Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on Forterra. We currently have 24 research reports from 4 professional analysts.
Forterra's year-end trading statement confirmed results are expected to be “in line” and the outlook for 2019 appeared to be benign. Once again, net debt declined faster than expected – a regular feature since the company floated in April 2016. We are not changing estimates, other than nudging down debt. We believe that increasing housing construction, across all tenures, and a constrained and consolidated supply base should continue to underpin prospects.
Circassia Pharma (CIR.L) - specialty pharmaceutical company focused on respiratory disease transferring from the Main Market. No funds being raised. Due 4 Feb. Greenfields Petroleum (TSX-V:GNF) production focused company with operated assets in Azerbaijan seeking AIM dual listing including $60m private placement. Mkt cap $12.6m CAD. Expected late January 2019.
Companies: ITX GYM FORT SLN EDEN KAPE CLIN CALL TPG TLOU
Forterra has “marginally” pulled back profit guidance for FY 2018E due to the temporary closure of one of its brick plants, caused by a local power cut. We have cut our PBT estimate for the current year by £3m, at the high end of the company’s indicative £2 - 3m impact of the closure and repairs. This is the first profit warning since Forterra IPO’d in April 2016. The fact the shares rose on today’s announcement suggests to us the market interprets this entirely as force majeure.
Shares of housebuilders have fallen, possibly prompted by concerns about home prices and margins, potentially triggering weakness in the wider sector. We believe, however, that developers and basic material producers such as Forterra have limited exposure to those drivers and operate under very different dynamics. Their pricing power is underpinned by low inventories and a consolidated sector. The positive demand-supply situation could improve further due to new government housebuilding initiatives.
Forterra’s guidance in its HY results today that FY 2018 results would be “in line” contrasts with this morning’s unscheduled trading update from larger rival Ibstock, warning on 2018 profits, due to production difficulties, needing more spending. We believe that Forterra, the UK’s number two, is reaping the benefits of several plant upgrades since the IPO and more aggressive rationalisation during the last downturn. We have kept our PBT, EPS and DPS estimates unchanged.
Forterra’s AGM statement revealed that poor weather from the ‘Beast from the East’ had delayed production and deliveries during Q1 – in common with the rest of the sector – but predicted the shortfall would be made up during the rest of the year and that the outlook for the year remained in line with its expectations. It also outlined in detail its previously flagged plans to boost capacity by c. 100 million bricks.
Two features stood out in Forterra’s first full year results since its IPO: another significant ‘beat’ on cashflow expectations; and the formal signal that Britain’s second biggest brickmaker was to ‘press the button’ on a new plant, having previously waited until there was clear evidence of sustainable housebuilding demand. We believe the time is right, but that the company will remain measured in its expansion, in keeping with what we believe is its conservative track record.
Next week’s FY 2017E results from Forterra, we envisage, are likely to feature the continuing sector theme of the gap between demand and supply for bricks – an issue highlighted in rival Ibstock’s figures. Latest government data show stocks at almost the same lows as during the “shortages” of 2014, amid new recent highs in imports. Government policies to increase housebuilding supply indicates to us that there is scope for Forterra to move ahead with measured capacity increases.
Chancellor Philip Hammond’s Budget pledged to add 300,000 homes a year, up from 185,000 in 2016. This should support or even strain a favourable supply-demand balance, underpinning pricing of Forterra’s bricks, blocks and specialist products. The Bison deal may bring innovative systems to build homes faster. We have nudged up FY 17E estimates after the November trading update, but suspect the mid-term outlook could improve further, given this positive backdrop.
Strong demand in the newbuild housing market helped towards a good first half result, in terms of meeting our FY 17 EBITDA and another strong cash performance. Although company guidance for the FY is unchanged, we sense there is scope for slight outperformance, since the H1 result represents 53% of our FY estimate. Net debt was c. £10m below our estimates, before the Bison acquisition, which we thought was a positive move
Brick and concrete products manufacturer Forterra has broadened its end markets and added to the group's growth prospects with what we see as the opportunistic £20m acquisition of the trade and assets of Bison Manufacturing from loss-making construction group Laing O'Rourke. Forterra states that it would have cost over £35m to build the business itself on a greenfield site and estimates that the deal will make returns in excess of its cost of capital during 2019. We estimate it will at least break even in 2018.
Strong housebuilding data, encouraging statements from leading housebuilders and the Conservative Manifesto’s pledge to build 1.5 million homes by 2022, reinforce, in our view, the robust tone of Forterra’s AGM statement. This indicated strong brick demand and overall trading in the first four months and, once again, impressive cash flow. Short-, mid- and long-term trends appear encouraging, in our view.
A year to the day after the IPO, Forterra's US private equity owner has placed its entire remaining c. 53% holding at 195p – a 5% discount to yesterday's closing price. The placing was larger than initially proposed yesterday "due to strong investor demand". We believe the market may have viewed the 'overhang' as a concern and this might have partly explained the stock's discount versus larger rival Ibstock (IBST). The shares have reacted positively in early trading, rising to a new high. This comes against what we see as a positive backdrop for suppliers of bricks and other new housing products.
The top three brickmaker’s FY 2016 results announcement gave an upbeat outlook, for at least the first half of the current financial year, driven by “strong” house-building levels and a reduction in the stock overhang among builders’ merchants. It maintained guidance for FY 2017E. We have trimmed back our estimates, which were slightly ahead of consensus, principally to reflect a higher depreciation charge than we had modelled. We continue to believe that Forterra offers long-term growth, fuelled by Government housing policy.
Government aid to boost housebuilding could require at least half a billion more bricks by 2021, we estimate. This reinforces what we see as Forterra’s attractions to investors: a fundamental product, underpinned by long-term demand; a consolidated market; and conservative management. Forterra has, in our view, a particularly attractive risk-reward balance and an undemanding valuation relative to its peer group.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Forterra. We currently have 24 research reports from 4 professional analysts.
|08Feb19 09:00||RNS||Director Declaration|
|08Feb19 07:00||RNS||Appointment of new Independent NED|
|06Feb19 13:30||RNS||Employee Benefit Trust Share Purchase|
|15Jan19 13:38||RNS||Employee Benefit Trust Share Purchase|
|15Jan19 07:00||RNS||Trading Update|
|08Jan19 09:27||RNS||Employee Benefit Trust Share Purchase|
|19Dec18 10:09||RNS||Employee Benefit Trust Share Purchase|
Wey Education plc is a UK-based educational group delivering online education services in the UK and around the world. The tragic loss of its Executive Chairman towards the end of last year has necessitated a refocusing of Wey’s strategy, the details of which were announced in early February. Under the Chairmanship of Barrie Whipp, and led by CEO Jacqueline Daniell, the Group is now set to be more focused and streamlined around its existing businesses of InterHigh and Academy21. Coupled with a revised sales and marketing campaign, Wey is seeking to capitalise on the growing demand for online-based education, alongside targeted overseas opportunities to be achieved from the UK. Although there is a material rebasing of our estimates, we believe near-term forecast risk significantly reduces with potential, certainly in 2020E, towards the upside. Our DCF valuation conservatively sees fair value at 35p.
Companies: Wey Education
United Oil & Gas (UOG.L) an oil and gas exploration and development company brought to the Official List (Standard Segment) in July 2017 by way of a reverse takeover of Senterra Energy plc. No capital to be raised, expected market cap of £17m and expected 28 Feb 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.
Companies: NMRP PGD KDR CER CLIN NBB MLVN RENX BAGR D4T4
Avingtrans’ subsidiary, Hayward Tyler, has been awarded a material aftermarket contract from Vattenfall in Sweden for critical parts and components to help extend the life of the Forsmark nuclear power station. These parts will replace original equipment supplied by Hayward Tyler in the early 1980s. The contract is worth over £10m, with delivery expected to be broadly evenly split across FY2021 and FY2022. We have made no changes to our estimates, as contributions from the new contract begin after our current forecast horizon. However we are encouraged by the increasing momentum at Hayward Tyler since its acquisition by Avingtrans. We also see good potential for the business to win further contracts in nuclear life extension, given its installed base of original equipment within nuclear plants around the world. Avingtrans shares remain on undemanding EV/EBITDA multiples (8.3x FY19 and 7.1x FY20), with interim results scheduled for 27th February.
The market has not faced quite so many conflicting challenges for a number of years, whether related to global geopolitics, trade wars, ongoing Eurozone issues or the “will they, won’t they” saga of Brexit. In our Best Ideas, we sought to highlight stocks that present investors with interesting opportunities following recent market moves. Those stocks, we believe, warrant investor attention, in many cases for uncorrelated or stockspecific reasons, regardless of the near-to-medium term market direction. These stocks, in general, represent attractive and well-managed businesses or assets, with share price catalysts and where valuations or recent stock performance provide investors with a good entry point.
Companies: 7DIG ABBY AMS ANX ARS ATYM AVON BLVN PIER CGS CAML CALL CSRT TIDE DTG DEMG ELM EMR FPO FST GTLY GENL GRI GEEC HDY HMI HAYD HEAD HILS HTG HUR IBPO IOG INDI JHD JOG KEYS KCT KGH LAM MACF MOD MKLW OXIG PCA PARK PMO RBW RMM REDD RSW RNO RKH RBGP ROR SUS SCPA SHG SOLG TWD TRAK TRI VNET VTC ZTF
The AGM update points to a change in the business mix, with weaker microelectronics demand, particularly in China, partly offset by better-than-expected growth in subsea fibre couplers. 2H order books and demand profile signals a stronger 2H. The change results in a less rich margin mix and prompts us to downgrade 2019 EPS by 11.6%. We reduce our price target by a similar amount from 1,675p to 1,475p, pointing to a 2020 P/E of 22x. We anticipate that the shares will react to this disappointing statement but believe that the group’s fundamental attractions remain, but may need confirmation of a stronger level of microelectronics demand to restore outperformance.
Companies: Gooch & Housego
We are introducing our Best Ideas for 2019 and also review the performance of last year’s picks. We suggest ten solidly financed stocks with good business dynamics that ought to be considered for core portfolio holdings and six UK domestically focused stocks that our analysts believe should perform strongly in the event that uncertainties unwind. We also introduce a new style of research from N+1 Singer which presents a Company’s dynamics and metrics in a clear and concise manner and concentrates on the pivotal issues affecting that Company and an investment decision.
Companies: BCA CLIN CLG CBP DNLM EAH FDL FCRM FUTR GTLY INS GLE NICL SDL SPR TRI
Roses are red – markets are blue! The rally since the start of the year resumed this week, after a pull-back last week. The FTSE 100 has risen due to the weakness of sterling and the impact on its dollar-earning constituents. More domestically-oriented indices have also risen but lagged more recently. The latest Brexit twist is due later with a statement to Parliament on the negotiations. Company news continue to dominate the morning headlines and amendment votes the evening ones. In Share News & Views we comment on DCC, EU Supply* FireAngel*, Location Sciences*, Northbridge* and NWF.
Companies: AOR APC BONH BMS CTG CRPR DMTR ESC EUSP FDM FA/ LSAI NKTN PCF SNX TCN VRE W7L
RA International shares have fallen significantly since December 2018 when it announced that several contracts were delayed into early 2019 and stated that revenue and profits for FY18E are expected to be “slightly behind market expectations”. We thus reduced our FY18E revenue and profit forecasts by c10% to reflect these contract timing differences. We left 2019 and 2020 forecasts unchanged given the extensive level of bidding activity undertaken during the year (doubling to cUS$400m between the June 2018 float and September 2018 interims alone) and reference to increased revenue backlog in the trading update. The fundamentals remain intact with RA positioned to win more larger scale contracts with existing and new customers.
Companies: RA International
The group’s trading update, covering the past four months, points to the group trading in line. Overall, most market conditions remain similar to the first half. Once again, the weaker UK automotive market has been mentioned, although this is a small exposure in the group’s globally growing automotive customer base. With 70% of sales overseas, Brexit risks are relatively limited and manageable. We maintain existing forecasts and point out the recent market weakness has severely derated the shares to a discount to its peer group – where we see good value. The trading update should provide some reassurance and the rally in the share price should continue.
UK Oil & Gas (UKOG) – Corporate – Resumption of Test Production at HH-1 | Croma Security Solutions Group (CSSG) – Corporate – H1 trading update / Strategy for growth | Ascent Resources (AST) – Corporate – Board Changes
Companies: UKOG CSSG AST
Low & Bonar announced a fully underwritten £54m placing and open offer (c £50m net) alongside FY18 results. The new equity funding goes a long way towards resolving balance sheet net debt constraints and allows the relatively new management team to execute its updated strategic plan. Our revised estimates incorporate the funding effects, more gradual EBIT margin recovery and reset dividends in line with the stated policy.
Companies: Low & Bonar
This Investment Research Paper addresses the issue of renewable power generation in the UK and in mainland Europe, which – after the deep-seated financial crisis of 2008/09 and the ensuing recession – now has better prospects of achieving critical mass. It also considers investment perspectives.
Companies: OPM AVO AJB AGY ARBB AVCT DISH BUR CLIG CSH DNL DPP GTLY GDR HAYD KOOV MCL MUR NSF OXB PCA RE/ REDX STX SCE SIXH TRX TON VAL VTA W7L
MLVN’s update this morning shows that the business is on track to deliver a major turnaround YoY, with sales doubled and a significant move from a £0.7m loss in the prior year to our forecast c.£0.4m PBTA in FY2018E. This encouraging outcome reflects good momentum which built further in the second half, a successful re-set of the Singapore business (where MLVN made a highly complementary acquisition), a strong showing in London, and a successful acquisition in Manchester in 07/18. Malaysia appears to have stabilised, and with a clear strategy is expected to make progress in due course. Demand for MLVN’s professional education services remains strong, and the company has received top ratings from global accounting and professional services bodies. With a good start to bookings in 2019, we see further major progress in the current year (tripling of PBTA).
Companies: Malvern International
Trifast has a released a good tr ading update for the 4.5 months to 13 February with tr ading in line with the Group’s expectations and confidence in the future from new business wins. We make no change to forecasts but b elieve our numbers are well underpinned with some upward press ure and we believe the market shoul d progressively recognise this and re-rate the shares so we reiterate our buy rating.
Xpediator’s pre-close trading update said that revenues and profits are both inline with market expectations. Top-line growth was significantly ahead, rising 54% y-o-y to c.£179m (c.1% ahead of ED estimate), while profits have more than doubled to c.£7.1m. The uplift to revenues has been driven by organic growth, most notably in Freight Forwarding (Baltics and Balkans), Pall-Ex Romania, and Affinity. Plus, there were benefits from the acquisition of ISL and Anglia Forwarding in 2018, and Regional Express in late 2017.