Check out this week's most popular equity research
Companies: DEBS, EMR, TUNE, DZV2, SOG, TPT, WJA
Investment Ideas | finnCap, 12 January
"What is The Slide Rule? The Slide Rule has been designed to dramatically simplify the identification of the best companies in the UK small/mid-cap sector by making a quantitative assessment of the relative potential of each company. At its core, The Slide Rule aims to identify those companies that create genuine shareholder value through strong returns on capital and solid growth, but also present a value opportunity with the potential tailwind of earnings momentum. Companies are assessed within a Quality, Value, Growth and Momentum (QVGM) framework..."
Topps Tiles Plc (TPT) | Liberum, 10 January
"In soft market conditions Topps has maintained the underlying -0.3% LFL sales run rate seen at the eight week stage in December. We cut our FY LFL sales growth forecast by -1.0%, our PBT forecast by -1.2% and FY EPS by -2.9%..."
Small-cap quantitative research - Momentum screen refresh + 10 focus stocks
Investment Ideas | N+1 Singer, 12 January
"We have refreshed our momentum style screen for the first time since inception on 26 July 2016. As before, the screen selects the 25 stocks exhibiting the most extreme momentum characteristics, according to our measurement method. From these we have selected 10 to focus on. Since inception the screen has underperformed both the main small-cap and micro-cap indices against a background of generally rising momentum. We have noted a subset of the basket, where decelerating momentum at the time of measurement appears correlated with significant share price falls since selection. We shall monitor this factor with the new screen, albeit there are only two such stocks showing this pattern, namely Lamprell (not rated) and Gear4music (not rated)..."
33% upgrade to January 2017 PBT
RedstoneConnect Plc (COMS) | Whitman Howard, 9 January
"Redstone has released a trading update stating it ‘expects to report EBITDA at the upper end of market expectations’. This implies EBITDA of £1.8m which is above our current estimate of £1.5m. Accordingly, we are upgrading our PBT forecast for the year ending January 2017 by 33% to £1.2m from £0.9m. We reiterate our buy recommendation with a 2.2p price target implying 69% upside..."
55% headline sales growth, strong trading through key period lifts FY guidance yet again
Boohoo.com (BOO) | Zeus Capital, 10 January
"boohoo has traded strongly across all regions in the four months to 31 December, including the Black Friday weekend and key peak season Christmas period. Headline sales growth was 55% (52% CER), with the USA delivering standout growth of 230% (188% CER) to £19.6m. UK growth at 31% is in line with previous quarters adjusting for the wholesale business (annualising the start of this business). As a result, management have increased FY17 guidance for boohoo sales growth to between 43% and 45%, against previous guidance of between 38% and 42%. Overall group revenue growth, including the two month contribution of PLT, is expected to be 46% to 48% with group EBITDA margin between 11% and 12%. The continued investment in price and promotions, the broadening product range (e.g. launch of kids wear) and success of the boohoo brand at offering the latest fashion trends, continues to drive significant improvements in customer loyalty and lifetime value. All of this is reflected in the continued impressive increase in active customers of 31% YoY to 5.1m. Since the period end, the PLT acquisition has completed and there remains the proposed acquisition of Nasty Gal in the US which will be governed by a court-approved bidding process, expected to complete in February..."
Empresaria Group Plc (EMR) | Capital Network, 6 January
"Empresaria looks strikingly inexpensive on a 2016e PE of 9x (Capital Network forecast) for a stock which keeps delivering strong double-digit EPS growth (2015: 24%, 2014: 29%, 2013: 24%, 2012: 25%)..."
Positive momentum on trading and cash
Focusrite Plc (TUNE) | Edison, 10 January
"Trading for the four months to end December continued the positive trend of the first two to October. We understand that both constant currency trading and exchange rates have been favourable. Cash has also grown encouragingly, reflecting net receipts from the strong sales in late FY16 as well as early FY17. Recent softness in the shares represents excellent medium-term value for a niche market leader with positive growth..."
Core business restructuring starts to pay off
eServGlobal (ESV) | Edison, 9 January
"eServGlobal reported FY16 results in line with its recent trading update. The turnaround in the core business is evident with H216 revenues 58% higher than in H116 and adjusted EBITDA losses significantly reducing over H216. Continued contract momentum combined with good cost control puts the company on track to generate positive EBITDA for FY17. At the same time, the HomeSend joint venture expects to see revenue contributions from new partners coming on line and continues to target break-even in CY17..."
Sector Note | Hardman & Co, 9 January
"Despite all the hullaballoo of the Brexit vote and the subsequent election of Donald Trump as the next US President, the UK stock market prospered last year, especially in the latter few months of 2016. The combination of a depreciating currency – making $ earnings more valuable in relative terms - and the Trump emphasis on infrastructure expenditure drove the stock market higher..."
Statpro Group (SOG) | Progressive Equity Research, 9 January
"StatPro has announced a five year contract with a global South African asset manager (an existing client) for a minimum value of around £1.5 million. This contract includes migration from StatPro Seven to the StatPro Revolution platform (which provides cloud-based analysis of portfolio performance, attribution, risk and compliance) in 2018. That will follow a proof of concept phase with the StatPro Revolution Performance module during 2017. This contract provides further evidence of existing clients’ willingness to retain and extend their relationships with StatPro as they migrate from their existing StatPro Seven solution to the Revolution platform. The announcement also suggests that the contract size is expanding from its previous level. This contract adds further support to our estimates for 2017 although we leave our numbers unchanged ahead of StatPro’s usual full year trading update which we expect to see towards the end of January..."
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