We report on the performance of our momentum style screen since the last refresh three months ago and present the 25 new constituents. The screen underperformed small-cap and microcap indices modestly, though our previous focus stocks did significantly better. While momentum (as we express it) has outperformed smallcap significantly since inception of the screen in July 2016, this has arisen in shorter periods and appears to only coincide with a steadily rising small-cap index. We therefore consider this style screen to have limited predictive capability. We highlight seven stocks, which we think are interesting.
Companies: BMY CKT KEYS LGT MACF VER WYG
Edison Investment Research is terminating coverage on Vernalis (VER). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant.
PROACTIS Holdings (PHD LN) New brand identity | Vernalis (VER LN) Tris Pharma liability clarified, sale talks underway (Hold to Not Rated) |
Companies: Proactis Vernalis
Cake Box Holdings—franchise retailer of cakes with a growing store base across the UK looking to join AIM, Offer tbc, expected late June
Mind Gym. Behavioural science business that uses scalable proprietary products to deliver human capital and business improvement solutions to large corporations. Offer TBA. Due 28 June
Anexo -specialist integrated credit hire and legal services group. Offer TBA. Due 19 June.
i-nexus—develops and provides strategy execution software to assist global enterprises in effective execution of their strategic plans and initiatives looking to jon AIM. Offer TBC, expected 19 June
Yellow Cake will use its expertise to generate value through the ownership of physical U3O8 (Uranium) together with a range of activities and opportunities connected with owning physical U3O8. Acquiring supply contract for up to $170m. Offer TBA.
Tekmar— technology provider of protection systems for subsea cable, umbilical and flexible pipes and offshore engineering services—Offshore wind farms and Oil & Gas. Revenue of £21.9m and Adjusted EBITDA of £4.9m Offer TBA
Knights Group— UK regional legal and professional services businesses. FYApr18 rev £34.9 million and adjusted operating profit was £6.8 million excluding Turner Parkinson (acquiring on IPO). Offer TBA
TransGlobe Energy Corporation—an independent international upstream oil and gas company with headquarters in Calgary, Canada is looking to join AIM. No Capital to be raised, market cap of £131m. Expected 29 June
Strongbow Exploration (TSX:SBW) intends to dual list on AIM. Holds rights to the South Crofty underground tin mine, a former producing tin mine located in the towns of Pool and Camborne, Cornwall . The project is estimated to require the Company to raise £25 million over the next 18 months to progress to a production decision. Offer TBS. Due June.
Companies: MTFB STX VER ITM NWF KZG IMM VERS ECSC BOOM
Avingtrans (AVG LN) Good progress on integration; FY19 PBT raised 13% | Devro (DVO LN) Upgrading to Buy on valuation and recovery grounds | Genus (GNS LN) H1’s in line with expectations: solid ABS performance | Vernalis (VER LN) Tuzistra® XR scrips below guidance: evaluating strategic options
Companies: AVG DVO GNS VER
Vernalis has provided a trading and operational update to its guidance for Tuzistra XR prescriptions for financial year-end 2018. Despite dynamic management of commercial initiatives, Tuzistra XR prescription growth is not accelerating fast enough to meet Vernalis’s guidance of 105-115k prescriptions (given at the FY17 results). Following a disappointing uptake in the current cough cold season (~65% of the season is complete), Vernalis is downgrading guidance on prescription numbers and, in light of slow progress in the US cough and flu business, is seeking alternative strategies for the US business and the group. As such, we place our financial forecasts and valuation under review until we receive clarity on strategic next steps and the potential impact on cash burn, given a cash balance of £44m (unaudited at 31 January 2018).
A look at what brokers are covering today, Thursday December 14.
The shortfall in prescription volume growth volume is disappointing, although we note our cautious stance vs. guidance for current-year prescriptions. We significantly lowered our rollout expectations for Tuzistra® XR and the four follow-on cough cold programmes on 24th November and will review our estimates following this morning’s update. The company enjoys a strong cash position of £48.9m (as per 11th Dec).
Advanced Medical Solutions (AMS LN) In line FY trading update | Infrastructure India (IIP LN) NAV declines further - financing discussions continue | IQE (IQE LN) Apple investment in VCSELs highlights upgrade potential | ReNeuron Group (RENE LN) Interim results and IND approved to commence Phase IIb in stroke | Severfield (SFR LN) Significant Google contract confirmed | Synairgen (SNG LN) Revised terms with Pharmaxis | Tribal Group (TRB LN) Financial performance materially ahead | Vernalis (VER LN) Trading update highlights Tuzistra® XR run-rate below expectations
Companies: AMS IQE VER SNG IIP TRB SFR RENE
Fusion Antibodies— Sch1 from the Belfast based contract research organisation providing services to biopharmaceutical and diagnostics companies that are involved in the development of antibodies for both therapeutic drug and diagnostic applications. Offer to raise £5.5m for the Company and £1.075m for selling shareholders at 82p with market cap of £18.1m. Due 18 Dec | Erris Resources PLC—a mineral exploration and development company currently focused on two geographic areas. Offer TBC, expected 21 December 2017 | CIP Merchant Capital—Closed ended investment Company. Sector focus oil & gas, healthcare, pharma, and real estate. Offer TBA. Due 21 Dec | Panthera Resources— The Company was established to act as a holding company for Indo Gold Limited, an unlisted Australian registered company. The Company aims to explore and develop gold assets in India and West Africa. Offer TBC, expected 20 Dec | Sumo Group—one of the UK's largest independent developers of AAA-rated video games providing both turnkey and codevelopment solutions, including initial concept and pre-production. Offer TBC. Due late Dec | Pelatro—provider of proprietary software solutions to enterprise-level customers for various aspects of precision marketing for use in B2C applications. Offer TBC, expected 19 December 2017 | Fusion Antibodies—contract research organisation providing services to biopharmaceutical and diagnostics companies that are involved in the development of antibodies for both therapeutic drug and diagnostic applications. Raising £5.5m at 82p plus £1.075mn vendor sale. £mkt cap £18.1m Due 18 Dec. | Sirius Petroleum—RTO. Becoming an operating company in the Ororo Field in Nigeria. Raising £7.2m/ Mkt Cap £35.6m. Due 19 Dec. | Bushveld Minerals—RTO of Bushveld Vametco and therefore 78.8% of Strategic Minerals Corporation, the intermediate holding company that owns a 75 per cent. interest in the Vametco Vanadium Mine. | Eqtec—Company with access to a proprietary advanced gasification technology used in industrial size power plants to convert waste into synthetic gas to generate electricity. Raising £1.6m. Mkt Cap £8.7m. Due 21 Dec | Volex VLX.L—The global provider of cable assemblies is proposing to move from the main market to AIM on 19 January. £71m market cap. FYMar18E rev £241.5m and £7.19m PBT | Miriad Advertising—Global video advertising company incorporated in 2015 and is engaged in the development of native invideo advertising. 2016 rev £0.7m and £7.3m operating loss. Offer TBA. Expected 19 Dec | OnTheMarket—Intention to float on AIM to raise c.£50m which will be used to fund the growth of the OnTheMarket.com portal,
already the third biggest UK residential property portal provider. Expected valuation £200m to £250m.
Companies: BIRD VER OTC MPH IQG PDZ MSYS REAT BCN
Future (FUTR LN) Results underline change and opportunity | IndigoVision Group (IND LN) Trading behind expectations; Chief Exec leaves | James Fisher & Sons (FSJ LN) Outlook unchanged; Offshore Oil recovery delayed | Sanderson Group (SND LN) Scaling up the Enterprise division | Speedy Hire (SDY LN) Earnings enhancing acquisitions | Vernalis (VER LN) Reduction in cough cold forecasts | WYG (WYG LN) UK challenges prompt further downgrades
Companies: SDY VER FSJ IND WYG SND FUTR
Tuzistra XR prescriptions (Rx) grew threefold to ~35k in FY16/17 (2nd year on the market) vs ~12k in FY15/16. Investment into addressing the barriers to higher Tuzistra XR prescribing is translating into higher Rx rates, although this has not been matched by revenue growth due to higher inventory stocking in the same period last year. In H217 FDA issued partner Tris with two complete response letters to Vernalis’s CCP-07 and CCP-08 NDAs and we now model launch during the 2018/19 cough cold season. Our updated forecasts reflect this and lower Tuzistra XR revenues due to a slower than anticipated sales trajectory in the near term.
See what's trending this week...
Futura Medical (FUM LN) H1 results: Eroxon® trial plan amended; licensing discussions underway | Goals Soccer Centres (GOAL LN) Further downgrades overshadow various strategic positives | Murgitroyd Group (MUR LN) Trading in line after record H2 performance | Oxford Instruments (OXIG LN) FY18 guidance maintained, but dependent on stronger H2 | Summit Therapeutics (SUMM LN) BARDA contract a major boost to ridinilazole | Vernalis (VER LN) Solid FY results driven by NCE collaborations; Tuzistra broadly in line
Companies: SUMM VER OXIG GOAL MUR FUM
FY results are ahead of our forecasts, mainly as a result of higher than expected NCE collaborative revenue, with Tuzistra™ XR prescriptions broadly in line. Following Complete Response Letters from the FDA for follow-on cough cold programmes CCP-07 and (post period-end) CCP-08, the share trades near all-time lows. Vernalis is currently working closely with Tris Pharma to resubmit the NDAs as soon as possible. We reiterate Hold.
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A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA
The announcement announced today highlights the potential breadth of the KidneyIntelX platform, opening up new routes to expand data inputs and test utility, and create opportunities alongside pharmacological therapy as a companion diagnostic. The first agreement with the University of Michigan adds an additional 800 chronic kidney disease (CKD) patients (adding to Mount Sinai’s 1,500 patients and the University of Groningen’s 3,500 patients) to analysis the performance of KidneyIntelX in different settings. This will ultimately carry additional sway with healthcare centres, regulators, and payers. The option to exclusively license a new urinary biomarker, urinary Epithelial Growth Factor (uEGF), shows the potential to add additional biomarkers and body fluids into the platform to further enhance the prognostic performance of KidneyIntelX. We understand there is a relatively immaterial upfront payment to access this new biobank, and a similar immaterial cash payment to gain the biomarker license option with additional milestones and standard tiered royalties payable if exercised. The second data sharing agreement with a major undisclosed pharma partner highlights KidneyIntelX’s potential use as a companion diagnostic (e.g. for SGLT2 inhibitors) and the potential to use the test multiple times to monitor drug response. This builds on work being conducted in Groningen with data expected H2 CY’20. Ultimately, pharmaceutical collaborations could drive additional long-term value creation and may open opportunities for lucrative licensing and M&A deals. At this juncture we make no changes to our forecasts and eagerly await further updates. We reiterate our positive stance on Renalytix.
Companies: Renalytix AI
Renalytix’s US IPO filing document went live overnight (having previously been filed confidentially). Whilst there are no details on size of offering, but the document is rich with details of the use of proceeds which we encourage UK investors to read. We are doing the same and will update our views in due course. Associated with the US filing document, another release this morning announces the publication of a circular, and outlines details for a new General Meeting on the 13 July 2020 to approve the issue of new shares, as well as board changes if the US IPO goes ahead. Namely, Julian Baines (Non-executive Chair) and Richard Evans (NED and Audit committee Chair) are stepping down from the board, Christopher Mills will assume the role of interim chair whilst a search for a successor is conducted.
Futura Medical confirms the timelines for the regulatory filings for MED3000, its novel erectile dysfunction (ED) treatment, are on track. Dialogues with both the US FDA and European Notified Body have been constructive. The EU Notified Body has begun its review of the supporting documentation and the FDA filing is still expected by end-Q320. There have been no COVID-19 related delays but, in our view, these remain a consideration. We assume the review processes will take a minimum of 12 months in both cases, so have approvals pencilled in for Q421. Commercialisation discussions are expected to start in earnest once the status of the regulatory approvals is known. Our DCF-based model, using conservative assumptions, values Futura Medical at £153.8m, equivalent to 60.9p a share.
Companies: Futura Medical
Today Ergomed held its annual general meeting (AGM). As expected, no new financial details were provided, although the executive chairman released a statement with a general business update. Q120 trading was good with ‘solid overall growth in revenue’ and cash generation ‘remained strong’. In Q220, Ergomed continued to grow the order book across the business and maintained its ‘revenue growth trend’. Its staff successfully adapted to remote working conditions and no employees were made redundant or furloughed. The H120 trading update will be released in July 2020 as usual, but Ergomed stated within its AGM update (June 10) that it is confident the results will be ‘in line with current market expectations’.
We are encouraged by today’s Phase IIa data from the hRPC programme in Retinitis Pigmentosa (RP) and continued clinical meaningful improvement in the treated eye vs. the untreated eye of 8.9 and 8.8 letters at 6 and 12 months, respectively. All patients have now reached 6 months of treatment, although one patient now has reached 18 months and continues to show a highly encouraging 16.0 letter improvement vs. the untreated eye. We believe analysing the 8 patients who had a successful surgical operation, and excluding the two patients who had surgical complications, is the most appropriate dataset. The recovery in eyesight of one of the two patients who had surgical complications is good news, but we exclude from our analysis. Whilst it is possible, we think this recovery is unlikely to be the result of the hRPC therapy. As previously announced, nine additional patients are expected to be recruited into the Phase IIa trial and sufficient data is expected to be available from the trial to seek approval in H2 2021 to commence a single pivotal clinical study in RP. We view today’s results to be supportive of ReNeuron’s investment thesis and the new primary focus on RP. We make no changes to our forecasts or valuation analysis, and look forward to further updates from the hRPC programme.
Companies: Reneuron Group
Hemogenyx (HEMO.L): Agreement with GlobalCo (from Friday) | ReNeuron Group (RENE.L): Positive data from ongoing Phase 2 retinal cell therapy trial
Companies: Hemogenyx Pharmaceuticals Reneuron Group
AVO’s goal is to deliver an affordable and novel proton therapy (PT) system, called LIGHT, based on state-of-the-art technology developed originally at the worldrenowned CERN. Over the past two years, the project has been significantly derisked through important technical milestones. AVO is working on the verification and validation phase, prior to LIGHT being used on the first patients to support CE certification. A recent equity issue, new loan facilities and some commercial announcements earlier in 2020 highlight the increasing confidence that is building in AVO’s ability to achieve its goal to deliver LIGHT in the near future.
Companies: Advanced Oncotherapy
Cambridge Cognition ("COG") has provided a trading update for the 6 months to 30 June and presented its growth strategy at an excellent Capital Markets Day. The Group continues to build on an impressive H1 2020, announcing additional contract wins that take the order intake to £4.9m (+88% vs H1 2019). COG is currently 'seeing unprecedented demand' for its solutions which enable pharmaceutical companies to continue clinical trials even while participants are unable to physically visit clinical trial sites.
Companies: Cambridge Cognition
We are initiating coverage on specialist pharmaceutical services provider Ergomed. We believe it should prove relatively resilient during the COVID-19 crisis and has the fundamentals in place to execute its growth strategy. Ergomed announced impressive audited numbers for FY19, with revenue up 26% to £68.3m and EBITDA up 5.5x to £12.5m. The FY19 announcement is effectively Ergomed’s fourth profit upgrade for FY19 and a small beat on recently reset FY19 expectations. Ergomed trades at a discounted EV/EBITDA of 10.1x vs the contract research outsourcing (CRO) sector average of 11.5x (FY20). We value Ergomed at £186m or 399p/share. Ergomed’s strong organic growth is benefiting from a clear strategic focus on high growth pharma sectors, margin control and order book growth (up 15% to £125m in FY19, giving 90% visibility to 2020).
SDI announced that it expects to meet market expectations for FY 2020, which are for adjusted pre-tax profit of £4.2m. Despite taking decisive action to reduce costs following the lockdown on 23 March, and confirmation that it has traded profitably in March and April, the lack of long-term visibility prompts a withdrawal of FY 2021 guidance. That said, we believe the company to have sufficient liquidity to weather the COVID-19 crisis with end markets still viable, and the improved 2020 margins are positive.
Companies: Scientific Digital Imaging
Following on from the Primestore MTM orders announced in April, EKF has received further orders worth $9.4m to be fulfilled between now and the end of July. This results in further upgrades to our already upgraded estimates, by 34% at the PBT/EPS level in FY20, with scope for further upgrades as and when additional orders are received. The Primestore device is proving its worth during the current Covid-19 pandemic. It deactivates viruses, bacteria, fungi and mycobacterium tuberculosis allowing safe sample handling and transport, greatly reducing risk of infection and enables samples to be transported at ambient temperatures, simplifying the significant logistical burden involved in transporting millions of samples. It is also worth reiterating that the sample collection device is agnostic as to which test is carried out on the patient sample, making this something of a picks and shovels play on the current environment. In addition to these US orders, EKF has now commissioned its facility in Wales and shipped its first product into the UK market this week. It has also begun the process to start manufacturing in Germany and will bring additional capacity on stream in the US in the near future. All of this is yet to be factored into estimates and represents additional potential sources of upgrades in due course. We continue to believe EKF is exceptionally well positioned in the current environment and is forming a crucial part of the supply chain required to significantly increase diagnostic testing capacity globally. EKF remains one of our Best Ideas for 2020, supported by a positive short and medium term outlook, strong fundamentals and a track record of meeting and beating expectations.
Companies: EKF Diagnostics Holding
New York state approval is a pivotal moment for Renalytix. Approval facilitates the launch of KidneyIntelX with launch partner Mount Sinai and progressively derisks the investment hypothesis. Understandably with Mount Sinai in the heart of the NYC Covid-19 health pandemic, testing and first commercial revenues is now set to begin in calendar Q3 2020 (vs Q2 2020) once the integration of KidneyIntelX into the Mount Sinai electronic health record is completed. Renalytix is now licensed to provide KidneyIntelX testing services in 47 states in the US, with the remaining licenses pending in calendar 2020. We have adjusted our forecasts to reflect a full launch in the Mount Sinai system in FY’21 (June yearend) and have upgraded our valuation analysis through unwinding our risk adjustment from 60% to 65%. Our valuation analysis now implies an intrinsic value of 477p/share (previously 459p/share).
Inspiration Healthcare has announced its intention to acquire SLE Limited (SLE), a leading neonatal ventilator designer and manufacturer for consideration of £18.0m. Inspiration Healthcare has conditionally raised £16.5m (gross, ahead of an open offer) via an oversubscribed equity placing to support the acquisition. We believe the acquisition represents a transformation deal, virtually doubling the size of the business and providing significant new revenue growth opportunities. We expect the acquisition, on a 12-month proforma basis to be accretive to adjusted earnings in the near-term and increasingly so in the medium-term. We reiterate our Buy recommendation.
Companies: Inspiration Healthcare Group
Alongside FY2019 results, Advanced Oncotherapy ("AVO") announced two new debt facilities which provide access to an additional c.£42m in strategic financing. The financing provides greater financial stability and flexibility for AVO moving forward, allowing the company to progress the development of the LIGHT system towards regulatory approval. LIGHT is now largely de-risked from a technology perspective, in our opinion, with development activities focused on the verification and validation of the system. In addition to an equity subscription completed in May (c.£15m), AVO has secured access to financing totalling nearly £60m in the 6 months to the end of June; an impressive achievement in our view which is credit to AVO's disruptive potential in the radiotherapy market, especially given COVID related headwinds currently faced by many companies today.