Recognise has been awarded a banking licence with restrictions (Authorisation with restriction, or AwR) from the PRA / FCA, delivering on a major milestone on the road to implementing its strategy to provide SMEs with the credit and service they desperately need. The next step is to meet demands of mobilisation (systems and infrastructure), which is well advanced, leading to the removal of deposit restrictions (up to £50,000) and then on to the full licence. This could be as early as Q1 2021. High barriers to entry, struggling competition and high demand for the product/service offering suggest high growth capabilities, alongside a rapid path to profitability. Compare this against many of the struggling fintech or challenger bank offerings and the investment thesis becomes ever more compelling.
Companies: City of London Group plc
City of London Group (CIN): Corp Completion of capital raise | Minds + Machines (MMX): Corp Revenue recognition issue requires clarification
Companies: Minds + Machines Group Limited (MMX:LON)City of London Group plc (CIN:LON)
What’s cooking in the IPO kitchen?
Guild Esports a UK-based owner and developer of esports teams, has announced its intention to seek a listing of its ordinary shares to the Standard Listing segment of the London Stock Exchange this autumn. its founding shareholders include David Beckham, former football player and captain of England, and now co-owner of new MLS team Inter Miami CF.
HOME REIT intends to float to the Main Market raising up to £250m. The Company will seek to contribute to the alleviation of homelessness in the UK, whilst targeting inflation-protected income and capital returns, by investing in a diversified portfolio of assets across the UK which will be dedicated to providing accommodation to the homeless. Due Mid October
S-VENTURES - The Company will look to identify investment opportunities in the wellness sector within the UK and Europe. Due 16 Sep on the Aquis Exchange.
Sativa Wellness Group—(Canadian Securities Exchange: STIL) renamed from Stillcanna Inc following the conditional acquisition of Sativa Group (AQSE:SATI) to list on the AQUIS Exchange. A fully integrated European seed to consumer CBD group with the pricing, products, and stability to meet the CBD market demand in the medium term. With world-class extraction and formulation experts, an agricultural team that has over 20 years’ experience farming hemp, along with laboratory testing capabilities, the group has established itself globally as a trusted source of high-grade, premium wholesale CBD brands and products.
Umuthi Healthcare Solutions Plc, the technology led healthcare business focused on the distribution of pharmaceuticals and the provision of medical facilities in remote areas, seeking admission to the Standard Listing segment of the Official List
The Hut Group. Expected intention to float on the Main Market. THG is a vertically integrated digital-first consumer brands group, retailing its own brands in beauty and nutrition plus third party brands, via its proprietary technology platform to an online and global customer base. For the year ended 31 December 2019, THG's revenue was £1.1 billion, up 24.5 per cent. year-on-year, and its Adjusted EBITDA was £111.3 million, representing an Adjusted EBITDA margin of 9.8 per cent . The Company has experienced an acceleration in growth during 2020, with revenue of £676 million, up 35.8 per cent. on the equivalent prior year period , achieved in the 6 months to 30 June 2020, which the Directors believe evidenced the non-discretionary nature of the nutrition and beauty categories .
Kibo Energy PLC, the multi-asset Africa focused energy company, is seeking admission for its 100% owned UK subsidiary Sloane Developments Ltd , which will be renamed Mast Energy Developments PLC (MED), to the Standard List of the London Stock Exchange plc . Targeted for Q4 2020. The MED business strategy is to acquire and develop a portfolio of flexible small-scale power generation assets, exploiting a growth niche market in the UK for Reserve Power generation to balance out the national grid at critical times.
Companies: MIRI VAST VCP AEO GFIN DX/ BREE CIN LOOP PALM
Chariot Oil & Gas (CHAR): Corp Reboot | City of London Group (CIN): Corp Clearing the runway for take-off
Companies: Chariot Oil & Gas Limited (CHAR:LON)City of London Group plc (CIN:LON)
Placing to raise gross proceeds of up to £30m at 80p (conditional upon AGM authorities and FCA controller approval) with £25m secured from a prestigious global family office. This paves the way for the full banking licence and allows Recognise to implement its strategy to provide SMEs with the credit and service they desperately need. The highly experienced management team stands ready to serve the client base once the full licence has been awarded (expected to be in H1 CY 2021) and we reiterate our positive outlook and target price of 300p.
Avacta (AVCT): Corp | City of London Group (CIN): Corp | Robinson (RBN): Corp | Telit (TCM): Corp
Companies: AVCT RBN TCM CIN
Full-year results to 31 March 2020 show lower-than-expected adjusted PBT before bank license costs (-£6.3m vs. our estimate of -£3.1m) as Milton Homes revenue fell £0.9m to £3.6m, bad debt provisions increased £1.3m to £1.6m and provisions for goodwill impairment increased £1.5m to £1.6m. However, the investment thesis continues to revolve around the banking licence application for Recognise, with the subsidiary reaching a major milestone (23 July) by receiving a Total Capital Requirement from the PRA. We price the shares on what we believe the sustainable ROE would look like (19.6% at £1.1bn of lending) as the bank begins to operate normally from 2024, serving an SME sector in desperate need of credit that is issued quickly alongside customer service from dedicated relationship managers and an allowance for flexibility in structuring (the Big Four banks in this pocket of the market are slow, understaffed and increasingly pulling out of SME lending). A lack of a legacy lending book will also be a huge positive.
Alumasc (ALU): Corp FY trading statement | City of London Group (CIN): Corp Recognition of a resilient potential operating model | dotDigital (DOTD): Corp FY20 trading update | Frenkel Topping (FEN): Corp A creative, niche acquisition strategy to secure growth | NAHL (NAH): Corp Net debt reducing and cost savings identified
Companies: ALU DOTD FEN NAH CIN
Access Intelligence (ACC): Corp | Avacta (AVCT): Corp | City of London Group (CIN): Corp | InnovaDerma (IDP): Corp | Quixant (QXT): Corp
Companies: AVCT IDP QXT ACC CIN
City of London Group (CIN): Corp Ready steady go | ClearStar (CLSU): Corp Trading update | Destiny Pharma (DEST): Corp Asian Pacific guidelines support XF-73 future use | Evgen Pharma (EVG): Corp Interims – cash to Q3 2021 | SDI Group (SDI): Corp Interims on track for strong FY 2020 | Tristel (TSTL): Corp AGM and trading update
Companies: SDI TSTL DEST EVG CIN
City of London Group’s (COLG) interim results underlines that the current group forms a solid base for the banking operations, Recognise, which is expected to start operations in H2 2020. We see COLG as an attractive way to get exposure to the UK SME banking market, where a large market share is up for grabs as the current market leaders struggle to provide the service the customers want. We maintain our 300p target price.
There is at present a significant opportunity to gain a share of the UK SME banking market as the ‘Big Four’, which have historically dominated this market, increasingly struggle to meet SMEs’ service demands and generate sufficient profitability from their SME operations. City of London Group (COLG) has spent time, money and effort over recent years to set up a focused, licensed UK SME bank, Recognise, to target the UK SME market. Key regulatory and operational hurdles have now been cleared, the application has been sent and Recognise looks set to start operations in 2020. All indications point to a high return on the capital in the bank, supporting future capital raises. We initiate coverage of COLG with a 300p target price.
Allergy Therapeutics (AGY): Corp | City of London Group (CIN): Corp | discoverIE (DSCV): Corp | DX (DX): Corp | Redcentric (RCN): Corp
Companies: DSCV AGY RCN CIN DX/
Cambridge Cognition (COG): Corp eCOA contract worth $225,000 | City of London Group (CIN): Corp Harvest time | D4T4 Solutions (D4T4): Corp H1 as expected but with growing SaaS prospects | Gateley (GTLY): Corp Double-digit sales growth in H1 | Intercede (IGP): Corp Costs, tick, now for revenue | Omega Diagnostics (ODX): Corp Grass allergy test – first of screening assays | Wameja (WJA): Corp Strong Q3 momentum on the HomeSend network
Companies: COG D4T4 WJA IGP ODX GTLY CIN
Techniplas –global producer and support services company providing highly engineered and technically complex components, making the supply chain to original equipment manufacturers more efficient. FYDec17 rev $515m. Loungers plc—the operator of 146 café/bar/restaurants across England and Wales under the Lounge and Cosy Club brands, announces its intention to seek admission on AIM, offer TBC, expected late April. 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.
Companies: CCS JOG CIN FLTA EDR GAN LOOP SRC RCN
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Oxford University and AstraZeneca announced the first interim analysis from the Phase III study of its COVID-19 vaccine candidate, which was found to be 70% effective in preventing COVID-19. This follows similar announcements from Moderna, and Pfizer/BioNTech in the previous two weeks, and the caveats we mentioned at the time remain the same. While all of these results have been highly encouraging, we reiterate that they do not diminish the urgent need for COVID-19 treatments and testing, which will be required for years to come. We consider Synairgen, Avacta, genedrive, Omega Diagnostics and Open Orphan to offer good buying opportunities.
Companies: AVCT ODX SNG GDR ORPH
Appreciate is the UK's leading voucher, gift card, and e-code provider, working with brands from Iceland to Halfords to Boots. It sells its pre-paid products to corporates as well as directly to consumers. It also runs the UK's largest Christmas Savings scheme, having helped some 2.7m families put money aside for Christmas expenses over the years.
In Appreciate, we see a business that's undergone significant change and modernisation since 2018. Under its highly competent and dynamic management team it has transformed from a Christmas savings business that physically produced hampers, to a pure play financial services business with material growth prospects in the longer term.
Companies: Appreciate Group plc
Gateley’s H1 update is highly impressive, confirming a year on year improvement in activity levels in September and October and a strong sense of optimism at the beginning of H2. The Platforms continue to drive new business, whilst operating margins have benefited from cost actions taken in response to the pandemic (H1 PBT will show growth year on year). In light of the confident tenor of the statement, we reintroduce headline forecasts this morning, assuming stable revenue this year - which would be a considerable achievement - with profits returning to pre-pandemic levels by FY23.
Companies: Gateley (Holdings) Plc
Braemar’s associate AqualisBraemar (AQUA-OSL) announced an acquisition and equity raise yesterday that was very well received by investors. The AQUA share price finished the day up +25%, meaning Braemar’s stake (which is on the balance sheet at £7m) is now worth £13.4m. This provides increased support to Braemar’s valuation and a significant potential source of funds if the stake were to be realised in the future. In the meantime, it provides a useful and increasing source of dividend income (prior to yesterday’s deal, we had forecast £0.6m dividend income p.a.) and we continue to highlight the strategic progress the new management team at Braemar is making and the very significant valuation gap to closest peer Clarkson (December 2021 P/E 22x).
Companies: Braemar Shipping Services plc
In its trading update, management confirmed that adjusted FY20e PBT is expected to be c €52m, a 27% increase y-o-y and 12.7% ahead of our prior estimate, with revenues of €367m, 0.5% ahead of our prior estimate. FY20e margins of 14.2% vs 12.5% in FY19 are driven by improved operational leverage and tight cost control, together with COVID-19 related cost reduction (eg marketing, travel). Having pared back our forecasts at the start of the COVID-19 pandemic, we now upgrade our FY20 estimates for a second time to reflect the significantly stronger margins in H220e, raising our FY21 estimates and introducing our FY22 estimates. We have also incorporated the US$32m acquisition of the LA-based marketing services business, gnet. With substantial financial resources following its £100m placing in May, management remains focused on its M&A agenda.
Companies: Keywords Studios plc
In an encouraging H1 update, Gateley has detailed that the Group’s activity levels and revenue generation continue to follow an improving trend with monthly activity during September and October being in excess of prior year. Sales in H1 2021E are expected to be not less than £50.0m (-3.5% on H1 2020) but adj. PBT is expected to be not less than £7.0m, up from £6.6m as cost-reduction initiatives benefited. Net cash was £9.6m at October 2020. We have reinstated forecasts, assuming H2 sees some increase in costs as salaries normalise and a bonus is accrued before more normal growth rates resume. Similarly, we assume dividends resume with a final in FY 2021E. We reiterate our view that Gateley’s proven model provides good growth prospects, supported by the addition of high-quality staff and acquisitions, strengthening the range of services offered.
President Trump likes to project himself as a highly successful businessman, but surprisingly little is known about his true financial position. Various articles, including a 2016 in-depth analysis by The Wall Street Journal, have speculated about his income and asset base. All sorts of claims and counter-claims have been made about his wealth – by Trump himself, pitching his fortune at some $9bn, and by journalist Timothy O'Brien, suggesting that it is as “low” as $150m-$250m. It is doubtful whether we shall ever know the truth, but we can use Trump’s UK corporate filings to gain an insight into his businesses in Scotland.
Companies: AVO ARBB ARIX CLIG DNL FLTA ICGT PCA PIN PHP RECI STX SCE TRX SHED VTA YEW
Thruvision has reported results for the six months to end-September 2020, showing a steady financial performance, with cost control enabling EBITDA break-even to be achieved in the half year, despite the challenges presented by the COVID-19 pandemic. H1 FY21 revenues were steady year-on-year at £4.7m, with gross margin being held at 48%. Net cash has increased from £5.0m at 30 September 2020 to £7.8m at 20 November, following payment from US Customs and Border Protection (CBP), which made a substantial £2.9m follow-on order in the half year. Near-term uncertainty means management are not in a position to provide full-year guidance for FY21, but they report a strengthening sales pipeline and their growing confidence in medium-term prospects is evidenced by investment in sales and pre-sales resource in both the US and Europe to support increased demand.
Companies: Thruvision Group PLC
Strong trading has continued through October and we raise FY21 revs forecasts by 6% to £56m. With much of the upside from lower margin SMS, we leave profits forecasts unchanged. H2FY20 revenue growth was impacted by the pandemic and dropped to 9% after 2.5 years of 15% growth. Our new FY21 forecast imply a return to c. 18% growth as dotdigital makes a strong recovery and benefits from the shift to omnichannel online marketing driven by booming e-commerce. FY20 growth was strongly assisted by International revenues up 19% and Functionality up 16% and yet there is still plenty of room for growth here with the former just 31%/revs and the latter just 30%. We see a significant and extended growth runway leading to consistent progress for the company over the foreseeable future.
Companies: dotDigital Group plc
Today's news & views, plus announcements from Compass Group, CRH, Carnival, AO World, Pets at Home, Appreciate Group*, ImmuPharma and IG Design.
*We have also initiated coverage on Appreciate Group, with the note linked in this edition.
RBG Holdings has updated on significant transactions completed in the Group’s Convex and LionFish divisions since its last market update in mid-September. With the Group’s legal division – RBL – continuing to trade well, management now have considerably improved visibility on financial performance, and so reinstate guidance with an expected FY20E revenue range of £24m-£26m (FY19A: £23.7m). For FY21E we anticipate revenue in the range of £26m-£29m We take this opportunity to reinstate our forecasts for both FY20E and FY21E; revenues of £24.6m / £26.9m, adj EBITDA £6.8m / £8.9m, adj EPS 5.0p / 6.8p respectively. Our forecasts are cautiously positioned towards the bottom end of guidance, with scope for upgrades when discretionary litigation asset sales or Convex transactions complete. On our FY21E forecast of 6.8p adj EPS, a mid-teens multiple of 15x PER implies the shares could be worth 100p.
Companies: RBG Holdings Plc
Last year, Venture Capital Trusts raised the second-highest amount since their launch in 1995, according to the Association of Investment Companies. This is good news for smaller companies seeking growth finance. Changes to pension regulations mean that VCTs are expected to continue to attract investors. Individual qualifying companies can receive up to £10m from VCT investors.
Companies: KEYS NBI MPM PTY BOO W7L
WSG reported H120 financials results with another period of double-digit revenue growth as well as positive EBITDA and EPS for the first time.
Companies: Westminster Group plc
The COVID-19 crisis is likely to persist for longer, although TUI sees early signs of enthusiasm for leisure in next summer. The second stabilisation package of €1.2bn has been granted to support TUI’s wait until holidaymakers show up again.
Companies: TUI AG
Keywords Studios has again showed the resilience of its model in H120, delivering 8% l-f-l revenue growth, 19% adjusted EBITDA growth and 17% adjusted EPS growth despite the impact of COVID-19. Adjusted EBITDA margins of 17.8% have held up better than we expected. Looking ahead, we see sustained industry growth, led by the console transition in Q420, with publishers increasingly recognising the resilience Keywords adds to their development processes. Following its third acquisition of the year, we see management once more focusing on M&A with net cash of €101m. Keywords’ strategy, which has delivered a five-year EPS CAGR of 42%, appears sustainable, with dividend payments to be resumed in FY21. As such, we believe that the shares remain set for continued appreciation.