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Edison Investment Research is terminating coverage on Avacta Group (AVCT), BCI Minerals (BCI), Destiny Pharma (DEST), Globalworth Real Estate Investments (GWI), Henderson Alternative Strategies Trust (HAST), Herantis Pharma (HRTIS), Jupiter Green Investment Trust (JGC) and Rockhopper Exploration (RKH). Please note you should no longer rely on any previous research or estimates for these companies. All forecasts should now be considered redundant.
Previously published reports can still be accessed via our website
Companies: Avacta Group
As is characteristic of this company, management has acted swiftly to execute an additional acquisition, putting the placing proceeds to work with another immediately earnings-enhancing acquisition, creating a Group with diversified revenue and profits, significant growth potential and greater visibility in a post-COVID world. We reintroduce estimates with CAGR in revenues of 29% between FY 2021 and FY 2023 and a CAGR in EBITDA of 34%. Quantuma, an insolvency and restructuring specialist targeting SMEs, is being acquired for £26.95m from existing resources to give an EBITDA multiple of 7.47x (EBITDA March 2020: £3.6m). Our forecasts take into account the greater visibility and predictability that the recent acquisitions bring to the Group. Our new SOTP valuation arrives at a reinstated price target of 300p.
Companies: K3 Capital Group Plc
Open Orphan has announced the signing of a new contract with Codagenix Inc, a vaccine developer, to conduct a phase 1 trial for a COVID-19 vaccine candidate. The trial will focus on evaluation of safety and immunogenicity of the single-dose intranasal candidate in 48 volunteers. Although this is a phase I trial, in our view, it goes some way to validate Open Orphan's offering in the market and could lead to follow-on contracts. We expect the opportunity available to Open Orphan continues to increase and that H2 2020 should bring further good news flow and momentum to the stock. Reiterate buy
Companies: Open Orphan
Franchise Brands’ results for the half year paint a picture of a resilient performance against the headwinds and challenges provided by the COVID-19 pandemic. With most of the Group’s largest businesses deemed to be essential services, management was able to limit the Group revenue reduction to just 10% before the addition of a maiden contribution from Willow Pumps. Tight cost controls also mitigated the impact and the Group’s overall performance in testing conditions is a testament to the strength of management and the investments made in the businesses over the past two years A strengthened balance sheet courtesy of the April fundraise puts Franchise Brands in a strong position to grow organically and through complementary earnings enhancing acquisitions.
Companies: Franchise Brands
For this Monthly, we are delighted that Rooney Nimmo and 24Haymarket have allowed us to reproduce a recent report they jointly published, entitled An analysis of UK exits (2015-2019), which provides a granular analysis by sector of the activity in our dynamic private companies world. We hope you find the insights of interest.
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H220 revs grew 9% yoy vs. N1S estimated 6%. This resilience drove FY20 EBITDA c. 7% ahead of our forecasts. We note especially a pick-up in connector revenues (47%/sales) to growth of some 16% in H2 from 4% in H1 and believe this relates to new hires and strategy driving success across all partners, notably Shopify and Magento. We re-introduce FY21 forecasts at the lower end of the range of probable outcomes meaning we would expect upgrades rather than downgrades from this level.
Companies: Dotdigital Group
Franchise Brands has reported robust results that reflect an impressive Q1, a Q2 impacted by CV-19 and the inclusion of trading at Willow Pumps. Revenue increased +21% to £24.2m (H1 2019: £20.1m) including an inaugural contribution from Willow Pumps. On a like-for-like basis, revenues declined to £18.0m reflecting the impact of CV-19. Fee and direct labour income leapt +39% to £14.7m (H1 2019: £10.6m) and Adjusted EBITDA increased +13% to £2.8m (H1 2019: £2.5m). The B2B division provides key workers to essential services and traded through the lockdown with increased activity in June as businesses re-opened. Metro Rod system sales grew +16% YoY in Q1 with a resilient -3% decline in H1 due to the impact of the lockdown. Franchise Brands took decisive action in right-sizing the Group and provided support to franchisees in adjusting to reduced volumes. The strength of the Metro Rod network resulted in 28 of 43 franchisees achieving YoY growth in sales in H1. Franchise Brands completed an equity raising in H1 strengthening the balance sheet and enabling the Group to pursue earnings enhancing acquisitions as opportunities arise post-CV19.
RBG Holdings pre-close trading update to June 30th confirms a strong H1 performance for RBL, the Group’s law firm, with revenues up 36% like-for-like to c.£11.4m YoY. Convex, the CF boutique, understandably has faced COVID headwinds, with most of its H1 pipeline deferred indefinitely, whilst Litigation Finance continues to grow its pipeline and financing commitments on a longer term view. Due to continued uncertainty from COVID we withdraw our forecasts this morning, with a view to reinstating once more clarity on H1 outturn and momentum into H2 is available.
Companies: Rosenblatt Group
The ongoing pandemic only serves to underline business models that are robust, and those that aren’t. This morning’s trading update from UPGS puts them firmly in the winners’ category. As the company approaches the final weeks of FY2020, it not only reports “better than expected progress” against an uncertain business backdrop, but also that revenue and key profit measures for the year should be ahead of current market expectations. Furthermore, online as a portion of total business should record a fourth consecutive increase, providing additional flexibility and strength in the case of a second wave.
Companies: Up Global Sourcing
This has been an impressive half for Bango. Mobile usage and transactions have risen during lockdown, driving End User Spend (EUS) over its platform up by nearly 60% to £740m. Moreover, Bango’s ongoing revenue also rose >50%, to a record level of £4.8m, with revenue growth more closely matching EUS growth than previously. With operational gearing in the payment platform, group profitability continues to rise rapidly as its revenue increases; group H1 2020 adj. EBITDA alone beating the whole of FY 2019. The major deals delayed from December also flowed through, both in Payments and the early-stage Bango Marketplace business. The period saw the purchase of a controlling stake in Audiens by a S. Korean tech conglomerate, allowing increased management focus while retaining a 40% stake in the business set to be boosted to a new level by considerable funding and IP injected by its new parent. Overall, Bango was cash generative and ended the half with £4.2m cash, suggesting c.£0.8m of cash from operations. This is a very reassuring performance, with the deals signed in H1 expected to boost H2 EUS to the £2bn targeted this year and leaving the company on track to meet our FY forecasts of strong revenue growth and material profitability.
XLMedia has remained profitable throughout the period its websites were deranked by Google. There is a clear strategy and pathway to secure a re-ranking of these websites which could restore revenues to historic levels. With roughly half the market cap in cash and a profitable outlook, the stock is factoring in little recovery potential.
Open Orphan (ORPH.L): COVID-19 vaccine trial contract
Avacta Group plc (AVCT): Expansion of agreement with Daewoong Pharmaceutical
James Halstead is a manufacturer and international distributor of commercial floor coverings. This morning, the group has provided a full year trading update for the twelve months to 30 June 2020, which illustrates stronger demand than anticipated at the time of the interims in March. A second interim dividend has been declared, whilst the year-end cash figure is reported to be ahead of the interim position. Furthermore, since the year-end, UK sales are reported to be less than 10% down against the comparative period, whilst key overseas businesses are near flat.
Dillistone has reported FY results to December 2019 with revenue of £8.0m (FY 2018: £8.7m), an adjusted loss before tax of £0.3m (FY 2018: £0.0m) and, against a favourable tax outcome (R&D tax credits), EPS of -0.15p (FY 2018: +0.61p). The company ended the year with cash of £0.4m (FY2018: £0.7m), and net debt position of £0.8m (FY 2018: net debt £0.4m).
Companies: Dillistone Group James Halstead
Due to a change in Analyst role, Cenkos Securities plc has suspended coverage of the following stocks (see table 1). Our previous recommendation and forecasts can no longer be relied upon.
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