Most popular equity research this week | 3-7 April

Featured Report:

AI Mobile Ecosystems: Men and Boys

By Edison

The difference between men and boys will be the brains of their toys. Artificial intelligence (AI) promises to substantially improve the Digital Life services offered by the ecosystems that has underpinned a period of feverish investment. Despite this activity, developments are at a very early stage with none of the big challenges of AI being close to being solved. It is the search engines that are ahead in AI followed by Apple, Microsoft and Amazon. AI remains the Achilles’ heel of Facebook...

Unilever's shareholders should feel satisfied
Unilever (ULVR) | AlphaValue, 6 April

"After a failed approach by Kraft-Heinz, Unilever has outlined its restructuring programme. The company has announced following measures: -The group is targeting a 20% underlying operating margin (before restructuring) and a 19% core operating margin (including restructuring costs) by 2020. This target should be achieved thanks to an increased savings target (€6bn, vs. €4bn previously) coming from the supply chain (€4bn vs. €3bn previously) and increasing savings in overheads as well as brand and marketing investments (€2bn vs. €1bn previously). This will be supported by €3.5bn of..." 

Laying the foundations for the next phase of growth
Utilitywise (UTW) | finnCap, 4 April

"Utilitywise’s refreshed growth strategy requires it to be able to offer the most competitive and transparent pricing for its customers. Commercial independence from its major utility partners is key, and the group is adjusting its financial model to support this. Advance payments will no longer be taken. Short-term debt will therefore rise, but there will now be a closer correlation between profits and cash flow. Only 16% of UK businesses use third parties to get a better deal on energy. This under-penetration and Utilitywise’s investment in innovative services demonstrate the potential for significant long-term growth..." 

Small-cap quantitative research - Growth style screen revamp and 10 focus stocks
Small-cap stocks | N+1 Singer, 6 April

"We have reviewed the performance of our consistent growth screen since the previous refresh on 27 September 2016 and revamped the selection parameters to focus more on forecast sales and EPS growth going forward. In the period under review the consistent growth style screen outperformed the small-cap benchmark by c. 6% and underperformed the microcap index by a similar amount. Interestingly, although growth doesn’t always seem to be defensive as might be expected, however it appears right to buy growth on dips caused by or coincident with wider market volatility. In the new forecast growth screen we take a close look at 10 focus stocks. We will monitor performance and refresh it in three to four months time..." 

A Transformational Deal
StatPro Group (SOG) | Panmure Gordon, 7 April

"We believe the acquisition (announced today) of UBS Delta, the risk and performance analytics service of UBS, is not only a boost to earnings but creates a broader platform for StatPro to accelerate its cloud strategy. UBS Delta brings complementary capability (cloud-based & front office) and scale (100 new clients). More importantly, the multiple of c0.8x sales and c5x EBITDA, a substantial discount to sector multiples, minimises acquisition risk but potentially creates considerable upside risks to our forecasts. We have increased our EPS forecasts for the 2017-19 period by 30%-81%, leaving the stock trading at just 10x 2019 EPS. Our valuation model is based on average revenue multiple of UK Fintech sector, currently 3.5x. At 1.6x revised 2017 sales forecast, StatPro is currently trading at a 54% discount. Using a 15% discount boosts our TP to 190p..." 

Ahead of market expectations - Again!

Telford Homes (TEF) | Equity Development, 6 April

"Telford Homes has published a positive full year trading update (FY to 31 March 2017). The company continues to trade well and will report record revenues and profits when it announces results in late May, with PBT ahead of market expectations..." 

Another record year expected

VP (VP/) | Equity Development, 7 April

"I guess it comes as no surprise, but quality stocks seem to consistently outperform their peers through both ‘thick and thin’ - and for specialist equipment hire business Vp, this certainly seems to be the case. You see, during the 2008-9 financial crisis the company’s downside resilience helped it cope admirably amid some of the toughest conditions in living memory – while many of its rivals only escaped bankruptcy by the skin of their teeth..." 

Compelling game plan, executed well
Keywords Studios (KWS) | Edison, 7 April

"FY16 was a strong year for Keywords Studios both financially and operationally, with EPS growing by 61% and acquisitions strengthening the business across a number of service lines and geographies. It has also invested into key staff and core systems to support continued growth and we fully expect the growth trajectory to continue from here. We see scope for further upgrades through organic performance, further acquisitions and potentially larger outsourcing deals. Given the recent run, we feel the valuation prices in strong progress this year but believe that sustained execution of the strategy will continue to create shareholder value..." 

Another upward surprise

Treatt (TET) | Edison, 7 April

"Despite the surprise trading statement of 23 February, which led us to raise our sales forecasts by c 10% and PBT and EPS by c 20-30%, Treatt has yet again upgraded its outlook for FY17, which leads us to raise our EPS forecasts again by c 6-9%. Our fair value increases to 401p (from 350p) as a result. The constant stream of upgrades demonstrates the strength of momentum in the business as the company moves further up the value chain...."