Most popular equity research this week | 6 - 10 Nov

Fevertree Drinks (FEVR) - click

On Track Materially to Beat Expectations

Whitman Howard, 7 Nov 

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"Fever Tree (FEVR LN, HOLD, T/P 2100p) released an unscheduled trading statement today which states that the company is on track materially to beat earnings expectations in 2017. Clearly, momentum remains strong and the company reiterates its estimate that it currently accounts for around 97% of the growth in the mixer category which is the fastest growing UK soft drinks category at an annual rate of around 20%. The UK represents 48% of the company’s revenue ..."

IQE (IQE) - click

Ramping up for 2019

N+1 Singer, 10 Nov 

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"IQE has announced a placing at 140p to raise c.£95.1m. The new funds will enable it to scale the business to take advantage of the growth opportunities in 3D sensing and other mass market opportunities. The group has also confirmed that if the current VCSEL ramp continues on its current growth curve, there is potential to exceed current FY’17 expectations. Our published bull case scenario shows the potential for 81% upgrades to FY’18 EPS and we believe this placing is indicative of demand for IQE’s products well in excess of our current forecasts. The new tools bought with the funds from this placing are unlikely to deliver material revenue until FY’19, however, we expect previously announced capacity increases to enable significant upgrades in FY’18. With continued strong newsflow likely we believe the shares remain attractive and retain our positive view on the stock ..."

The Joy of Techs - click

by finnCap, 9 Nov 

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7Digital | Altitude Group | Amino Technologies | Artilium | Best Of The Best | Blancco Technology | Castleton Technology | Cityfibre | Cyanconnode | D4T4 Solutions | Datatec | Dotdigital | Elecosoft | ESERVGLOBAL | Frontier Developments | GB Group | Ideagen | IDOX | Imaginatik | Intercede | Iomart Group | K3 Business Technology | KCOM | Keywords Studios | Lombard Risk Management | Maintel | Minds + Machines | Nasstar | Netcall | Oneview Group | Proactis | Quartix | Quixant | Redcentric | RM GROUP HOLDINGS | Scisys | Seeing Machines | SimiGon | Sopheon | SRT Marine Systems | Stride Gaming | Taptica | Tax Systems | Telecom Plus | The People's Operator | Trakm8 | Universe Group | Vipera | Zoo Digital 

"This quarter we use finnCap’s Slide Rule to provide both top-down and bottom-up analysis of the UK’s Technology and Telecoms sectors. Our findings are very reassuring: the Tech sector scores the best (across all sectors) when considering Growth and Quality – Taptica*, Frontier Developments* and dotDigital* in particular stand out on these metrics. Given these attractive characteristics and growth prospects, the Tech sector is unsurprisingly one of the most expensive – currently trading at 17.2x FY1 EV/EBIT and 23.8x FY1 P/E, versus 15.0x and 18.5x respectively for the wider market. Despite valuations appearing high, we believe there are value opportunities. For example, Proactis* features in finnCap’s QVGM+ portfolio (ranked 17/462) – the company offers attractive organic and inorganic growth, with earnings forecast to grow by 26% CAGR over the next two years, but despite this, only trades on 15x FY1 earnings and offers 8% FCF yield in FY2 ..."

Wandisco (WAND) - click

Cloud OEM agreement with Virtustream/Dell

Edison, 7 Nov 

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"WANdisco’s second OEM partnership, with Virtustream, Dell/EMC’s cloud platform and software business, significantly strengthens the company’s platform for growth in FY18 and beyond. It is also significant because it relates to cloud object storage rather than Hadoop, firmly demonstrating the applicability of Fusion in cloud/hybrid cloud deployments. It thus raises confidence that other similar deals in the pipeline will also convert, laying a platform for a very significant acceleration in growth ..."

Rhythmone (RTHM) - click

Financing and Brand

N+1 Singer, 9 Nov 

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"The Company issued an announcement yesterday afternoon confirming it has integrated RadiumOne and is now using the RhythmOne brand. This will help reinforce the rapidly evolving scale and presence of RHTM in the marketplace. In addition the Company announced this morning that it has secured a $25m senior RCF with Silicon Valley Bank. The funding is designed to provide cash to support strategic initiatives and general corporate purposes. The recent drift in the share price highlights deep value. We expect a continued improvement in the business to be announced at the interim results stage on 4th December ..."

Cityfibre Infrastructure (CFHL) - click

The dawn of a new UK

finnCap, 9 Nov 

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"CityFibre has announced a long-term strategic partnership with Vodafone which will provide the foundation to deliver full fibre connectivity to 20% of UK households. The minimum 10-year agreement will see initial deployment to 1 million homes by 2021, worth £500m over the first 20 years of the network life, with the right to extend to 5 million homes (20% of the UK) by 2025. Vodafone has made a minimum guaranteed spend commitment, in exchange for initial exclusivity, having demonstrated a willingness to lead fibre markets in Ireland and Germany thus far, and now too in the UK. After the exclusive access period, it will be incumbent on any major UK service provider to have a partnership with CityFibre to gain access to the only independent pure fibre network in 50 cities across the UK. This is the execution of a consistent and very clear strategic direction, which will now deliver to a grateful UK starved of appropriate bandwidth ..."

Avon Rubber (AVON) - click

First blood to Avon in David vs Goliath

Panmure Gordon, 6 Nov 

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"Avon appears to have won the first battle with the Scott/3M combination after it announced on Friday lunch time that the UK Ministry of Defence (MoD) has nominated it as the preferred bidder for the resupply and in-service support of its General Service Respirator (GSR). In 2004, Scott had been awarded the exclusive contract to supply the newly-designed GSR mask and filter in an initial contract estimated to be worth $70m. For now, this news addresses the concern that Avon will struggle to compete with the combined strengths of Scott and 3M and could lose the DoD business after the 10 year contract ends in 2018. Subject to approval in early 2018, our best guess at this stage is that a MoD contract will add several million pounds of annual revenues from FY2019 ..."

The Oily Rag - click

finnCap, 10 Nov 

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Chariot Oil & Gas | Europa Oil & Gas | FALCON OIL & GAS | Hurricane Energy | Independent Oil & Gas | Nautilus Marine Services | Parkmead | President Energy | WENTWORTH RESOURCES

"We discuss the impact of this year’s hurricane season on the US and global markets. We are of the view that the market needs to factor in the potential impact on the oil price of annual disruptions to US production during the hurricane season. The impact of the hurricane season has historically only resulted in mainly offshore production being shut in. However, as climate change accelerates, hurricanes in the Gulf of Mexico now have more energy and can reach landfall. As a result, densely packed refining infrastructure needed to shut in, affecting both domestic and international prices for refined products and crude ..."

Stadium Group (SDM) - click

Contract delays

N+1 Singer, 8 Nov 

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"Stadium has reported that two contracts have been delayed into FY18 which will lead to FY17 PBT falling short of expectations. The delays are compounded by the previously discussed supply chain shortages which have reduced the Group’s ability to adjust and mitigate the challenges. Despite this, the attraction of the Group’s new offering continues, with the order book at a record level again, now over £32m. However, we reduce FY17 PBT by 15% to £4.5m reflecting the delays. We prudently reduce FY18 PBT by 17% to £5.4m, assuming ongoing challenges throughout the year ..."