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Bioventix reported a strong set of full-year results, that were 8% above expectations, assisted in part by a c.£0.2m (+3%) FX benefit, which helped offset the obvious drag on performance in Q4 due to the impact of COVID-19 on routine testing in hospitals. A 53p special dividend was proposed, resulting in a full-year dividend of 141p, up 18%. Due to the COVID-19-related disruption to testing, which only exacerbates the poor visibility to customer royalty streams, we are withdrawing forecasts until normality returns. That said, the business remains in very good shape, with evidence that: (i) high sensitivity troponin is gaining momentum; (ii) physical antibody sales growth remains robust (+34%); and (iii) progress in its development pipeline (particularly pollution monitoring programme) is being made. The business is expected to remain cash generative, and with c.£8.1m of cash at 30 June, the company is a strong position to weather this period of disruption before returning to growth.
Companies: Bioventix Plc
ORPH has signed a contract with the UK Government for the development of a COVID-19 human challenge model. This will involve manufacture of the challenge virus and a first-in-human characterisation study. The contract begins immediately and is likely to be worth c.£10m. The government has also reserved the first three slots to test vaccines using the challenge study at a total cost of £7.5m. We revise our forecasts and increase our SOTP target price to 28p (range 25-31p), reflecting ORPH’s world-leading position in traditional challenge models, and now COVID-19 challenge models, with additional upside from the potential development of new challenge models, the monetisation of valuable challenge model data and the potential sale of its non-core pharmaceutical assets.
Companies: Open Orphan Plc
Open Orphan has announced a contract with the UK Government to develop and perform the UK's first COVID-19 (COVID) human challenge studies. The multi-faceted agreement provides strong endorsement and validation of hVIVO's capabilities, with material revenues driving forecast upgrades and further upside risk to earnings as pipeline conversion continues and industry awareness and penetration of challenge studies accelerates.
Companies: OPORF ORPH CRO VENN
Verditek’s core lightweight solar PV business is positioned in an attractive secular growth market with strong regulatory and technological drivers. Recent management changes have resulted in the company focusing on sales execution and moving the business into the initial phase of commercialisation. With first orders for its solar PV modules already in place, the company should report its first revenues later this year. Recent contract wins in the oil gas and mining sectors will act as reference contracts for future wins in the off grid solar market. In addition to energy and mining, significant opportunities exist for Verditek’s lightweight and durable solar PV product in the marine, telecoms, residential housing, commercial real estate and transport sectors. From its plant in Italy, the company has sufficient manufacturing capacity to produce up to 60 MW per year of solar modules (based on triple shift production). The Paragraf joint development program (to produce a graphene integrated solar PV cell provides a source of substantial optionality within the solar business.
Companies: Verditek Plc
WATR's Q3 update this morning highlights more good news around the business, including YTD double digit overall revenue growth and Franchise-Related, Corporate and International up by respectively 14%, 15% and 21%. Once again, this evidences the model very aptly, since these excellent growth rates reflect respectively WATR's innovative - and national – exploitation of the insurance channel, the strong growth of the company-operated stores which have been a big strategic feature of recent years, and lastly the growing global dimension of this business. As an “essential service provider”, WATR is well-placed to assist its customer-base through Covid-related challenges. We raise profit forecasts by a blended c.8% across ‘20/-'21, but we believe there is plenty more potential for upside here. In a $US13bn addressable market – just for the insurance opportunities - WATR remains the only national player; while in today's update the company highlights encouraging developments in a new growth area (“dirty” water diagnostics), which is also an area of interest in the context of the pandemic. We continue to see plenty more upside for this company which carries on delivering, raising our SOTP-based fair value assessment to 550p.
Companies: Water Intelligence plc
Positive update today, reporting that trading in FYJun21 has begun well. As a result – and also thanks to DOTD’s strong revenue visibility – revenue guidance is already being upgraded. Consequently, we lift FY21E sales by 6% to £53.0m, so now expecting +12% y/y growth. To put this into context, growth fell to +9% in 2H20. We find this rapid recovery to more typical growth levels highly encouraging. Guidance for profit and cash is reiterated, meaning we leave both profit and cash forecasts unchanged. Somewhat obviously, this requires us increasing our cost assumptions….and if these don’t fully materialise, provides upside risk. Cash continues to build, now £27.7m as at Q1 – we might expect this to be strategically deployed, to enhance what is impressively consistent organic growth.
Companies: dotDigital Group plc
“Very positive” trading drives double digit upgrades
Wey's announcement this morning that the business is trading ahead of expectation reflects both the positive underlying drivers for the business and the proactive stance the company took last year in focusing the business and growing the sales line. Our raised forecast means that we expect H2-20E to continue the progress made in the very strong first half. As a leading and well-established supplier of online education with a long-term track record of quality, Wey has doubtless had the wind in its sails during the Covid crisis; however both sides of the business appear to be performing well, and most important, the company continues to invest in its future. Within this investment, it has made senior and well-respected hires, notably a new Head of Marketing and a leading educationalist respectively, who may be expected to drive sales and new ideas in a market in which online education has gained new fans as an effective and robust alternative to traditional education, available at a competitive price when compared to private schools, and benefiting from a range of strategies and techniques, including AI. As before, fair value is assessed at 30p-plus, while a strong balance sheet continues to provide additional support (raised net cash forecast for FY2020, now £6m).
Companies: Wey Education PLC
FRP has announced the £5.3m acquisition of JDC Group, a corporate finance and forensic services firm with a strong presence in East Anglia, Essex and London. The deal, paid in cash (upfront & deferred) and new FRP equity, adds scale FRP's corporate finance and forensic capabilities, while widening FRP's geographical spread in its core restructuring activities. Given the multiple paid and minor dilution, the deal is accretive to both FY21E (+3%) and FY22E (+5%) earnings per our newly updated forecasts. We see JDC as a highly complementary bolt-on.
Companies: FRP Advisory Group Plc
Bioventix delivered a strong set of interims, with revenues up 21%. Given the 9% decline in operating expenses, this resulted in a 31% increase in adjusted EBITDA, with adjusted pre-tax profit also rising 31% to £4.4m (52% of full-year forecasts) and adjusted EPS up 29% to 69.4p. An interim dividend of 36p was declared (+20%) with net cash at period end of £5.5m. Growth was driven by both Vitamin D antibody sales/royalties (+c.25%), its portfolio of other antibodies (+c.12%) and a more meaningful contribution from troponin. Given the inevitable disruption that COVID-19 will have to some testing volumes (although tests such as NTproBNP are likely to benefit from high risk COVID patients), we leave forecasts unchanged, confident that the strong H1 and weaker sterling in H2 should offset any potential H2 trading shortfall. We leave our forecasts unchanged and reiterate our 3750p target price. At this level, the stock would trade on a 30x FY 2020 P/E with a free cashflow yield of 3.1x
Interim results for the six months ended 30 June 2020 cover a period of significant change for Open Orphan and lay the foundations for a potentially transformational H2 and beyond. They include the first six months of hVIVO performance as part of the company, and due to the implementation of operational efficiencies across the group, the operating loss fell by 11% and EBITDA was held at the same level despite a 36% reduction in revenue. The outlook for the business has never been stronger, with a strong forward order book into December 2021 and beyond and advanced negotiations for a COVID-19 challenge contract, in conjunction with potential new revenue streams. We leave our forecasts unchanged (beyond conversion to pound sterling) and retain our 19p target price for the time being, but with room for upside.
In a positive trading update, Elixirr has announced that trading continues to be strong, with September 2020 being another record revenue month, following previous records achieved in both June and July 2020. This outperformance has dropped through to profits with EBITDA (on an IAS 17 basis) now expected to be in excess of £8.75m. This is ahead of our previous forecast of £7.8m and we have upgraded by 12% to this level. As at September 2020 Elixirr had net cash of £16.8m (ahead of our previous December 2020 forecast of £16.0m). Cash conversion has clearly remained strong. We reiterate our view that the entrepreneurial culture and focus on helping clients build businesses, new products and client experiences are key differentiators, and very much in tune with client needs. We have raised our target price from 312p to 336p.
Companies: Elixirr International Plc
VDTK is the originator and owner of a clean tech energy solution based on ultra-lightweight, strong but flexible solar panels. The company has been led by new management since the start of May. During this new phase, a string of new successes has been announced to the market, largely at the smaller end, but including the meaningful contract announced on August 6th. This in turn, a $US2.2m / 1.5MW award from a specialist engineering, construction and project management company, SAF Group, is noteworthy as a follow on order from the client which previously ordered on a much smaller scale. By a significant margin the largest order so far secured, we view this as a genuine milestone for VDTK; and we note that one of the units involved is to be shared with a quasi-governmental organisation, again a first for the company. Recent years have seen the company in the development phase, but since the change in the management with the appointment of new CEO Rob Richards on May 7th, VDKT has started to make the most of the opportunities inherent in an attractive product; and we see growing potential for future success
Wey Education plc is a UK-based educational group delivering online education services in the UK and around the world. The tragic loss of its Executive Chairman towards the end of last year has necessitated a refocusing of Wey’s strategy, the details of which were announced in early February. Under the Chairmanship of Barrie Whipp, and led by CEO Jacqueline Daniell, the Group is now set to be more focused and streamlined around its existing businesses of InterHigh and Academy21. Coupled with a revised sales and marketing campaign, Wey is seeking to capitalise on the growing demand for online-based education, alongside targeted overseas opportunities to be achieved from the UK. Although there is a material rebasing of our estimates, we believe near-term forecast risk significantly reduces with potential, certainly in 2020E, towards the upside. Our DCF valuation conservatively sees fair value at 35p.
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.
With 6 law firms now listed in the UK, and likely more to come, the listed legal model is gaining clear momentum, with significant outperformance against the broader market (sector index up c.25% against c.10% ASX Index, YTD). We publish a follow-on from our sector note published earlier this year; ‘Courting success: the future of listed legals’, exploring three separate areas;
o The broader legal services market
o Developments within the listed legal sector
o A quantitative deep-dive into sector fundamentals
Companies: Keystone Law Group Plc (KEYS:LON)Knights Group Holdings Plc (KGH:LON)