Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on Novozymes. We currently have 16 research reports from 1 professional analysts.
In an announcement post-market close yesterday (9 October), Novozymes cut its FY 19 guidance for the third time this year (citing a slower-than expected recovery in bioenergy, a weakness in global agriculture and a softness in the US grain processing market). FY 19 organic revenue growth is now expected to be -2% to 0%, the EBIT margin at 27-28% and net profit growth of -5% to 0%. Following the latest guidance cut, we will be reducing our estimates and target price.
Novozymes reported soft Q2 19 numbers – missing street consensus but meeting our estimates. Sales were down 2% on an organic basis – driven by Agriculture & Feed and Food & Beverages. Q2 EBIT came in at DKK1,189m. Management re-iterated its FY 19 guidance: top-line growth of 1-3% and an EBIT margin of 28-29%. Following the largely in line Q2 numbers (vs our estimates), we do not expect any significant changes to our estimates or recommendation.
Novozymes reported soft Q1 2019 numbers. Sales declined 4% on an organic basis, led by an 8% drop in Bioenergy and a 6% drop in Agriculture & Feed revenue. The EBIT margin came in at 25.7%, a 3.2ppt drop from Q1 18 – driven by higher raw material and staffing costs. Following the soft Q1, management lowered FY 2019 top-line guidance to 3-5% from 3-6% earlier and continues to expect an EBIT margin of 29-30% and 5-10% growth in net income.
FY2018 results slightly missed our estimates. The Middle East crisis took a heavy toll on the performance of the Household, Food & Beverage and Technical & Pharma segments. The US policy paralysis on E-15 framework negatively affected Bioenergy’s growth, which was more than offset by the robust demand originating from the emerging markets. FY2019 revenue growth outlook was widened on the lower side, while the EBIT margin outlook remained largely unchanged. We will revise our estimates downwards. No change in the stock recommendation.
The Q3 results were below our estimates and market expectations. Each segment continues to tussle with its respective problems and adopt mitigating strategies. We expect Household segment to end its year in positive territory. Our optimism on the Bioenergy segment is fuelled by recent events in the US, China and Brazil. We understand that new product launches are still in the nascent stages. Thus, we opt for a watchful approach. Estimates are revised upwards. No change in stock recommendation.
The company Q2 results were below our estimates. Revenue increased 5%, in-line with our estimates, whereas operating margin came-in 60bp lower than our expectation (+27.4%). Revenue from Household declined, whereas Bioenergy’s current momentum gained further strength (benefitting from the pickup in the US and global ethanol production). Moving forward, the company’s strategy to expand the geographical outreach of its (latest) freshness and hygiene product-line is rightly placed. We have increased our estimate upward. No change in the stock recommendation.
The company reported its Q1 results which came in below our estimates. Its biggest segment, household, came back into the black after being in the red for a quarter, benefiting from the robust demand from regional players. Both Food & Beverages and Bioenergy witnessed a weakening of last year’s growth momentum, whereas Agriculture & Feed revenue fell for the second straight quarter on the back of lower BioAg and animal feed revenue. We have revised our estimates slightly downward. No change in our stock recommendation.
FY 17 was a mixed bag for Novozymes, with F&B and Bioenergy thriving but the high potential Agriculture & Feed segment being held back by low crop prices in the US. With most end markets expected to remain challenging in the near term, the outlook for the company remains soft. Increased investments in R&D, manufacturing and emerging markets are likely to keep margin progression in check. We remain cautious and maintain our Sell recommendation on the stock.
Coming on the heels of a strong Q4 16, Novozymes reported another healthy quarter with Q1 17 sales marginally ahead and net profit in-line with both consensus and our estimates. Organically, sales nudged up 3% (ahead of management’s own guidance of flat growth) to DKK3.7bn, driven by growth across all segments, with the exception of Technical & Pharma (flat growth vs. 37% in Q1 16). This, along with a 2% currency gain and a 1% acquisition impact, lifted reported sales growth to 4% (second straight quarter of yoy expansion, both organically and on a reported basis). Organically, Food & Beverages (6% vs. 4% in Q4 16 and 2% in Q1 16) and Bioenergy (6% vs. 7% in Q4 16 and -6% in Q1 16) led the charge while Household Care (1% vs. 5% both in Q4 16 and Q1 16) and Agriculture & Feed (2% vs. 22% in Q4 16 and -8% in Q1 16) disappointed. On the profitability front, the adjusted operating margin (excluding the c.DKK75m one-off cost related to layoffs) improved to c.29% from c.28% in Q1 16 supported by productivity improvements, but partially offset by adverse pricing/mix change. Despite a lower tax rate (21% vs. 22% in Q1 16), DKK12m of forex losses in the quarter meant that the net margin remained flat at 20.6% (3.6% yoy growth to DKK771m). Geographically, growth was driven by the developing markets of Latin America (+13%) and Asia-Pacific (+5%), while the developed markets of EMEA and North America (together contributing c.70% of revenue) remained soft (+3% and 0% growth, respectively). Despite the better-than-expected Q1 result, management maintained its previous guidance for the year (2-5% organic, 3-6% reported) citing end-markets risks/uncertainties. Separately, Novozymes recently announced that its CFO Benny D. Loft will be leaving the company by 1 September 2017, after 17 years with the organisation (ten years as CFO).
After a string of disappointing results, Novozymes ended the year on a strong footing with both Q4 and FY 16’s numbers coming slightly ahead of ours as well as consensus estimates. After a poor Q3 (sales contracted 4% and 3% on a reported and organic basis, respectively), sales rebounded 8% (6% organic and a 2% positive currency impact) to DKK3.7bn driven by surge across segments, except for Technical & Pharma (-17% reported basis and -12% organically). The outperformance was primarily driven by a sturdy performance in Agriculture & Feed (+22% vs. -3% in Q3 16, organically) and a turnaround in Bioenergy (+7% vs. -8% in Q3 16, organically) segments. Healthy performances from the larger segments – Household Care (+5% vs. -5% in Q3 16, organically) and Food & Beverages (+4% vs. -2% in Q3 16, organically) also supported the quarterly uptick. Strong sales performance percolated down to profitability too with EBIT growing 10% to DKK1,062m. For FY 16, revenue inched up 1% (2% organic and -1% currency impact) while EBIT rose by c.2% (EBIT margin slightly up to 27.9% vs. 27.7% in FY 15). The dividend has been upped by 14% to DKK4 per share, while a new share buy-back programme of DKK2bn running over FY 17 has been announced. The FY 17 sales growth guidance of 3-6% (in DKK) and 2-5% (organically) is below its long-term ambition (6-7% organically). On the profitability front, management expects EBIT growth to range 3-6% (margin: c.28%) and net profit to expand 2-5%. Also, to ramp-up capacity and fuel innovations, management intends to increase investments in the next few years (DKK1.7-1.9bn guided for FY 17 compared to DKK1.2bn in FY 16).
Yet another disappointing quarter for Novozymes – in fact, it witnessed a decline at both the organic and reported level for the first time in a long period. Both sales and net income were below (all ~ 6%) our, as well as consensus, expectations as all the segments turned negative organically, except for the smaller Technical & Pharma (+16%). The reported sales decline of 4% at the group level was a function of 3% organic contraction and 1% negative currency impact, to DKK3.4bn. Segment-wise, Household Care and Food & Beverages fell by 5% and 2% (all sales growth rates in organic terms, unless otherwise specified), respectively, after 4% growth in Q2 16. Moreover, as expected, the Bioenergy segment contracted at an accelerated pace (-8% vs. -6% in both Q2 16 and Q1 16) while the Agriculture & Feed segment again turned negative (-3% vs. 13% (including the impact of deferred income) in Q2 16 and -8% in Q1 16). Lower sales translated into an adjusted operating profit decline of c.4% to DKK973m. Lower net financial expenses (DKK14m compared to DKK53m in Q3 15) and the tax burden (DKK205m vs. DKK216min 3Q 15) rendered some support to net income, which was up by c.1% to DKK750m). In effect, management has materially (for the fourth time in the year) downgraded its guidance. Organic sales are now expected to expand by c.2% from the previous 2-4% while in DKK terms it is 0-1% from the previous 1-3%, EBIT to grow by 1-2% from the previous 1-3%, net profit to increase by 8-9% from the previous 8-10%). However, the EBIT margin expectations remain unchanged at c.28%.
Novozymes reported unsatisfactory Q2 16 results, below both consensus as well as our expectations, primarily on lower than expected sales from the Agriculture & Feed segment. After successive growth in multiple quarters, sales contracted 1% in reported figures to DKK3.4bn following a negative currency impact of 5% (pervasive across all the segments) that more than eclipsed the 4% organic sales expansion. On the positive side, both Household Care and Food & Beverages segments grew moderately at 4%. Technical & Pharma also expanded robustly, albeit at a slower pace qoq (+9% vs. +37% in Q1 16) while Bioenergy continued its deceleration (-6%). However, the major disappointment stemmed from Agriculture & Feed which, although it grew ~5% organically (excluding the impact of deferred income), reflected a substantial slowdown from last year (+19% in FY 15) and dented the expectations of solid growth for the year (now moderate growth expected). On the profitability metrics, adjusted operating profit declined c.2% to DKK961m (margin down by 40bp to 28%) while a lower net financial expense of DKK6m compared to DKK48m in Q2 15 augmented attributable net profit by 10.0% to DKK750m (margin up by 2.1ppt to 21.9%). Factoring in the Q2 sales performance and the unexpected weakness in BioAg resulting from uncertainties in the end-markets, management has downgraded its guidance for the third time this year (organic sales growth range decreased to 2-4% from the previous 3-5%). However, the sales growth range in DKK (1-3%) and other profitability forecasts (EBIT margin: ~28%, EBIT growth in DKK: 1-3% and net profit growth: 8-10%) remain unchanged.
Novozymes’ Q1 16 top-line number came in slightly below our expectation (although largely in line with consensus estimates), while profitability remained strong. Sales grew 2% yoy (sales growth rates in organic terms, unless otherwise specified) and 1% in DKK (following waning currency tailwinds) to DKK3.6bn, driven by the Household Care and Technical & Pharma segments, offset partially by weakness in the Bioenergy and Agriculture & Feed segments. The adjusted EBIT margin (excluding the reorganisation costs of c.DKK70m) was up c.90bp to c.28.3% (including the DKK70m reorganisation costs, it declined c.100bp to 26.3%) led by productivity improvements and a slightly favourable product mix. Hedging gains and a lower effective tax rate allowed net profit to improve 5% to DKK745m. Following the unfavourable movement in exchange rates, the company has downgraded its FY 16 reported sales and EBIT growth guidance to 1-3% (down from the earlier 3-5%). However, organic sales growth, EBIT margin and net profit growth expectations remain unchanged at 3-5%, 28% and 8-10%, respectively. Management expects Q2 16 organic growth to be higher than in Q1 16, mainly on account of easier comps. Amid the challenges being faced by the company, it has announced major organisational and leadership changes (in February 2016), in an effort to streamline operations and become more customer centric. It has consolidated its earlier structure of five divisions into three (Household Care & Technical Industries, Agriculture & Bioenergy and Food & Beverages), appointing new heads for the three new divisions. In addition, it has formed a central Research, Innovation & Supply centre, with COO Thomas Videbæk as its head. While Thomas Nagy, Head of Supply Operations, has left the company, Per Falholt stepped down as head of R&D but is continuing to serve the company in a consulting role.
Novozymes ended a turbulent FY 15 on an expectedly soft note with Q4 15 results coming in boardly in line with the muted market and our expectations. Q4 sales were up 2% yoy (organic growth rates, unless otherwise specified) to DKK3.5bn (Q3: +3%), as continued momentum in Agriculture & Feed (+18%; Q3: +20%) and Food & Beverages (+4%; Q3: +6%) as well as recovery in Technical & Pharma (+21%; Q3: -8%) partially offset the weak performance of Bioenergy (-15%; Q3: -6%). Forex benefits contributed 7ppts to the top-line (Q3: 8ppts), catapulting reported growth to 9%. Profitability, on the other hand, remained resilient, with reported EBIT witnessing growth of 14% (in DKK) to DKK962m, driven by productivity improvements, lower raw material costs as well as tight cost control in the R&D and Administrative divisions. A DKK50m write-down reversal in the quarter was fully offset by the DKK54m net write-down in intangible assets related to the Beta Renewables partnership. For the full year, while sales grew by 4% to DKK14bn (+12% in DKK), EBIT and net profit increased by 15% and 12% (in DKK) to DKK3.9bn and DKK2.8bn, respectively (lower end of the revised FY 15 guidance announced in Q3 15). The chief dampener, however, came from the conservative FY 16 guidance along with the lowering of the sales outlook for FY 17-20. For FY 16, management expects (all in DKK) both sales and EBIT growth of 3-5%, and net profit growth of 8-10%. Furthermore, it revised down its FY 17-20 organic sales growth outlook to 6-7% from the earlier 8-10%, citing low commodity prices and weaker emerging market growth. It is worth noting that the company slashed its long-term organic sales growth rate target from above 10% to 8-10% at the time of the FY 14 results. On the positive side, it continued to reward shareholders by proposing a FY 15 dividend of DKK3.5 per share (vs. DKK3.0 in FY 14) and announcing a new DKK2bn share buyback program (to be completed in FY 16).
Novozymes, not surprisingly, reported another weak quarter, although slightly better than market expectations, which were tepid at best, thanks to a disappointing Q2 15. In Q3, organic sales were up 3% yoy to DKK3.5bn (better than the 1% seen in Q2, but lower than the 9% recorded in Q3 14) primarily driven by the recovery in Agriculture & Feed (+20% vs. -3% in Q2) and sustained momentum in Food & Beverages (+6%; +4% in Q2), offsetting further sluggishness in Bioenergy (-6% vs. -4% in Q2) and an unexpected decline in Technical & Pharma (-8% vs. +7% in Q2). Household Care continued to face a challenging environment, but showed a slight sequential improvement (+3% vs +2% in Q2). Currency gyrations continue to play a significant role, adding 8% to topline growth, but the impact seems to be moderating (+12% in Q2 and +11% in Q1). Profitability, on the other hand, remained resilient, driven by productivity improvements, slightly lower raw material costs, excellent cost control in R&D and Administrative divisions, as well as positive forex. While EBIT jumped 22% to DKK1.0bn (the margin improved 266bp), hedging losses limited growth at the net profit level to 17% to DKK743m (margin improved 109bp). Considering the worsening environment in Bioenergy and the slight depreciation of the US$, management has narrowed its FY 15 guidance downwards – organic sales growth is now expected to be 4-5% (vs. previously 4-7%), 12-13% reported (vs. 13-16% earlier). The company maintains EBIT margin guidance at 27-28%, but sees EBIT growth at c.15% (vs. previously 15-17%) and net profit growth at c.12% (vs. earlier 11-13%).
Research Tree provides access to ongoing research coverage, media content and regulatory news on Novozymes. We currently have 16 research reports from 1 professional analysts.
ReNeuron’s clinical data presentation at last month’s American Academy of Ophthalmology (AAO) meeting was met with some stock price weakness. The first 8 out of a total of 22 patients in the Phase I/IIa study included a 180-day update on the three patients initially reported in February where startling vision gains were reported. The first 12 patients in the Phase I study portion will now be followed for safety only. Two recently-dosed patients experienced some procedure-related vision loss. The results to date remain encouraging, while reminding us how early on the learning curve this technology is.
Companies: Reneuron Group
Following continued delays of a Brexit agreement, few sectors within the UK market have remained attractive to investors despite low valuations. One sector which has continued to outperform despite the political drama has been the UK video gaming sector (henceforth UK gaming), which we are fans of. We believe a combination of sector-leading growth, strong cash conversion and timely cyclical positioning support our positive view on the UK video gaming sector.
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The trade-off in the risk/reward for gold and gold mining equities is improving, as central banks push the current iteration of the post-World War II Bretton Woods financial order towards its limits.
Companies: AVO AJB AGY ARBB BUR CLIG DNL DPP FLTA GTLY GDR MCL MUR NSF PCA PIN SRE PHP RE/ RECI RMDL STX SCE TON SHED VTA W7L
SkinBioTherapeutics (SBTX.L): Commercial & Manufacturing Agreement
Hemogenyx Pharmaceuticals (HEMO.L): Operations Update | Open Orphan (ORPH.L): New contract with Carna Bioscience
Companies: Hemogenyx Pharmaceuticals Open Orphan
AVO’s goal is to deliver an affordable and novel proton beam therapy (PBT) system, based on state-of-the-art technology developed originally at the worldrenowned CERN. In the past 18 months, the project has been de-risked through important technical milestones. AVO is working on the verification and validation phase, prior to CE marking and LIGHT being used on the first patients. Proposed changes to the US reimbursement framework are beneficial to PBT as a whole, and the trend towards hypo-fractionation of ultra-high doses in a single patient visit (FLASH), for which LIGHT is uniquely positioned to deliver.
Companies: Advanced Oncotherapy
The wider use of proton therapy ("PT") has been limited by price, installation hurdles, and a lack of robust clinical data in the past. AVO is on the cusp of disrupting the radiotherapy market as a whole supported by proven dosimetric superiority of PT over radiotherapy ("RT"), combined with the implied economic advantages associated with linear accelerators. The £14 million investment from Cancer Research UK into radiotherapy research announced last week is testimony to the increasing momentum of PT that we believe will form a strong foundation for the adoption of LIGHT. In addition, the c.£31.6m total funds raised by AVO in 2019 provide a strong endorsement for the potential of the LIGHT system, in our view. The proceeds are expected to support ongoing operational activities and to progress the verification and validation of the LIGHT system towards regulatory approval. We maintain and reiterate both our OUTPERFORM recommendation and 155 GBp target price ("TP").
Companies: Advanced Oncotherapy
Oncimmune’s EarlyCDT technology, via a simple blood test, can detect lung cancer up to four years earlier than standard diagnosis. Development, validation and revenue generation have taken time but, boosted by new management since end 2018 pursuing a “scale & diversification” strategy (e.g. Protagen acquisition in May 2019), transformative licensing deals in US and China will soon generate meaningful revenues, and an anticipated population-scale cancer evaluation programme in UK (following on from the 12,209-patient ECLS study which showed a 36% decrease in late-stage cancer diagnosis in high-risk patients) could drive significant revenue acceleration from Q2 2020. Despite a share price that has halved since early September (51p today versus a May 2016 IPO price of 130p), we expect the market to begin to digest the improved visibility of revenue streams that are increasingly derisked and significantly undervalued at current levels.
Genedrive plc (GDR) is a commercial-stage company focused on point-of-care molecular diagnostics. Its Genedrive® molecular diagnostic platform is at the forefront of this technology, offering a rapid, low-cost, simple-to-use device with high sensitivity and specificity. Rapid analysis of samples aids real-time decision-making, whether in clinical, public health or biothreat applications. GDR is developing a portfolio of assays for the Genedrive device, with its hepatitis C virus (HCV) and pathogen detection assays already on the market. Its assay for screening against adverse reactions to antibiotics obtained CE marking this week, allowing progression to the next stage towards commercialisation: an NHS implementation study.
Oncimmune is a commercial-stage immune biomarker company whose technology platform and first product, EarlyCDT Lung, are in the early stages of adoption as a screening test for lung cancer. Positive headline results from the largest lung cancer screening study (ECLS) undertaken to date, the imminent publication of the ECLS results in a peer-reviewed publication and the commencement in H1 CY 2020 of a population-scale cancer evaluation in c.0.1m high-risk subjects significantly de-risk the investment opportunity. With supply and licence deals established in the US and China, distribution agreements in 23 additional markets and a diversifying pipeline of revenues, commercial execution risk has been substantially reduced. The company has a cash runway into 2022 that should provide the time to deliver further meaningful valuation points, some of which have already been met by the new leadership team. We initiate with a 150p target price.
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.
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Bioventix reported full-year results in line with expectations, although 4% (£0.3m) higher than expected revenues were offset by higher costs. A 47p special dividend was proposed, resulting in full-year dividend of 120p, up 3%. Strong underlying revenue growth (c.16%), which excludes c.£0.8m of backdated royalties, supported by evidence of early sales traction of troponin, provides a solid base for future growth. We have made minor changes to FY 2020 forecasts as well as introducing FY 2021, which implies c.10% EPS growth. We nudge up our target price to 3750p, which implies a 3.1% FY 2020 free cash flow yield, underpinned by 54% free cash flow/capital employed and 71% ROCE.
Redx Pharma: Funding for IPF therapy development
Companies: Redx Pharma
Pharmaceutical Services is a vast and varied landscape, reflecting the complexities in the discovery, development, manufacturing and monitoring of drugs and devices, all within a stringent regulatory environment. The overall growth prospects are highly favourable: drug development activity globally is on the up, led by smaller companies, which is driving demand for outsourced services. In this report we provide a breakdown of the sector into its main activity segments, and identify biologics, increasing service specialisation and consolidation as important value drivers. Finally, we present 15 companies (9 of which are publicly listed) that, in our view, are well placed to benefit from the sector’s secular growth trends.
Companies: ABZA BQE CSRT INS UDG CLIN ABZA HZD ERGO OXB
Medica is the UK market leader in teleradiology, providing outsourced image analysis and reporting services to the NHS and private sector. It is benefitting from structural growth in demand for complex medical images and an NHS struggling to manage workflows efficiently. We view the current share price weakness as being temporary and offering a strong buying opportunity. The valuation is very attractive given the strong mid-teens organic growth outlook. We initiate coverage with a Buy recommendation and 186p TP, offering a TSR of 30%.
Companies: Medica Group