Most popular equity research this week | 7 - 11 Aug

Tech sector update - New records galore

Stockdale, 7 Aug

Gold Access

Brave Bison Group | ECSC Group | EU Supply | FDM Group | ProPhotonix | Quarto Group | Sprue Aegis | SQS Software Quality Systems | Synectics

"The past fortnight has seen a number of records broken in the technology sector, both in the UK and abroad. FDM* share price set a record, going past the £10 mark, after beating market expectations. Sage made its biggest ever acquisition. Samsung set a record for net profit in a quarter, making it the world’s most profitable company. Apple’s cash pile grew to a record US$262bn. Google’s record US$2.7bn fine meant it had a rare decline in profitability. GetBusy* had a strong debut on AIM, increasing 22% on its first day, adding to the track record of recent tech company listings in London."

Plus500 (PLUS)

Stellar H1/17 results; very material upgrades | Liberum, 7 Aug

Gold Access

"Plus500 has delivered an outstanding set of H1/17 results which drive upgrades to our sterling EPS forecasts of 31% in CY17, 74% in CY18 and 71% in CY19. The company has also announced an additional share buyback of up to $27.2m to 1 Feb 18."

A watershed moment for CAR-T

Panmure Gordon, 10 Aug

Gold Access

Abcam | Advanced Medical Solutions Group | Allergy Therapeutics | Animalcare Group | BTG | C4X Discovery | CareTech | Consort Medical | Dechra Pharmaceuticals | Diurnal Group | EKF Diagnostics Holding | Faron Pharmaceuticals Oy | Hutchison China Meditech | Horizon Discovery Group | ImmuPharma | MaxCyte | Midatech Pharma | ProMetic Life Sciences | Scancell | Sphere Medical Holding | Venture Life Group | Vernalis

"In the short term, we retain our sector neutral recommendation, as drug pricing, uncertainty over healthcare reform in the US, and Brexit in Europe create a more challenging backdrop. However, the long term trends in healthcare – an ageing population, rising spending on healthcare globally both in developed and emerging markets and innovation changing healthcare practice – in addition to the rapid pace of technology development, make it an attractive time for stock picking."

Keywords Studios (KWS)

French audio and localisation consolidation | Edison,  9 Aug

Free Access

"The acquisition of four French companies gives Keywords Studios strong capabilities across all major European languages for localisation and voice-over recording. The transactions boost our FY18 EPS by 5%, although some investment in integrating the entities will be required. The expanded offering should also support organic growth, through helping secure more centrally procured, multi-language contacts."

Taptica International (TAP)

Going straight to video | finnCap, 7 Aug

Gold Access

"Taptica is expanding its range of markets addressed and revenue streams received with the acquisition of a share in its small Japanese partner, followed by a much bigger move into the video advertising business with the purchase of US-listed Tremor Video’s DSP business for $50.0m, although this comes with a net $22.5m of working capital in the target. Taptica is utilising cheap debt with a $30m loan to help fund the second acquisition, along with existing cash resources. These two additions are both expected to be earnings-enhancing – seeing a 6% upgrade in FY 2018 – and will accelerate the group’s expansion in two high-growth areas of digital ad spending (Asia-Pacific and digital video) while substantially broadening the revenue base."

EVR (EVRH)

MelodyVR signs five music licensing agreements with European Rights Holders | Zeus Capital, 10 Aug

Gold Access

"MelodyVR, the leading creator of virtual reality content focused on the music industry and subsidiary of EVR Holdings, this morning announces that it has entered into five music licensing, collection and distribution agreements with various European rights holders. The agreements, which are believed to be the first deals to license a virtual reality service, cover rights in the following territories: Germany, UK, Ireland, Sweden, Greece, Belgium, The Netherlands and Switzerland. Agreements with music publishers, collection societies and performance rights organisations are vital for the exploitation of the underlying musical works (e.g. Songwriter copyrights) featured throughout MelodyVR’s substantial library of original VR music content. In advance of the launch of the MelodyVR platform, the multi-year agreements license the distribution of VR content and enhance Melody’s capabilities across strategically important European territories."

Cairn Energy (CNE)

SNE North encounters oil | Whitman Howard, 7 Aug

Gold Access

"Cairn has announced that the SNE North-1 exploration well, offshore Senegal encountered oil and gas in the primary objective, and oil in the deeper secondary target. Further work is being undertaken in order to establish commerciality, so we don’t change our numbers yet, but note we include 12p risked (18p unrisked) in our RENAV of 281p (using a LT oil price of $70/bbl and a gross resource of 80mmboe for SNE North). Management will provide an update on resources at the H1 results on 22nd August. We remain with our BUY recommendation."

T Clarke (CTO)

Good organic progress alongside Eton upgrades | N+1 Singer, 8 Aug

Gold Access

"T Clarke’s interims confirm good organic progress, which will be bolstered by the acquisition of Eton Associates, announced yesterday. Revenue increased by 17% and PBT by 8%, driven by a particularly impressive performance from the dominant London & South East division. Profit growth would have been greater still were it not for a loss making half from Central & South West (a profitable H2 is expected). Overall, the Group is well positioned for the full year and we upgrade 2018 EPS by 6.5%, principally to reflect the contribution from Eton. Further upgrades may yet follow and we believe the shares are undervalued on a P/E rating of 7x with a 4% yield."

S&U (SUS)

H118 trading update; growth metrics intact | Arden Partners, 4 Aug

Gold Access

"The half year end trading update should serve to reassure investors on the robustness of the S&U model; the group is not exposed to the PCP market and, with an average loan of £6,200, the prospect of declining residuals on the business model is minimal. Whilst competitive activity in the car financing market has had some impact on product mix and impairment, we are confident these metrics are factored into our model and believe the group is tracking to deliver our forecast of 18% earnings growth for FY18. The group has the benefit of inherent “momentum in the system” from loan activity in recent years that has been maintained in H118, which will drive growth into FY19 and beyond. Long term investors should recognise the quality of earnings that is not reflected in a single-digit rating."

Legal & General Group (LGEN)

Strong signs of a good 2017 | AlphaValue, 10 Aug

Gold Access

"L&G reported an operating profit of £988m, up 27% year-on-year. Except for General Insurance which recorded a 52% drop in operating profits to £15m, all business lines posted an improvement in profitability. The best performance was posted by Legal & General Retirement (LGR) which recorded a 40% increase to £566m, remaining the major contributor to operating profits (more than 50%). Legal & General Investment Management (LGIM) operating earnings saw a 13% increase to £194m. Legal & General Capital (LGC) raised its profits by 5% to £151m, while Legal & General Investment Management’s (LGIM) earnings were stable at £151m. The Solvency II surplus reached £6.7bn over its Solvency Capital Requirement, corresponding to a coverage ratio of 186% on a shareholder basis. The Board recommended an interim dividend of 4.3p/share vs. 4p a year before."