioprocessing royalties are likely to result in significant upside potential in the near future..."

Results in line but longer term is the key focus

K3 Business Technology Group (KBT) | Progressive Equity Research, 27 March

"K3’s H1 2017E results are in line with January’s trading update and reflect the sales slippage in December and continued investment. K3 states that deals expected in H1 are now starting to come through and highlights a £2 million-plus contract with the British Heart Foundation. It also says that the operational reorganisation is largely complete and that changes have been implemented to create a more streamlined platform. The announcement reports an increase in recurring revenues while the move towards higher own-IP sales and cloud delivery continues. We don’t believe that a difficult first half has affected the ongoing strategic refocus. We note that news of a strong pipeline and deals coming through are reflected in the Board’s optimism in future prospects. Following changes in January, we make no further alterations to estimates today..."

Deleveraging to drive value

Jackpotjoy (JPJ) | Edison, 30 March

"Jackpotjoy plc’s (JPJ) maiden London-listed results demonstrated the benefits of leading market brands in a profitable and cash generative business. Pro-forma group revenues grew 15% in FY16, with industry leading EBITDA margins of 38%. The stock has suffered from unusually high net debt, a lack of dividend and a complex relationship with Gamesys. However, the revised terms of the contract, together with the end of the major earn-out period, suggest that deleveraging will be on track. 2017 trading multiples of 6.7x EV/EBITDA and 5.9x P/E are far below the sector and, as JPJ continues to demonstrate its market dominance in bingo-led gaming, the stock appears attractive as a turn-around candidate..."

Strong second half performance

Entertainment One (ETO) | Edison, 30 March

"A strong performance from Television and Family and continued recovery at the Box Office in Film put eOne on track to deliver strong growth in reported revenues and underlying EBITDA in FY17, as expected. The divisional mix may be weighted more towards Television than we had forecast but overall, we do not make any changes to our estimates..."

Building Value

Watkin Jones (WJG) | Equity Development, 28 March

"Established for over 200 years, Watkin Jones is one of the UK’s leading property development companies involved in two of the hottest areas of residential real estate, namely the purpose-built student accommodation (PBSA) and private rented sector (PRS) segments...."