ABD’s fundamentals are sound, but trading has been challenging with track testing activities restricted and equipment sales deferred. R&D spend by the OEMs ultimately drives ABD’s revenues. Budget cuts are inevitable, although time will tell whether spending on autonomous driving R&D and active safety systems are sheltered. For now, we assume testing activity and kit sales will be subdued for at least two more quarters. We reflect this in our no-growth forecasts for FY21e, before some recovery in FY22e. Of course, ABD has balance sheet headroom to acquire. And new track, lab and simulation testing products and services should help grab market share. That said, with no immediate earnings catalyst and with ABD trading on a full rating (CY21e PE c.43x), we think the stock will continue to drift. Our revised valuation is £18.0 from £19.50.
Companies: AB Dynamics plc (ABDP:LON)Nuzee Inc (NUZE:NAS)
AB Dynamics (ABD) has so far weathered Covid-19 well. The Group secured £50m of new equity for expansion in mid-2019, and combined with solid recent trading, has been able to continue to implement its strategic priorities. What should emerge is a broader and more balanced business, with higher recurring revenue alongside equipment sales. We predict a bigger footprint in the crucial US market and more driving simulators capability, alongside existing ADAS1 testing products and services. As we head into FY20e results on 25 November, there is no guidance yet on the outlook for earnings. OEM R&D spend ultimately drives ABD’s revenues; we assume testing activity and kit sales will be subdued for at least two more quarters. Untested is the assertion that OEM R&D spend on autonomous driving and active safety systems will be protected from looming corporate budget cuts. Post GFC2, R&D spend was cut, but this time autonomous driving and active safety may be viewed as too secular and mission critical for the big axe to fall. Meanwhile, ABD is trading on a premium CY21e PE of c.36x. Conclusion: ABD is a market leader, but momentum is lacking, and the valuation is full. No need to jump in before the full year results in late November.
Essentra (ESNT LN, £1.1bn) | AB Dynamics (ABDP LN, £624m) | Versarien (VRS LN, £155m) | Filtronic (FTC LN, £18m) | Pressure Technologies (PRES LN, £17m)
Companies: ESNT ABDP VRS FTC PRES
Companies: ABDP IHC BIRD JWNG WCH RBD FARN MIND EQLS CHRT
SEC S.p.A. Admission is following a reverse takeover under Rule 14 by SEC S.p.A of Porta Communications plc, another AIM quoted company. No funds being raised. Due 4 September. Mkt cap c £9.9m. The merger will create a business with global fee income of around €80m and a host of PR agencies, including Newgate, Publicasity and Newington. The Group undertakes its main trade of lending as well as electricity generation through the operation of two solar farms.
Companies: SEE SRE C21 TEK C4XD HUR ABDP FARN
ReAssure Group plc - The Group is a leading closed book life insurance consolidator in the United Kingdom with 4.3m policies, £68.7 billionof assets under administration on a Post-L&G Illustrative Basis. It is considering a premium listing segment of the main market.
Voyager AIR The Company will focus on the acquisition, leasing and management of primarily widebody aircraft, with asset management services to be provided by Amedeo Limited he IPO will comprise a Placing and Offer for Subscription of Shares to raise up to approximately US$200m·
IMC Exploration Group (NEX: IMCP), focused on acquiring and exploring prospecting licence areas which have high potential for natural resource, is looking to admit its shares to the standard list and will withdraw for the NEX Exchange. TBC
Uniphar, a diversified healthcare services business with a workforce of over 2,000, is looking to join AIM. Raise TBC, expected mid-July 2019
Companies: FOX ARCM ABDP IGAS MTW CMB CNIC EMR DCTA
Essensys plc—a provider of mission-critical SaaS platforms and on-demand cloud services to the high growth flexible workspace industry, plans to join AIM. Offer TBC, expected 29 May 2019.
Induction Healthcare Group plc—a healthcare technology company focused on streamlining the delivery of care by Healthcare Professionals looking to join AIM. Expected raise of £14.58m at 115p, market cap of £34.07m. Expected 22 May 2019.
SDX Energy plc—a North Africa focused oil and gas company, announces its intention to complete a Canadian plan of arrangement under section 192 of the Canada Business Corporations Act and will have shares de-listed from the TSX-V and admitted to trading on AIM. Expected 28 May 2019, anticipated market cap of £76m
Renold plc—a leading international supplier of industrial chains and related power transmission products, announced that it will cancel the listing of the Company from the premium segment and apply for admission on AIM. Expected 06 June 2019.
Alumasc Group plc, the premium building products, systems and solutions group, has announced its intention to move from the Premium Segment of the main market to AIM. Expected market cap of £33.4m. Expected 25 June 2019
Companies: SCLP VGAS RBD AGY ABDP IOF CPC ACT ROCK
AB Dynamics (“ABD”) has delivered a strong H1 FY19 performance for the six months to February, as heralded in the early-April update. Revenue grew a stunning 69%, and reported PBT almost doubled. The group appears to be benefiting from recent investment, and is well placed to continue to prosper in a highly attractive (and growing) end market. The announcement also includes five pillars of the revised strategy – New Product Development, Capability & Capacity, International Footprint, Service and Support, and Acquisitive Growth. We increase our adjusted PBT estimates by 9% and 8% respectively for FY 2019E and FY 2020E and look forward to the group delivering against its clearly-significant potential.
Companies: AB Dynamics plc
AB Dynamics’ (ABD) trading update for the first six months of FY 2019E states that revenues and adjusted operating profits are expected to be ‘significantly ahead’ of the same period last year. Consequently, management expects the full year to be in line with market (and its own) expectations. Market demand for track testing products and ABD’s own operational improvements are cited as the main drivers of a continuation of the strong performance seen in FY 2018. The announcement also highlights an updated strategy, which will be presented at the time of the interim results - CEO Dr James Routh notes that the focus is on “successfully implementing the strategy which builds on our strong foundations to create long-term sustainable growth." Noting the strong first half performance and the in-line trading update, we bring our revenue estimates up from the lower end of market expectations, adding 8% and 5% for FY 2019E and FY 2020E respectively. We adjust EBITDA to reflect previous guidance on investment in growth opportunities.
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AB Dynamics has reported FY 2018 revenue and Adjusted PBT in line with our estimates, which were revised in October when the Group announced that it would significantly exceed market expectations. Both numbers are at record levels. The Group has delivered strong performances across a number of global geographies in the ADAS (Advanced Driver Assistance System) targets and steering robot businesses, and won its first simulator order (for delivery in FY19). As ADAS complexity is increasing, further customer demand is anticipated. The announcement also notes the tailwind of a ‘healthy’ order book at the start of FY2019. Given this strong outlook, and the prospect of another year of ‘solid progress’, AB Dynamics is to make further investment in supporting the significant growth opportunity, constraining near-term operating margin. We have upgraded our FY19 and FY20 estimates materially, while assuming an increased level of investment and upgrading EBITDA at a lower rate.
Kropz, an emerging plant nutrient producer with an advanced stage phosphate mining project in South Africa, a phosphate project in the Republic of Congo and exploration assets in Ghana, is looking to join AIM. Offer TBC, expected late Nov
Titon holdings—international manufacturer and supplier of ventilation systems and window and door hardware. No capital raise. Due 10 Dec. Mkt cap c.£22m.
Greenfields Petroleum (TSX-V:GNF) production focused company with operated assets in Azerbaijan seeking AIM dual listing including $60m private placement. Mkt cap $12.6m CAD
Finncap—proposed acquisition of M&A adviser Cavendish Corporate Finance and AIM admission. Offer TBA
Crossword Cybersecurity PLC* (NEX:CCS)—the technology commercialisation company focusing exclusively on the cyber security sector is investigating the possibility of AIM admission. The Company is proposing to raise up to £2.25 million before the end of December, conditional on Admission.
Companies: CGNR COG ABDP FLX LGT MMH TEK CRV MNO SIS
AB Dynamics (ABD) has announced that it will significantly exceed market expectations for both revenue and profit for the year to the end of August – full results are due on 14 November. The update says that the Group has performed well through the year, with the significant growth in turnover mainly from increased sales of its track testing products. We think that the Group is likely to have seen strength across a number of global geographies with commensurate levels of sales and deliveries in the ADAS targets and steering robot businesses. We have increased our estimates for FY 2018E to reflect the announcement, with our revenue and Adjusted PBT numbers increasing by 16% and 14% respectively, reflecting our position at the lower end of the range of market forecasts. A strong and positive update, boding well for ongoing growth and market development.
Admission is being sought as a result of the proposed RTO of Cambian Group plc following completion of the acquisition by CareTech a leading provider of specialist social care services, supporting adults and children with a wide range of complex needs. No raise, market cap TBC expected 19 October.
PetroTal (TAL.TO) - The exploration and production company focused on oil assets in Peru is seeking a secondary AIM quoting before the end of 2018.
Path Investments— First acquisition of a 50 per cent. participating interest in the producing Alfeld-Elze II gas field located 22 kilometres south of Hannover in Germany. Seeking £10m raise. Due early Oct
Green Man Gaming—pure play e-commerce and technology company in the digital video games industry. revenue CAGR growth of 26.7% in the last three years to £47.5m. Due Mid October 2018. EBITDA Profitable. Offer TBA
Crossword Cybersecurity PLC* (NEX:CCS)—the technology commercialisation company focusing exclusively on the cyber security sector is exploring its options in relation to a potential move to the AIM market of the London Stock Exchange which, if it were to proceed, would likely take place over the next few months.
Companies: ABDP IGP CHRT RCN YGEN MRL VLE BOD CLIG BOOM
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The acquisition and planned relaunch of Debenhams online business is a transformational deal for the Group, establishing an ecommerce marketplace of immediate scale and high brand awareness. The deal expands boohoo’s target addressable market and opens the Group up to new product categories including beauty, sport and homeware. It is a significant step forwards in realising the Group’s ambition to operate the UK’s largest ecommerce marketplace, combining boohoo’s online capability and multi-brand platform with Debenhams leading brand recognition and extensive established network of third-party brand partnerships.
Companies: boohoo group Plc
SCE is raising £20m through a placing and open offer as the future commercial pipeline now justifies building the next manufacturing cell (“Cell 2”). Cell 2 will essentially double production capacity and transform the potential of the business. When operating at full capacity, we estimate that SCE would be capable of £35m revenues, £15m EBIT and £12.5m Earnings. This would equate to EV/EBIT of 7.1x and P/E of 9.5x based on the enlarged capital base. Recent trading updates have highlighted that trading is strong and in line with expectations, while longer term ASP expectations have increased significantly.
Companies: Surface Transforms plc
Boohoo has delivered strong results over the peak trading period for the four months ended 31 December 2020. Group revenue is +40% YOY, with robust growth seen across all brands and regions. The Agenda for Change programme is progressing at pace, demonstrating the Group’s commitment to setting a new standard for ethical supply chains in the fashion industry.
Today's news & views, plus announcements from BRBY, BHB, DPLM, IWG,GFTU, CMCX, JDW, GFRD, BGO
Companies: Bango plc (BGO:LON)Galliford Try Holdings PLC (GFRD:LON)
Although 2020 will probably go down in history as one of the most challenging years experienced during our lifetime, it will also likely be chronicled as one of the best years for the recognition and appreciation of science. As we entered 2020, the COVID-19 pandemic was in its infancy. However, it rapidly evolved through the exponential rise in infections and mortality globally. Much has been achieved during the past 12 months in the fight against COVID-19, but, as we enter 2021, there are considerable concerns about the emergence of a mutant version of the virus and the second wave that we are now facing.
Companies: AVO ARBB ARIX BBGI CLIG DNL FLTA ICGT OCI PCA PIN PHP RECI STX SCE TRX SHED VTA YEW
Trackwise has announced that it expects FY20 revenues to be c £6.1m, which is lower than our estimate, reflecting disruptions to supply chains caused by tighter coronavirus restrictions and uncertainty about the Brexit deal. However, careful cost control means that management expects adjusted operating losses to be c £0.2m, in line with our estimates. We have updated our FY20 forecasts but leave our FY21 estimates, which are underpinned by an order worth up to £38m over three years from a UK electric vehicle (EV) OEM, unchanged.
Companies: Trackwise Designs Plc
The group’s year-end trading update highlights that the group is on track with its growth and expansion strategy. At the end of the year, a couple of COVID and Brexit-related delays to customer ordering were seen, which have reduced revenue by £0.7m. Nevertheless, operating profits are in line with expectations due to continued cost control. Our forecasts have therefore been adjusted accordingly. The investment case remains sound and this doesn’t alter our view of the company’s prospects, where we forecast a robust scale up over the next few years, focused on significant growth opportunities in the EVs, Medical and Aerospace markets.
We introduce FY21 forecasts this morning, cautiously assuming a continuation of current activity levels. As indicated in last Friday’s trading update, revenue stabilised at £2m per quarter in Q4’20 and Q1’21, reflecting current lower levels of demand caused by the COVID pandemic. We assume that EBITDA remains positive for the balance of the year, benefitting from the reorganisation and cost reduction measures implemented by management last year. This has served to protect the balance sheet with the result that we expect only a negligible reduction in the strong net cash position in the current year (£13.5m net cash forecast for September 2021). The timing of the recovery remains difficult to predict but we believe Zytronic is well positioned to weather the downturn before returning to growth.
Companies: Zytronic plc
InnovaDerma raised £4.0m to (i) strengthen the balance sheet following the impact of COVID-19 on current trading and (ii) grow its global Direct-to-Consumer (DTC) and E-Commerce capacity in the UK and new geographic markets, thereby enabling the company to accelerate sales and take advantage of the opportunities expected to exist post COVID restrictions being eased. With a clear plan for growth, to be executed by its new CEO, we introduce new forecasts for FY 2021 and 2022 that assume some gradual easing of restrictions in the UK in the spring, with an adjusted pre-tax loss of c.£0.9m in 2021 (positive EBITDA in H2) returning to c.£0.3m profit in FY 2022 on the back of revenues returning to pre-pandemic levels, including higher international contributions. We introduce a target price of 90p, with scope for this to be raised as the new CEO executes on the growth plan, which is based on a peer group EV/Sales multiple of 1.6x.
Companies: InnovaDerma PLC
Today’s Q1 trading update indicates that sales have levelled out at c.£2m per quarter, reflecting current lower levels of demand in light of ongoing restrictions related to the COVID pandemic. The reorganisation and cost reduction measures undertaken by management last year have enabled the Group to maintain a positive EBITDA and there has been a slight increase in orders in the new financial year. Zytronic entered the new year in a strong financial position with £14m net cash. The stable sales pattern should enable us to reintroduce forecasts in due course and the current rating remains very modest indeed based on preCOVID levels of profitability
The Character Group’s (Character) AGM statement confirms the strong start to the year noted in its preliminary results. Revenues in the first four months were ahead by more than 30% and management expects that profitability for the first half to February 2021 will be significantly higher than in the same period last year. While there are more challenges facing the Company in the second half, assuming these do not worsen the Board believes the Group will achieve current market expectations. Our forecasts for FY2021 were raised significantly in December and we are encouraged that despite the temporarily deteriorating macros, current market expectations are still valid. When some normality returns to the market Character will be exceptionally well positioned with a strong balance sheet and a product range in strong demand.
Companies: Character Group plc
Residential for rent developer and manager Watkin Jones today posted FY 2020 results, in which profits, cash and dividend beat our estimates by c. 4 - 5%. We have maintained our FY 2021E forecasts and introduced estimates for FY 2022E. Our growth assumptions are supported by further evidence in the statement of a revival in forward funding by institutional investors for both the Group’s build-to-rent and student accommodation developments. A new strategy is aimed to trial the private residential sales division more to affordable housing, in line with WJ’s low-risk, capital-light model.
Companies: Watkin Jones Plc
This brief but important update has underlined that Galliford Try is coping admirably with the seemingly constantly changing COVID restrictions, with all sites open (as they have been since the start of the financial year in July 2020) and trading at “normal” levels – in line with management expectations.
Crucially, a return of profitability and dividends (as previously flagged) is expected with the half year results, due to be released on 4th March. Consensus is for a 2.5p dividend for the year ending in June 2021, growing rapidly to 4.0p for 2022 and 5.4p for 2023.
Companies: Galliford Try Holdings PLC
The YE trading update confirms the improved H2, flagged last month. The global casino industry has been reopening and a backlog of orders boosted YE sales, while Densitron’s trading has been robust throughout the pandemic. Overall, group sales are down 31% and we expect Gaming revenue to be almost halved. However, the swiftly imposed cost reductions took effect in H2 and the group has been profitable and cash generative across FY20 – adj. PBT >$1m and net cash up $1.3m – an excellent result from the original scenarios. There are concerns ahead: a potential for further COVID restrictions and a global component squeeze, but management is working to mitigate them. The orderbook is healthy and in the long term, the pandemic will surely be a catalyst for increased outsourcing across the gaming industry. With cash in hand and retaining its excellent industry reputation and position, QXT will be a beneficiary. We reintroduce conservative forecasts for a much improved FY21. Note that given the global scenario, management feels unable to give guidance at this stage so these are solely finnCap’s own estimates without input from the company.
Companies: Quixant Plc
Accrol Group Holdings plc (ACRL LN)
Bango plc (BGO LN)
Brickability Group plc (BRCK LN)
Norcros plc (NXR LN)
OnTheMarket (OTMP LN)
Ricardo (RCDO LN)
UP Global Sourcing Holdings (UPGS LN)
Watkin Jones (WJG LN)
Xpediator (XPD LN)
ZOO Digital (ZOO LN)
Companies: ACRL BGO BRCK NXR OTMP RCDO UPGS WJG XPD ZOO NUZE