Check out what's trending in the world of equity research this week..
Companies: FOUR, AMO, CVR, GATC, GEM, JOG, MPE, NXT, QFI
The valuation genie is out of the bottle | M P Evans Plc | MPE
finnCap, 2 November
"KLK's offer for MPE is 640p per share in cash, representing a 50% premium to the pre-bid closing price. In many bid circumstances this would likely be a knock-out blow, virtually guaranteeing success. However, in this case, all it serves to do is highlight the extreme under-valuation of MPE prior to the bid. In our view, KLK would probably have to increase its bid by another 50% to be offering something closer to the true value of MPE."
Statement guides to in-line as FOUR grows ahead of softer market | 4Imprint Group Plc | FOUR
Liberum, 2 November
"Re-assuring trading update confirms continued organic revenue growth. We expect FY net cash of $16m despite pension payment due to impressive working capital. Brexit risks minimal, US recession risk receding, but industry data slowing."
Gold top potential | Jersey Oil and Gas Plc | JOG
Arden Partners, 1 November
"Jersey Oil and Gas (“JOG”) is a UK E&P company focused on the North Sea. It holds 18% in the P2170 licence where it is expecting to participate in a Statoil funded and operated exploration well in 2017. The company is also planning to build a 10mbbl/d production portfolio via acquisitions as the supermajors trim their portfolios and debt-laden peers are forced into asset sales. We believe these two themes should create catalysts over the next 12 months and beyond."
Solid H1 update | Conviviality Plc | CVR
N+1 Singer, 1 November
"Conviviality has issued a solid H1 trading update. Overall it’s had a good first half with the dominant Mathew Clark and Bibendum businesses growing LFL’s by >5% - this is impressive. The Retail business traded broadly in line with our expectations. Delivery on synergies remains on track. We make no changes to our above consensus forecast this morning but reinforce our Buy on growth, rating and yield considerations. The company has a Capital Markets day tomorrow."
Q1 market update | Gemfields Plc | GEM
Panmure Gordon, 1 November
"Gemfields announced a market update covering the period to 30 September 2016 which, whist experiencing lower emerald grades, gives us no immediate reason to reduce forecasts. Kagem often sees grade variability and the nature of quarterly production reports can highlight this. Rubies remain marginally ahead of our forecasts."
Substantial progress on two key programmes | Quadrise Fuels International | QFI
Edison, 1 November
"Since our last outlook note, Quadrise has begun to supply MSAR for extended LONO sea trials, paving the way for commercial adoption from calendar H217 onwards. In August it signed a memorandum of understanding with clients in the Kingdom of Saudi Arabia (KSA), which is a key enabler for progressing the production-to-combustion pilot there. In October it completed a placing and open offer raising a total of £5.25m (gross). This should enable it to transition comfortably to the commercial phase on successful completion of the LONO and KSA trials."
The Monthly November 2016 | Sector Note
Hardman & Co, 1 November
"Share prices are built on expectations - expectations about all sorts of things, such as a company’s future sales growth, the trend in margins and the profits it can return. Understanding those expectations and how they move is critical to share price formation. Listing rules require quoted companies to update investors on progress relative to expectations. What managements often fail to understand is that many of their key investors do not have access to brokers’ research and, thus, cannot put management statements into context. It is these very investors that can cause shock movements in share prices on announcements in limited trading."
Positioned for further success | Amino Technologies Plc | AMO
Progressive Equity Research, 31 October
"Amino is a material player in the global market for hybrid-IP and cloud-based TV solutions. This note is published to coincide with an investor education event, and focusses on three things – the summary investment case, the level of Total Shareholder Return delivered over 5 years, and an overview of Amino’s geographic and product presence, set within the context of an evolving and dynamic marketplace."
Resilient Q3 despite challenging conditions | Next Plc | NXT
Beaufort Securities, 3 November
"Next performed resiliently in the Q3 despite warning of prospectively challenging conditions back in September. August saw full-price sales down by -7% due to larger than usual end-of-season trade in July, while September's full price sales were down by -5.1% due to a strong Q3 FY2016 comparative. October on the other hand, saw +1.3% increase in full price sales as the comparative weakened.
This resulted in an overall decline of -3.5% in the Q3, somewhat below the consensus analyst's estimate of -2%. Although the new full year sales range resulted the mid-point falling slightly lower than previous guidance, the Group reiterated its central profit forecast at £805m, due to it achieving higher than expected cost savings. In its interim result, the Group said it is fully hedged all its
currency exposures for the current year. For the FY2018, the impact of weaker Sterling will be partly mitigated by factors such as pre-referendum hedging and weight of Euro and Dollar revenues. Despite the recent UK consumer sentiment index from GfK indicating confidence weakened in October to -3 (from -1 September) and many economic think-tanks now forecasting that UK will suffer an inflationary shock next year, the economic growth in the remainder of the calendar year 2016 is expected to stay strong. Q4 is expected to read better, subject to the seasonal weather improvement seen in recent years being sustained. Having narrowed its full year guidance, but kept the central profit forecast at £805m, we see Group continuing to generate a satisfactorily strong cashflow going forward. Beaufort reiterates its Buy rating on these high-quality shares."
'Solid’ FY 16 with strong cash generation | Gattaca Plc | GATC (Formerly Matchtech)
Equity Development, 3 November
"Post-traumatic stress disorder is a dreadful condition that doesn’t only affect the military. Investors can also suffer, fearful of buying even long term winners after an extreme bout of stock market volatility. We saw this in the wake of the 9/11 terror attacks and the 2008/9 credit crunch. And unfortunately it seems to be happening again post BREXIT, with Bank of America Merrill Lynch reporting that institutional cash positions currently sit at 15 year highs. A sure-fire sign that sentiment is too bearish. We mention this because one quality name that appears overly impacted by this ‘wall of worry’ is Gattaca (formerly Matchtech) - trading on a prospective PER of 8.5x and offering a thumping 6.9% dividend yield (1.7x covered)."