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Bagir Group (BAGR LN) Interim results | M&C Saatchi (SAA LN) H1 outperformance provides a huge buffer against uncertainty | Summit Therapeutics (SUMM LN) H1’s highlight antibiotics programmes on track
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Bagir Group (BAGR LN) Posting of circular and notice of EGM - proposed strategic partnership | Dechra Pharmaceuticals (DPH LN) Sterling progress once again, but one or two clouds on the horizon | Future (FUTR LN) A great summer | Microsaic Systems (MSYS LN) Progressing to plan | Murgitroyd Group (MUR LN) In line trading update, increased dividend, exceptional (historical) item
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Bagir Group (BAGR LN) Strategic partnership with Shandong Ruyi – update | City of London Investment Group (CLIG LN) In line but lacking net inflows, HOLD for the yield | Northgate (NTG LN) Risks abating with positive signals in the FY18 results | Renold (RNO LN) AGM/Q1 update in line with expectations | Zinc Media Group (ZIN LN) CFO appointment
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Bagir Group (BAGR LN) Strategic partnership with Shandong Ruyi - update | Frontier Smart Technologies Group (FST LN) Challenging Q2’18 results in downgrades | Halfords Group (HFD LN) Groundhog day as HFD guides to another flat year | Miton Group (MGR LN) Rise of nascent funds, income growth potential | Polypipe Group (PLP LN) Expectations unchanged, despite weather impact | Restaurant Group (RTN LN) Reassuring trading update | Sanderson Group (SND LN) Solid H1 highlights reassuring consistency | Technology Adobe set to buy Magento for $1.7bn |
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Bagir has signed an exciting new agreement with Sizer, the body measuring app, to enable it's customers to sell made-to-measure suits and other tailored garments online direct to consumer at highly competitive price points compared to traditional retail routes. The technology behind Sizer is market leading and has been patented in the USA and is in the process of being patented in Europe. The application is expected to be ready to use in about 3 months, once final modifications and refinements have been concluded.
Bagir Group
Following Monday’s news that Bagir was in live discussions with a potential strategic partner, the group has today announced a proposed strategic partnership with Shangdong Ruyi Technology Group, a leading Chinese textile manufacturer, alongside a proposed $16.5m investment to acquire 54% (51% fully diluted) of the enlarged issued share capital. The new capital will principally be used to substantially expand the production capability in Ethiopia, on a much quicker timetable and with greater certainty than is currently planned organically. It will also support Bagir’s R&D and innovation, and fund working capital demands that will stem from any increased expansion facilitated by increasing the Ethiopian capacity which is far outstripped by current demand. Under the proposal, which is subject to shareholder approval, Shandong Ruyi will subscribe for 359.56m new shares at 3.5p/share. This equates to a c155% premium to the share price prior to suspension, and is in line with the previous placing price in December. Suspension of the shares is expected to be lifted today given the transaction does not constitute a reverse take-over.
The group has revealed its order book has slowed in Q4, due to general order weakness across its customer base and later phasing from Q4’17 into Q1’18. Along with slightly higher production costs (Vietnam), EBITDA is now expected to be nil (vs $1m). However, $2m cost savings and a more margin focused approach to 2018, means FY18 EBITDA forecasts are left at $2m. The timetable to expand Ethiopia is unchanged but, of potentially great significance, BAGR announces it is in advanced talks with a global player to form a strategic partnership to significantly accelerate the capacity timetable with new investment, a potentially transformational event.
Bagir has reported flat H1 EBITDA, in line with expectations at $0.8m, and $7.0m net cash. There have been no further delays to production line timetables since revising guidance in July. Trading and execution has progressed in line with expectations since then and management has reiterated its confidence in the strategic plan. Its approach to marketing, new customer wins, innovation and market leading production costs (incl. Ethiopia) are on track, albeit there is risk of orders slipping into Q1. Trading close to tangible asset value in Ethiopia, and on 3.3x cal18 EV/EBITDA, the market is clearly overlooking the prospect of a return to growth in FY18.
Bagir has announced the appointment of Jonathan Feldman as NED. Under Israeli law two external directors are required in a public company, and this announcement follows on from Esther Maoz’s appointment on 19 January. Jonathan has significant experience in international clothing manufacturing and dealing with major retailers, having previously been Joint MD of Jayroma London Limited. He is currently Joint MD of Global Mutual Properties (property management and investment specialists). His nomination is conditional upon the consent of shareholders at the AGM (at 10am on 6 June). Bagir also announces that, although a procedural formality, the share registrations necessary to formally complete the acquisition of the remaining 50% share in its Ethiopian JV will not be concluded by 30 April as previously agreed by the vendor. Bagir has had full operational control of the site since the acquisition was announced in February though.
Prelims very clearly highlight the positive effects of management’s Recovery Plan with a reversion to sales growth in H2, a step-change in FY16 EBITDA and transformation of the balance sheet to net cash, with no bank debt. Critically the strategic changes, including reconfiguration of its geographic production, position it for significant future growth by exploiting competitive advantages from its regional hubs. The range of discussions it is having with potential customers underpins positive outlook comments, albeit relating mostly to FY18 given the lead times. Fair value is c9p over 2 years.
Arix Bioscience — Intention to float on the main market from the global healthcare and life science company supporting medical innovation. Raised £52m in Feb 16 with investors including Woodford Investment Management Eco (Atlantic) Oil & Gas—Schedule One Update. Now expects admission ‘early February’. Ramsdens Holdings –Schedule One from the financial services provider and retailer, operating in the core business segments of foreign currency exchange, pawnbroking loans, precious metals buying and selling and retailing of second hand and new jewellery. Expected admission to AIM 15 Feb raising circa £15.6m. Expected mkt cap £26.5m.
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Bagir has announced the conditional appointment of Esther Maoz as an independent NED. Esther has considerable global apparel manufacturing and marketing experience which fits well with the group’s growth plans. Under Israeli law two external directors are required in a public company, and the approval of Esther’s nomination by the board is now conditional upon the consent of shareholders at an EGM (at 10am on 24 Feb). Bagir plans to appoint an additional external NED and further announcements will be made at the appropriate time. Despite a number of positive announcements over the last 6 months, including the refinancing which eliminated the group of all its bank debt, Bagir trades on a cal17 EV/EBITDA multiple of just 3.2x reducing to only 2.4x next year.
Under new leadership Bagir’s recovery plan is now visibly bearing fruit. The break-even point has reduced significantly and H1 EBITDA rose $1.2m to $0.8m. Successful reconfiguration of production has also boosted competitiveness, especially the move to Ethiopia where demand far outstrips current supply. Alongside a strong pipeline of product innovations, Bagir is poised to revert to profitable growth via new customer wins and bigger orders. The refinancing is transformational taking the group from net debt to net cash and establishing the platform to deliver this next phase.
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