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HMS NETWORKS AB
HMS NETWORKS AB
Panmure Morning Note 05-12-16
05 Dec 16
Filtronic, the designer and manufacturer of microwave electronics for the wireless telco market, has provided a solid 1H17 trading update. As seen during 1Q17, demand for its new ultra-wide band integrated antennas has been driven by its key customer. Crucially the roll-out provides a reference client and adoption from other clients should be coming in due course. Having said that, programme roll-outs tend to be lumpy in nature and management expect activity to be slowing in the early part of 2H17 until customer concentration is remedied, meaning Filtronic will be exposed to short-term fluctuations in demand.
08 Dec 16
Amino has this morning published a positive trading update, with figures for the year to November 2016 slightly ahead of our forecasts. We upgrade our 2016 estimates modestly, to reflect confirmation of this expected strength and upbeat comments on order backlog. Having recently upgraded our 2017 estimates, we choose to leave these unchanged for now, but will revisit them in February 2017 alongside full FY16 results.
Joy of Techs
21 Nov 16
ICT evolution is driven by technological development as advances are made which both meet and shape customer requirements. Our 2011 note No such thing as a telco described the modern reality in that former ‘telcos’ now deliver varying elements of a range of managed services. We built on this theme last year, exploring in further detail their evolutionary paths, operating fundamentals, and cashflow yield similarities. In the consumer environment, demand for bundles of technology is complemented by demand for content. Across the pond, the mooted combination of AT&T and Time Warner typifies the bundled need of ‘pipe’ and content, since unbundled alternatives such as FaceTime and WhatsApp can be easier and clearer to chat over, and Amazon and Netflix are easier to watch anywhere. In the UK, BT’s defensive actions cover delivery, content and capabilities, acquiring EE yet also buying football rights. While TV was long ago added to triple play to become quad play, voice is now merely an app, and fixed and mobile seen as just dumb pipes: it's the content that will influence consumer choices. Growth of TV and film as well as music and gaming over IP leads to UK small cap opportunities. In context of the drive to maximise value from pipes and access by offering content and data, we look at some amongst the potential tech small cap beneficiaries: Amino*, Keyword Studios, ZOO Digital*, 7digital*, KCOM* and CityFibre*.
N+1 Singer - Morning Song 06-12-2016
06 Dec 16
With FY16 volume and revenue already disclosed in the pre-close, the focus in today’s prelims is on PBT (£100.3m versus our £101m) and EPS (96.8p versus our 95.4p). No special dividend triggered this year (none forecast) and DPS is held at 46.8p (N1SE: 48.0p). On end markets, recent commentary is reiterated – the core business is growing, whilst consumer electronics will be subdued in the current year (competitive capacity from Solvay). On currency, there will be a material benefit in the current year (a little more than the £14m to £15m previously indicated), and a further tailwind next year if current rates are maintained (quantum TBC). There is also an investment of £10m today in a minority interest in Magma Global, Victrex’ oil and gas mega programme partner. Although the share price is now close to our TP of 1730p, we feel that there is enough in today’s announcement to retain a positive stance on medium term opportunities with strong cashflow and a special dividend potentially to look forward to in the current year.
Prospects electrify; return of cash
07 Dec 16
The sale of the Opus Energy stake to Drax Group is expected to complete during calendar 1Q17, injecting £71m into the balance sheet. With manageable net debt/EBITDA close to 1x, the board expects to return all proceeds to shareholders through a tender offer around the time of prelims, expected June 2017. Telecom Plus’ interims had reported performance in line with mildly tweaked forecasts. While 3 of the "big 6" utility providers committed to price freezes through winter, the implication is for price rises subsequently, from the beginning of TEP’s FY18 (y/e March). The collapse of GB Energy shows that the cheapest utility providers’ business models are unsustainable, which compounds interest from willing and concerned consumers, and re-incentivises the self-employed sales force, as the competitive landscape rebalances. With positive catalysts lining up to lift the share price, we lift our twelve-month target price to 1360p.