Most popular equity research this week | 30 Oct - 3 Nov

AIM – A Decade of Achievement

by Hardman & Co, 1 Nov 

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Sinclair Pharma | Advanced Oncotherapy | Scancell | ValiRx | Allergy Therapeutics | City Of London Investment Group | Tissue Regenix Group | Avacta Group | Alliance Pharma | Chamberlin | Morses Club | Murgitroyd Group 

"In the November edition of the Hardman Monthly Newsletter, Nigel Hawkins assesses the achievements of AIM – and how it has thrived, despite a challenging financial environment, in recent years.

AIM, which was founded in 1995, now hosts 959 stocks, currently worth over £100 billion. Since its founding, over £100 billion has been raised by AIM-quoted stocks – with 2006 and 2007 being its best years.

The AIM Index has risen by 31% over the last year and by over 60% during the last five years. Impressive. AIM now hosts eleven companies with valuations of over £1 billion each, led by top on-line clothing retailer ASOS, currently worth c£5 billion.

Liquidity on AIM has improved remarkably in recent years..."

Royal Dutch Shell (RDSA)

3Q17 results – Raising TP to 2,700p/share | Panmure, 3 Nov 

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"Shell beat consensus EPS estimates and our forecasts by 13%, although negative working capital weighed on cash flow and interrupted the decline in gearing. Reported cash flow for the last four quarters when the Brent price averaged US$51/bbl was US$38bn, that would cover cash capex of US$23bn and the full dividend paid in cash of US15bn. We increase our 2017 EPS forecast by 16% to US$1.91 to reflect the 3Q17 beat and flow through into 4Q17. We increase our Target Price to 2,700p per share (from 2,500p) based on the perpetualised value of the dividend and current parameters for the required equity return. We reiterate our Buy recommendation and continue to prefer Shell over BP..."

Trinity Exploration & Production (TRIN)

Initiation - Resurrected | Whitman Howard, 30 Oct 

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"We initiate coverage of Trinity E&P with a BUY recommendation and PT of 33p (83% upside). Trinity is one of Trinidad’s leading and most established independents, with a balanced portfolio of production assets (H1 17 WI production 2.4kbopd, 2P reserves 21.3mmbbls) and longer-term appraisal and exploration upside (2C resources 21mmbls, prospective resources c20mmbbls). An established and prolific hydrocarbon province, Trinidad allows nimble E&Ps to exploit low risk, high return barrels which have been underdeveloped by the majors, whilst also offering material E&A upside..."

Hurricane Energy (HUR)

Hurricane hoping for a storm-less 2018 | Edison, 2 Nov 

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"Investor focus is understandably on the execution of Hurricane’s Lancaster EPS development. First oil from Lancaster will complete the transition from explorer to producer and unlock a stream of cash flow that management can direct towards appraisal, full field development or shareholder returns. In this note, we look at progress made to date and the potential for farm-down of the Greater Lancaster Area (GLA) and Greater Warwick Area (GWA) to fund further appraisal ahead of full field development. Our updated RENAV stands at 79p/share, down from 103p/share, reflecting a recent reduction in our long-term (2022) oil price assumption from $80/bbl to $70/bbl..."

Morses Club (MCL)

Emerging leader | finnCap, 31 Oct 

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"Morses Club is the highest ROE specialist lender in the sector with the lowest leverage. A significant growth window has opened as Provident Financial loses significant market share, enabling Morses to grow credit issued by 24.7% in the six months to August 2017. Strategic initiatives have the potential to deliver significant upside that is not in our forecasts. We have a 175p share price target..."

Zotefoams (ZTF)

Momentum building, we remain at BUY | N+1 Singer, 3 Nov 

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"We upgrade our forecasts this morning following Wednesday’s positive Q3 update (PBT +4% and +5% in FY17/FY18 respectively). Zotefoams has strong trading momentum across all business segments, which to our mind vindicates the investment that is being made in the US and Asia, which will provide the capacity for medium-term growth. Despite the strong share price performance since we re-initiated last year (+40%), we stick with our BUY recommendation, upgrading our TP to 450p, based on a c.£40m valuation for MuCell and a sector rating for the rest of the Group. In our view, Zotefoams is a high-quality business with significant long-term growth potential. We expect current momentum to continue into FY18 with share price catalysts in the form of further earnings upgrade potential..."

GlaxoSmithKline (GSK)

Results fine but market panics on dividend-funded shopping fears | AlphaValue, 31 Oct 

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"GSK reported an in-line top-line performance in its Q3 results. All revenue growth numbers at CER unless specified otherwise. Sales grew by 2% at CER to £7.8bn, with pharma (+2%) delivering better-than-expected results, courtesy of HIV and some established drugs, but both vaccine (flat) and consumer health (+2%) underperforming vs our estimates. Currency tailwinds added 2ppts to the CER growth. The US-registered growth of 4% (+8% reported) and International of 1% (+2% reported), while Europe declined by 2% (+2% reported). Robust HIV The Pharma business growth was solely driven by the HIV franchise (+13%), while a couple of divestments (Romanian distribution business in Q4 16, and the thrombosis and anaesthesia businesses to Aspen in Q1 17) added to the weakness ex-HIV pharma sales..."

Market Update in "Halloween heralds trick or treat season?"

by Stockdale Securities, 31 Oct 

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Bloomsbury Publishing | Braemar Shipping Services | Vitesse Media 

"All Hallows’ Eve could well herald both trick and treat. We have the likelihood of an increase in interest rates for the first time in more than a decade, a scary thought for some. In the last few weeks, we have also seen two sides to the market, with both a significant increase in secondary fundraisings across a range of sectors, as well as the market’s unforgiving nature to any downbeat news. Most indices have retained their progress year to date in the last fortnight. In Share News & Views, we comment on recent updates from Bloomsbury, Braemar Shipping and Vitesse Media ..."

UK Motor Retail Sector - earnings downgrades in "Prospects for 2018/19"

by Zeus Capital, 3 Nov 

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Cambria Automobiles | Lookers | Marshall Motor | Pendragon | Vertu Motors

"Sector sentiment remains low and the new car market continues to decline. We believe the sector valuation has priced in a lot of this risk but update our forecasts to reflect the more difficult trading environment, applying a c.10% -15% downgrade to earnings across the sector. Balance sheet strength across the sector is generally robust, and in our view, we are likely to see further consolidation activity once recovery is in sight as smaller operators become more distressed. Dividend yields are attractive at current valuation and FCF yields are generally attractive despite high levels of capex."

BT Group (BT/A)

Only EE really shows good results | AlphaValue, 2 Nov 

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"Q2 revenues at end September were down by a little 1% yoy (they were flat in the previous quarter), while EBITDA was down by 4% (vs -2% in Q1 17/18) with still a very good performance from EE driven by 4% revenue growth (its EBITDA climbing in parallel by an impressive 16% yoy growth) but with a continued decline in the UK public sector (as in Q1) and a sharp revenue decrease of 10% in Global Services due to the ongoing challenging market conditions and also lower IP Exchange volumes and equipment sales in line with BT’s strategy to reduce low margin business. The cautious outlook given by the group, due to the pressures in the UK public sector and international corporate markets (added to the uncertainty around the the nature of the UK’s future trading relationship with the EU and globally following Brexit), has been reiterated: for 2017/18, the group continues to expect revenues to be broadly flat yoy, while EBITDA is expected to be between £7.5bn and £7.6bn."