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Reach plc, the market-leading commercial regional and national news publisher, is approaching a positive revenue inflection point which is transformational to perceptions of the Group. With the 5th largest digital unique visitor base (>40m) in the UK (behind the likes of Facebook and Google), the Group has a material, yet currently under-exploited opportunity which could see Digital revenues double on a 4-year view. Among initiatives to unlock value, new management is focused on granular data capture, audience stratification, and targeted, highly-relevant content dissemination, with successful execution already manifesting itself in rising user engagement. Cost efficiencies and a mix shift towards Digital support margin expansion, and are forecast to improve already attractive FCF margins (FY’20E: 19%). A progressive dividend (N1S FY’21 DPS: 6.8p) augments the investment case whilst an intrinsic value of 300p/share offers significant upside potential.
Companies: Reach plc
Kape has announced that it has raised gross proceeds of $115.5 million through a significantly oversubscribed placing and retail offer of 59.2 million shares at 150p and will use $72 million of the proceeds to buy out the two major vendors of PIA, the transformational deal which the Group completed at the end of 2019. The remaining $43.5 million will be used to strengthen the Group’s balance sheet as it looks to select further acquisitions. There is an additional tax-related cash benefit of around $50 million over 15 years that is now available to Kape following this change to the PIA deal structure. This seems an intelligent way of removing any potential share overhang while also adding further to the group’s M&A firepower. Kape will cancel the shares which it acquires from the vendors and will not issue the vast majority of the deferred shares. With trading still robust and guidance unchanged, we make no alteration to our underlying business assumptions. Our EPS estimates reflect the changes to the shares in issue, both existing and prospective.
Companies: Kape Technologies Plc
Edison Investment Research is terminating coverage on De La Rue (DLAR) and Walker Greenbank (WGB). Please note you should no longer rely on any previous research or estimates for these companies. All forecasts should now be considered redundant.
Companies: DELRF DLAR DL1C
De La Rue remains challenged. New management has to navigate a difficult Currency market and consequent concern over its finances. The swift response in terms of a turnaround programme is a positive start, accelerating cost cutting initiatives and cash management measures, including suspension of the dividend. Restoring stability and rebuilding confidence in the investment case is likely to take some time.
Companies: DLAR DELRF DL1C
MISSION’s wide-ranging activities, efficient ability to work remotely and close, long-standing client relationships has enabled it to weather the COVID-19 crisis in relatively good shape. It has continued to win new business and run assignments throughout. Lower revenues as clients pulled or postponed campaigns mean a H120 loss of c £2.2m, but we expect this to be more than recouped in H220. A mix of entrepreneurialism and collaboration makes the post-COVID-19 outlook attractive, but this is not currently fully reflected in the share price.
Companies: Mission Group Plc (TMG:LON)Mission Group Plc (M7K:BER)
Future today released an update highlighting FY’20E adj EBITDA which is trading towards the top-end of consensus (£86.3m-£91.0m; N1Se: £88.5m). Strong performance has been supported by acceleration of the consumer shift to digital, positive cost control and cost synergy extraction from the TI Media acquisition (c.£9m annualised savings delivered so far). Migration of TI Media sites to the Group’s Vanilla platform are underway, whilst Hawk (price comparison platform) has been successfully deployed on three key existing TI Media websites. TI Media represents a significant opportunity to drive strong EBITDA growth in the medium-term as the portfolio transitions to digital, whilst the Group also has a number of additional levers to drive outperformance against conservative consensus forecasts. We leave forecasts unchanged for now, although upside risk is building. Future offers a 7% FY’21E FCF yield on N1Se forecasts, peers offer closer to 4%.
Companies: Future plc
YouGov’s online business model and direct panel relationships give it a clear advantage through lockdown. Both state and commercial interests have an increased need to gauge and track shifts in consumer attitudes, which YouGov is well placed to monitor through its growing suite of products and services. The group has a strong, cash-positive balance sheet and a major asset in its connected data library, termed the YouGov Cube, which now contains over 15 years of data. YouGov’s share price has recovered from the mark-down at the earlier stage of the pandemic, with the rating reflecting its premium growth and strong market positioning.
Companies: YouGov plc
GlobalData has delivered strong interims, further validating the Group’s core operating model and product strategy. Whilst event delays into H2 saw the top-line moderate 2% y/y to £86.7m, underlying subscription revenue rose +7%, ahead peer growth rates (3%-6%). EBITDA margins benefitted from organic cost decline (particularly travel and events), whilst paused sales and marketing FTE investment also supported margin expansion (+410bps y/y to 31.4%). Underlying deferred revenue rose +3% to £80.6m (ex events) offering a high degree of earnings visibility. GlobalData continues to execute on its mission to become the world’s trusted source of industry data, analytics, and insight, embedding its product in customer workflows to support decision making through provision of rich data, analytics and insights. The Group looks exceptionally well placed to build value, benefitting from strong incremental revenue margins against an increasingly static cost base.
Companies: GlobalData Plc
These were impressive FY 20 results that came in at the top end of guidance given back in March. The Data & Information core has proven resilient whilst the swift digital transition with Training and Networking has mitigated the worst revenue impacts from lockdown. Underlying cash generation was healthy, and management have been able to materially de-risk the balance sheet without needing to raise dilutive, new equity capital. In this note, we are re-initiating coverage will full estimates published for FY 21 and beyond. We also discuss the revenue scenarios outlined by the company at the FY 20 results announcement and what these imply in terms of earnings outcomes. Both of these scenarios hinge on the key swing factor for FY 21; namely whether face to face events can resume in time for Wilmington’s H2. Our estimates effectively represent a middle ground between these two outcomes. In our eyes, the current valuation is difficult to justify on fundamentals, nor on a comparative basis. Although we do not know the full current year outcome for the rest of the peer group, we would be surprised if many do better than Wilmington and yet the valuation gap has widened. Looking at the components within the group, the argument can be made that Risk & Compliance alone could be worth more than the current group market capitalisation. This suggests that investors are being given a free option on the c.£70m of revenue and £6m of EBIT (£80m / £13m pre-Covid) that sit outside Risk & Compliance.
Companies: Wilmington plc
The MISSION’s H120 results were as indicated at the trading update, with headline pre-tax loss of £2.2m. H220 looks stronger, with new clients and new business and the continuing benefit of a broad agency portfolio across verticals. It is adding central resource to service group agencies efficiently, setting up a digital production studio and using recently acquired Innovationbubble for behavioural consultancy. Careful cash management reduced net debt to £0.9m at end June, with annualised cost savings of £0.7m targeted. Our unchanged PBT and EPS forecasts leave the shares trading below peers.
Tremor has announced in today’s trading update that its platform has continued to gather further momentum since H1 20 results on 22 September, and it now expects FY20 revenue and EBITDA to be in the range of $340-360m for revenue and $30-36m for EBITDA. This leads us to upgrade our FY20 revenue forecasts by +6% to $350m from $330m, and upgrade our FY20 EBITDA by +32% to $33m from $25m at an incremental margin of 40%. This reflects that Tremor’s platform benefits from strong operational gearing that translates to EFCF, and we increase our FY20 net cash to $79m from $71m. This strengthening momentum for Tremor’s differentiated platform reflects that it is capitalising upon a rebound and shift in advertising spend through the success of the initiatives it launched in 2019 and the successful integration of Unruly, and we explain these factors in more depth from p9 of our 22 September report. Today’s announcement also marks the second upgrade to our Tremor forecasts since COVID-19 impacted the advertising market and Tremor in Q2, and this reflects that Tremor has adopted a prudent approach to its guidance. Applying a similar approach to our estimates, we conservatively do not change our FY21 forecasts, and this means that we continue to forecast FY21 organic revenue growth to $420m or +20% YoY, with organic EBITDA growth to $55m or +67% YoY. This conservative, strong FY21 organic growth means that Tremor looks substantially undervalued on 7x FY20 EV/EBITDA or 5x NTM, and a NTM EFCF yield of 6%; vs peers on 13-19x EV/EBITDA with NTM EBITDA growth of 18-47%, and EFCF yields of 1-2%.
Companies: Tremor International Ltd.
FOUR's update today shows that the business continues to move forward notwithstanding the difficult general environment caused by Covid. The continuing recovery in order intake is encouraging, and combined with a rise in the size of orders, means that revenues have already reached two thirds of 2019 levels at the same point in the year. Apparel has recovered particularly strongly and is operating at close to 2019 levels, driving 100% utilisation of the Oshkosh distribution hub. Recovering volumes are not just being driven by existing clients, but also by new client acquisitions, as a stable band is being maintained around this ratio (27% in H1-20, 29% in FY-19). Cash, at $US40.1m, is up on the $US37.5m figure reported in early August, both reflecting progress made and providing a robust platform for further progress, while taking account of the challenges inherent in the Covid backdrop.
Companies: 4imprint Group plc