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Calnex Solutions has announced very strong maiden interim results, with H1/21 revenue up 37% to £7.7m and adjusted PBT up 90% to £2.3m. Calnex has firmly established a trusted reputation worldwide, launching multiple first to market telecoms and network testing solutions. The exponential growth of data creation and secular migration of industries to cloud computing along with the long-term transition of the telecoms industry to 5G is driving demand for high value test instrumentation. Given the strength of H1/21 reported today we have upgraded our revenue forecasts for FY21E and FY22E by 10.6% and 12.2% to £15.4m and £16.4m and increased forecast EPS up 24.1%. and 14.3% respectively. Calnex is accelerating its growth investment plans, ahead of our previous expectations, expanding both R&D and sales capacity to capture increased market share within a substantial and growing global market.
Companies: Calnex Solutions Plc
Calnex Solutions is a leading provider of test and measurement hardware and software solutions that enable performance validation and standards conformance of critical infrastructure associated with telecoms and high-speed data networks. 5G network evolution is a significant, long-term driver of growth for the business along with the continued expansion of hyperscale datacentre enterprises and their increasing participation in telecoms infrastructure markets. Calnex has established a trusted reputation worldwide, launching multiple first to market testing solutions. We have initiated coverage with very conservative forecasts given the strong financial track record with historical revenue CAGR of over 27.7% between FY18 and FY20. Calnex is profitable, cash generative and entered FY21E with a record order backlog.
ADT has produced a resilient set of interims despite being impacted by the lockdown and is well positioned to benefit from recovery both from an operational and financial leverage point of view. Group revenues declined by 8% yoy in H1 with Managed Services seeing a 6% organic decline, mainly due to weaker project work (-17%) while recurring Managed Services revenues decline was held to 3%. Margins and cash flow remained robust with senior net debt reduced to £24.8m from £27.9m at end March and c. £10m headroom on the RCF. ADT trades on an historic FCF yield of >6%, but this should rise to >10% as recovery begins.
Companies: AdEPT Technology Group Plc
Huawei was granted a temporary reprieve as part of a broader accord between the Trump administration and the Chinese central government at a much-anticipated meeting between the countries’ leaders. The autonomous vehicle industry has two big challenges it needs to overcome before self-driving cars become widespread - technology and business models that can make money, according to Michelle Avary, head of autonomous mobility at the World Economic Forum. US chip gear maker Applied Materials on Monday agreed to buy Japanese peer Kokusai Electric for $2.2 billion from KKR & Co Inc, as it bets on rising demand for memory chips used in data centres, 5G phones and AI-powered devices.
Companies: AMO IQE TRAK SEE CPX TCM TRCS QTX
Warren Buffett once said that as an investor, it is wise to be ‘fearful when others are greedy and greedy when others are fearful’. Fear is not in short supply right now.
Companies: OPM ALU ANCR BLV CONN CRC STU GATC HAT LEK MMH MCB MWE NXR NTBR NOG PAF PEG RFX SRC TEF TEG TPT VTU WYN XLM
Update to forecasts – Neutral
Companies: Vitec Group PLC
Interims are in line with the guideline full-year performance we quantified at the time of the June prelims –£5m of EBITDA and £5.3m of free cash flow derived from £53m revenue, with guidance of consistent performance in 2H20. We reintroduce forecasts for FY20, £9.5m EBITDA from £105m revenue, as 3Q sees the re-invigoration of projects postponed through COVID-19 and the opportunity for recovery into 2H20 and FY21, on top of £3m annualised cost savings. Cloud & software grew to 25% of group revenue; recurring revenue is at 74%; and new CEO Ioan MacRae’s measures to deliver efficiency and growth will increasingly bear fruit in 2H20 and FY21. Even if you think our 600p (11.5x a depressed level of EBITDA) target is wrong, the current share price is more so, with a current FY20 P/E of 6.0x and EV/EBITDA of 5.6x, and 1H proof of credible FY forecasts.
Companies: Maintel Holdings Plc
Q2 EBITDA was slightly better than expected, down by only 3% yoy despite an expected 7% revenue decline. As a result the EBITDA outlook for 2020/21 has been slightly raised. We have a Buy on the stock which offers significant upside potential to our target price as it has not recovered since mid-March and is still down by 50% ytd. Now that the dividend has been cut, we continue to believe that BT merits a much higher share price.
Companies: BTQ BTAN BTGOF BT/A BTQ
Today’s update demonstrates 20% operating profit growth at the technology group specialising in comprehensive radio frequency communication solutions across multiple sectors for the first nine months - a function of revenue growth (+2%) coupled with cost savings and operating leverage. A good performance given the global backdrop. EBIT margin increased 150bps to 10.1% and this higher margin means MTI remains on track to meet our FY20 profit forecasts albeit on a lower revenue base and we reduce revenue forecasts by 6%. We anticipate limited cost inflation in FY21 and hence profit forecasts remain unchanged but we trim revenue. We also introduce FY22 forecasts. MTI has a diversified business and each division can point to structural growth drivers. Despite a good share price performance this year (+28%), the current price fails to reflect MTI’s track record and growth potential, balance sheet strength and yield. We set a new fair value (63p from 46p), equivalent to an FY21 EV/EBITDA of 11.4x falling to 10.1x in FY22.
Companies: MTI Wireless Edge Ltd
As in Q1, a quite correct resilience to the COVID-19 impacts in Q2. The good news is indeed the H1 EBITDAal margin, which was stable yoy despite the slight decline in revenues. Free cash flow should therefore be at least €5bn for the whole year. So we have no concerns about Vodafone’s dividend and we remain at Buy on the stock.
Companies: Vodafone Group Plc
