Initial Equity Trading Comments - 11 May 2023

JD Sports Fashion - Set to take on America

Few retailers can boast the enviable track record of JD Sports, the ambitious multi-channel ‘athleisure’ business with a fashion-forward offering that combines the major sportswear brands with established own-label ranges. The company’s expanding international footprint is about to be enhanced by a potentially game-changing recently announced US acquisition, which has yet to be reflected in the consensus forecasts.

Good sports

JD’s P/E ratio appears reasonable relative to those of other UK retailers of young fashion with international ambitions. However, it is almost twice the level of rival Sports Direct’s (SPD). While there are justifications for a healthy premium, it is likely to act as a brake on the valuation, as will the low dividend yield.

Continued strong trading drives 3.8% FY’16 upgrade

Continued strong trading so far in H2 has led JD to upgrade its full year PBT guidance to c£135m, leading us to upgrade our forecasts by 3.8% from £130m (cons £125m). JD’s prospects look favourable given the ongoing trend towards athletic apparel and footwear, suggesting there may yet be further upside risk to forecasts. However, limited disclosure at a time when divisional and geographic complexity is on the increase makes this difficult to be certain of. With the stock trading on a cal’16 P/E

Morning Song

AMINO TECHNOLOGIES (AMO LN) Starting to rebuild - Buy | CVS GROUP PLC (CVSG LN) Strategically positive corporate news strengthens growth thesis | IOMART GROUP (IOM LN) Underpinned, with upside from further acquisitions | JD SPORTS FASHION PLC (JD/ LN) Continued strong trading drives 3.8% FY’16 upgrade | SIGMA CAPITAL GROUP PLC (SGM LN) Development of PRS begins ahead of schedule

Strong H1 growth highlights gains via organic and market growth trends

JD has delivered an excellent first half result, ahead of our forecast – although, it should be noted that in the absence of any performance details having been released in H1, forecast visibility was low. The beat against our estimate stemmed from the core Sports fascias. The combination of operational initiatives and positive end market trends suggests to us that forecast risk could still be to the upside there. Outdoor is still loss making and continues to carry surplus A/W14 stock, but chang

Upgrades as favourable fashion trends continue

JD has delivered a strong H1 performance, led by the core Sports fascias where we estimate LFL growth to have continued at the rate seen in H2 (i.e. +12%). This is an important achievement signifying strong growth on growth, and confirms that the favourable trend in athletic footwear and apparel is continuing. We have upgraded FY’16 PBT by 13.6% as a result. It is hard to know if this 2-year run rate can be sustained over the seasonal peak, when densities are higher, but if it can then further u

Morning Song

Avon Rubber (AVON LN) | Hill & Smith Holdings (HILS LN) | JD Sports Fashion (JD/ LN) | UDG Healthcare (UDG LN)

New flagship in Oxford Street well worth the capital investment

Although Oxford Street capex will be >10% of JD’s £70m FY budget the use of funds is not excessive. With international aspirations JD needed to raise its profile in London to attract attention from brands and future partners. So whilst securing the lease came at a significant cost, the flagship is a key stepping stone for future development. On the £3m fit-out it should generate a direct return - the store could break-even in Jan’16 and over time could make £1-2m EBIT. The site visit serves as a

Morning Song

Goals Soccer Centres (GOAL LN) Mixed H1 trading update – we downgrade from Buy to Hold | JD Sports Fashion (JD/ LN) New flagship in Oxford Street well worth the capital investment | NCC Group (NCC LN) Finals show strong performance from core businesses | Spirent Communications (SPT LN) Weak first half but Q2 order intake stronger | Summit Therapeutics (SUMM LN) FDA grants Fast Track designation for SMT 19969

Morning Song

Applied Graphene Materials (AGM LN) First patent approval secured | Futura Medical (FUM LN) AGM statement shows continued progress | JD Sports Fashion (JD/ LN) Strong start to the year and confidence in meeting FY expectations | MJ Gleeson (GLE LN) FY15 results to be ahead of expectations following strategic land sale | Redcentric (RCN LN) Clean year showcases organic growth | Ten Alps (TAL LN) Extracting value and putting TAL on a growth path | The Innovation Group (TIG LN) £46m contract win wi

Surface Transforms plc (SCE LN) - Forecasts and valuation withdrawn

We note the regulatory announcement this morning from Surface Transforms and withdraw our estimates and valuation, pending conversations with management.

Surface Transforms - New guidance – forecasts under review

Surface Transforms has issued new revenue guidance for FY24, with the company now expecting revenues in the range £17.5-22m. We are withdrawing our previous forecasts for FY24 and withdrawing our price target while we review the impact of the new guidance.

Morning Note – 16 April 2024

Robust margin and cash performance

Surface Transforms (SCE LN) - Obstacles removed for higher production

Surface has issued a brief Q1 update. Production will ramp-up this year as final new equipment is installed, and manufacturing teething problems recede.

Initial Equity Trading Comments - 19 February 2024

Hybridan Small Cap Feast - 16/04/2024

16th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radical Limited for

Dowlais Group - Motoring forward

Dowlais Group’s first set of results were ahead of our expectations, with positive cash generation a highlight despite restructuring and demerger costs. Softer automotive markets will limit margin progress in FY24 towards the double-digit target. Despite this, margins of c 6.5% are still ahead of automotive peers, although the shares trade at a significant discount to our implied generic peer-based valuation.

Morning Note – 9 April 2024

Zeus Top Picks for 2024 - 2023 review and outlook for 2024

On 9 January last year, we set out our ten top stock picks for 2023, for what turned out to be another relatively poor twelve months for UK equities due to two wars, stubbornly high inflation and further tightening of monetary policy. This was even as other major markets, such as the US, largely recovered in the year. In the 2023 calendar year, the AIM All-Share index fell 8.2% and is still 42% off its 2021 high. From the release of our 2023 top picks note, the average total return (assuming div

Morning Note – 4 April 2024

LIBERUM: New Energy Nuggets: Hydrogen - the future is green

Hybridan Small Cap Feast - 17 April 24

17th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radi

Gooch & Housego (GHH LN) - A chink of light

Gooch has issued a positive update for H1. Trading has started to recover with stocking levels normalising at industrial and medical devices customers. The outlook is positive with growth returning, and management has confirmed our full year estimates (adjusted for the disposal of EM4). The order book and order flow appear healthy, and net debt is comfortable. Gooch clearly still has plenty to do to lift operating margins from a lacklustre 8.1%, but the transformation plan appears to be back on

Nexteq - FY23 adj EBITDA +4% ahead, FY24E upgrades of +1-10%

Nexteq’s FY23 results show adjusted EBITDA +4% ahead of the +6% upgrade at the January trading update, record FY23 EFCF of $17.4m, and a confident outlook that leads us to reiterate our FY24E revenue and upgrade FY24E gross profit, adj EBITDA, and EFCF by +1-10%. The strategic focus on higher-margin products and customers reducing elevated inventory levels led FY23 group revenue -5% yoy to $114.3m, with Quixant 6% lower at $69.3m and Densitron 2% lower at $45.1m. Effective supply-chain managemen