Churchill China (CHH LN) Continuing to dish out premium growth | IFG Group (IFP LN) Operational progress, but still no clarity on HMRC investigation | Xaar (XAR LN) Trading below expectations; reviewing partnering options for printheads
Companies: CHH IFP XAR
Crossword Cybersecurity PLC* (NEX:CCS)—the technology commercialisation company focusing exclusively on the cyber security sector is exploring its options in relation to a potential move to the AIM market of the London Stock Exchange which, if it were to proceed, would likely take place over the next few months.
Path Investments (PATH) -RTO of a 50 per cent. participating interest in the producing Alfeld-Elze II gas field located 22 kilometres south of Hannover in Germany. Offer TBA. Due late Aug.
Kropz PLC-Intention to float by the emerging plant nutrient producer with an advanced stage phosphate mining project in South Africa and exploration assets in West Africa
Companies: IFP KETL EME BBB GWMO SYM FIH CRAW RBD SSY
Cello Health (CLL LN) AGM | Gresham Technologies (GHT LN) Clareti win with global tier 1 bank | IFG Group (IFP LN) Q1 update shows some progress, cost review in progress | Microsaic Systems (MSYS LN) 3rd small molecule agreement signed this year | Renishaw (RSW LN)
Strong Q3 update with modest increase in guidance
Companies: CLL GHT IFP MSYS RSW
Team17 Group -video games label and creative partner for independent developers. Since 2014, delivered a revenue CAGR of 69% (31 December 2015 to 31 December 2017), with revenues of £29.6m and Adjusted EBITDA of £12.9m. Offer TBA
Serinus Energy -international upstream oil and gas exploration and production company. Its principal assets are located in Romania (development phase) and Tunisia (production phase). Raising c.£10m. Offer TBA. Due mid May.
Companies: IFP NMRP LME IGAS MSYS CLL GWI VLG FFI TYR
Edison Investment Research is terminating coverage on IFG Group (IFP). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant.
Companies: IFG Group
2016 saw growth in revenues, as well as a further increase in client numbers and assets under advice and administration (AUA), both positive indicators for future performance. However, accelerated investment aimed at further enhancing IFG’s ability to serve clients and deliver further sustainable growth was a drag on earnings in addition to the well-flagged negative impact of reduced interest rates. A platform repricing initiative to be phased in will ameliorate the ongoing impact from low rates in the current year. Investment in improving the customer proposition should better position IFG to benefit from an ageing population and pension freedom, while balance sheet strength supports organic and inorganic growth opportunities.
In its trading update IFG reported that performance has been in line with management expectations. The cooling effect of market uncertainty on growth in James Hay and financial advice client numbers, together with the impact of low interest rates, remain a near-term head wind for revenues. Even so, with Saunderson House continuing to increase profits, IFG expects to match 2015 earnings. The long-term growth opportunity presented by an ageing population and pension freedoms remains in place and to address this IFG is continuing investment to enhance its service and increase operational gearing.
Uncertainty surrounding the EU referendum and the accompanying reduction in base rate has resulted in lower earnings estimates for IFG, although the longer-term outlook for its two businesses remains promising. Both the retirement wealth platform and financial adviser stand to benefit from an ageing population and pension freedoms. Meanwhile, IFG continues to invest to address these opportunities and has sufficient capital and net cash to support growth while maintaining a progressive dividend policy.
IFG’s Q1 trading update reports the group trading in line with expectations with both James Hay and Saunderson House continuing to attract new clients and assets, and maintain strong levels of retention. Revenues and profits are ahead of the same period in 2015 with a continued emphasis on margin and costs discipline. The refocused IFG is well positioned for further progress, supported by a strong and liquid balance sheet, in markets that offer good long-term growth potential and consolidation opportunities.
First Derivatives (FDP LN) No surprises expected from full year results on 17 May | IFG Group (IFP LN) Positive start to the year, 21% upside to target price
Companies: First Derivatives Plc IFG Group
IFG Group released a Q1 update yesterday lunchtime which illustrated a positive start to FY16e, in-line with our current expectations. AuA grew by 2.1% in JHP whilst c.50 new clients were added in Saunderson House; both indicative of organic growth momentum. We are encouraged by reported performance but, at this early stage in the year, leave our forecasts unchanged. We retain our BUY recommendation underpinned by a 215p 12m TP, set using a SOTP using prudent divisional multiples.
A review of other platform businesses leads us to increase our valuation of JHP and drives a positive shift in our group sum-of-the-parts ‘relative’ valuation to €2.45, (was €2.15). Our DCF ‘absolute’ valuation is now €2.33. The mid-point is €2.39.
IFG Group delivered strong final results for 2015 (reported 22/3) with returns on investment beginning to become evident. Notably, the operating margin in the group’s James Hay (“JHP”) pensions business grew by 670bps leading to a 20% beat vs our EPS forecasts. Whilst maintaining some caution in our forecasts, we expect further earnings growth on an operationally geared platform. Given two distinct business units, we set our 12m Target Price at 215p using a SOTP valuation – equating to 12.7x FY16e EV/EBITDA – and we reiterate our BUY recommendation.
Brewin Dolphin Holdings (BRW LN) Shares undeservedly lagging key benchmarks | First Derivatives (FDP LN) Full year comfortably ahead of expectations | IFG Group (IFP LN) Upgrading forecasts, improving returns | Instem (INS LN) SEND momentum building
Companies: BRW FDP IFP INS HYVE
IFG Group (“IFG”) has reported strong final results for FY15. Revenues were broadly in line with our forecast, however, as a result of improvement in the underlying margin performance in James Hay, IFG has delivered 8.1p adj. EPS for the period – ahead of our 6.7p forecast. The balance sheet remains strong and net cash has grown to £27.3m on strong operating cash flow and consideration from disposals. We expect IFG to continue to deliver strong shareholder returns from further growth in an operational geared model, with a strong balance sheet underpinning.
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FY20A results largely reflect a period prior to the Covid-19 lockdown, yet show Duke entering a more challenging FY21E with momentum. Yesterday's trading update demonstrated another notable rise in quarterly cash receipts for Q2/21, as royalty partner trading continues to improve. As some partners' forbearance measures will expire this month, Q3/21 receipts should continue this upwardly momentum. This opens the door to a return to cash dividends at some future point. Today, Duke also confirms it is now seeking new royalty partners, alongside follow-ons.
Companies: Duke Royalty
With the sale of the Singaporean operations for £1.6bn, the new CEO, Amanda Blanc, shows her intention to focus rapidly on its preferred markets (the UK, Ireland and Canada). The next candidate for sale is the French unit. This transaction is more complicated than the previous one, with the necessity to obtain the agreement of Afer, its key partner in France. With potential proceeds of £2.9bn, Aviva could reduce its debts significantly and allocate more capital to the UK bulk annuity business.
Companies: Aviva Plc
Oil posted its first back-to-back weekly loss since April's rout with the end of the summer driving season and concern about OPEC's production compliance weighing on prices.
Futures in New York edged up on Friday, but prices fell 6.1% this week coinciding with a retreat in U.S. equities. Traders are also examining data indicating the United Arab Emirates since July has been regularly exceeding its quota under a deal between the Organization of Petroleum Exporting Countries and its allies.
The uncertainty over how much supply OPEC+ is returning to the market adds another wrench in the recovery for oil prices still reeling from the pandemic-driven blow to consumption. While U.S. supplies had grown tighter in past months and producers were expected to restrain production amid a weak financial backdrop, stockpiles rose again last week for the first time since mid-July.
Companies: XOM HES KOS JSE 88E ADV CAD CHAR ECHO ENOG EME I3E PMG RBD SQZ SOU TLW VGAS WTE PHAR
What’s new: CLIG results have beaten Zeus expectations at revenue, EPS and DPS. On 14 July CLIG provided an update which revealed $338m of net inflows (6% of opening FUM), outperformance of the Emerging Market and Developed strategies (98% of FuM) and 25% rise in FuM in 4Q to $5.5bn and an indication that the final dividend would be not less than last year. In our opinion, key features of CLIG’s full year results include:
4.4% rise in revenue to £33.3m (Zeus forecast: £32.0m);
6.1% fall in adj PBT to £10.7m (Zeus forecast: £10.3m), excluding gains/losses on seed investment 9.4% rise to £11.6m (FY19: £10.6m);
3.2% rise in adj EPS to 35.3p (Zeus forecast 32.5p);
11.1% rise in final DPS to 20.0p (Zeus forecast: 18p) with the total DPS of 30p (Zeus forecast: 28p) is 11.1% above the prior year excluding special DPS.
Net cash of £14.6m (Zeus forecast: £10.0m)
The acquisition of KMI is expected to complete on 1 October 2020.
Companies: City of London Investment Group Plc
The COVID-19 pandemic has had a significant impact globally in many areas. While primarily a health issue, it has had wide-ranging implications for stock markets, which have now rallied after the plunge in share prices in mid-March when the full severity of the emerging pandemic became more widely appreciated. Nonetheless, the FTSE 100 Index remains almost 20% off its late February 2020 figure.
Companies: AVO ARBB ARIX CLIG DNL GDR ICGT NSF PCA PIN PXC PHP RECI STX SCE TRX SHED VTA YEW
S4 Capital had an extraordinary week with strong interims and an impressive CMD accompanied by a further merger and topped off with winning its third Whopper. Interims were ahead of our expectations and we were particularly encouraged by LFL Gross Profit growth of +18% in July. The group announced the merger with Dare.Win, an award-winning digital creative agency which extends the geographical presence of MediaMonks to France. BMW and MINI consolidated its Pan-European account into a team led by MediaMonks, which is the third whopper account for S4 Capital, and notable in our view for being won in a pitch, rather than by land & expand, and being an automotive rather than technology client. The group held a three day CMD and our summary would be i) Day One demonstrated the compelling strategic logic and strict financial discipline underpinning the group ii) Day Two illustrated the already formidable partner/client list of S4 Capital, including Adobe, Amazon, Google and CAA and iii) Day Three highlighted the chemistry between the individual agencies brought together to form S4 Capital and the outstanding work that they produce. To reflect BMW and Dare.Win we raise our FY21 EPS forecast by +8% to 10.8p (was 10.0p) and continue to view 15p as a realistic target with further whoppers in prospect and the balance of the recent equity raise to deploy. On a 30x multiple, we raise our target price to 450p (was 375p) and retain our Buy recommendation.
Companies: S4 Capital Plc
Frontier IP has announced it has invested £320k in a £720k convertible loan financing of Nandi Proteins. Nandi Proteins is developing functional proteins for food ingredients aimed at reducing levels of fat, additives and gluten in processed foods addressing important social, health and environmental concerns about processed food. Frontier IP holds a 20.1% equity stake in Nandi Proteins; the last disclosed value of the holding was back in July 2017 at approx. £2.9m. Connected in part to the announcement today, we have used the opportunity to refresh our cash flow forecasts to reflect the net £2.1m proceeds of the July 2020 fundraise, the planned deployment of proceeds into bridge financing and refreshed our Sum-of-the-Parts valuation analysis to reflect the excellent portfolio progress made in FY’20. We anticipate a 50% increase in the unrealised profit on the revaluation of investments in FY’20e to £5.82m (vs. £3.0m prior estimate; £3.85m in FY’19). Applying the peer group multiple of 1.6x on Yr1 Book value of late-stage assets and incorporating the £2.1m proceeds and dilution associated with the July placing, implies an intrinsic value of 82p/share, 27% above the current share.
Companies: Frontier IP Group Plc
We believe now is an interesting time to invest in Northgate, with a new executive board and a capable management team in place who have already delivered progress on an ongoing turnaround as we await a full strategic review. The group now has a clear and well communicated capital allocation strategy in place and improved earnings quality, in our view. We believe that the growth opportunity in the UK, the value of the Spanish business and the progress made to date with the turnaround are not being reflected in the share price, which is currently 15.9% below book value (414p per share in FY19A rising to 468p in FY22E). We use a variety of valuation methods including P/B, SOTP, DDM and DCF modelling and arrive at an average implied share price of 450p, 29.0% above the current share price.
Companies: Redde Northgate Plc
Following a solid H120, HgCapital Trust (HGT) announced several portfolio transactions representing a considerable uplift to the carrying value at end March 2020 and translating into a c 12.0% ytd NAV total return (TR) to end August. On completion of these deals, HGT’s cash resources will improve significantly to £314m from £123m in early July, while its unfunded commitments will decline to £814m. Consequently, HGT’s commitment coverage ratio will improve markedly to c 39% vs 13% in early July.
Companies: Hgcapital Trust
Artemis Alpha Trust (ATS LN) has undergone a radical transformation over the past two years following a comprehensive strategic review. In April 2018, the trust held around 90 stocks with approximately 25% of NAV held in unquoted positions. Following the implementation of the review, Kartik Kumar (who has been with Artemis since 2012) was appointed lead manager alongside John Dodd remaining in place with an overseeing role. Kartik has since significantly reduced the number of stocks to a much more concentrated high conviction portfolio of just 36 stocks, and has significantly reduced the unquoted exposure to only 7%. This shift in focus has at the same time improved portfolio liquidity by moving up the market capitalisation scale.
Companies: Artemis Alpha Trust
L&G reported an operating profit from continuing divisions (excluding Mature Savings and General Insurance businesses) of £1,128m, -2.2% yoy. The COVID-19-related cost was £129m. LGR posted a growing operating profit to £721m. Net profit amounted to £290m vs. £874m a year before, being affected by the reduced discount rate used to calculate LGI reserves. The Solvency II ratio stood at 173%. The Board recommended an interim dividend of 4.93p/share, stable relative to H1 19.
Companies: Legal & General Group Plc
Avation is a lessor of commercial aircraft to a diversified airline client base. In relation to the ongoing administration process of Virgin Australia, Avation has this morning announced that following the successful placing of five of the original thirteen aircraft that were on lease to the airline (two Fokker 100s plus three ATR 72-500s, with the latter having gone to two new customers), the remaining eight aircraft will be returned to Avation, being made up of three ATR 72-500s and five ATR 72-600s. Additionally, subject to approval at a creditors' meeting scheduled for 4 September 2020, the expected return to unsecured creditors is now anticipated at between 9-13% being paid prior to 30 June 2021.
Companies: Avation Plc
Deltic Energy is entering an exciting phase in its development based on its fully funded joint-venture projects with Shell. Preparations are now underway for an exploration well to test the Pensacola Zechstein prospect in the SNS (Southern North Sea). Deltic has indicated that it expects the current contingent well commitment to become firm on schedule by December 1, 2020. Drilling, according to Deltic, should follow in H2 2021. We see scope for positive news flow over the next few months, not least from the evaluation of Shell’s recently obtained processed 3-D seismic over Pensacola. Following Pensacola, the Selene prospect is scheduled to be drilled in mid-2022. The recent 32nd Round UKCS licence awards greatly expands Deltic’s exploration potential in the CNS and particularly the SNS Carboniferous fairway. Here some highly prospective acreage has been obtained.
Companies: Deltic Energy Plc
Belvoir’s H1 results evidence both strategic progress and profits growth. Given the challenges presented by COVID-19, this bodes very well for the group’s long-term growth potential. H1 adj. EPS grew +16%, the acquisition of Lovelle contributed well and in July the group entered into a strategic alliance with The Nottingham Building Society. Cash flow remained strong and the progressive dividend policy has been reinstated, with a 3.4p interim declared plus an additional 2p, as partial compensation for the missed 2019 final. With the resilience of lettings and the current record activity levels in sales and new mortgages the Board is optimistic that full-year results will hit its pre-COVID expectations and we make no changes to our PBT/EPS forecasts. Our target price of 233p (48% upside) assumes a 10% discount to the small/mid cap market. Given the above average performance in H1 and continued evidence that the long-term growth strategy is yielding value we see good upside to this target over time.
Companies: Belvoir Group Plc
S4 Capital has reported interim results that are ahead of our expectations and indicates an acceleration in the pace of recovery in Q3. LFL Gross Profit rose +12.2% in H1, with Q1 +18.8% and Q2 +6.5%. Encouragingly, after the trough of +3% in April, recovery accelerated to +5% in May, +11% in June and July was an impressive +18% ahead. PBT and EPS were both slightly better than our forecasts, while the group delivered a particularly impressive cash performance leaving it with net cash in June even before the £113m July placing. While we maintain our FY20 LFL Gross Profit growth forecast of +14% (Q3 +12%, Q4 +18%), the strong July result makes this look conservative. Further, the group awaits the outcome of two 'whopper' pitches each worth $20m+ with one due 'very shortly' and it can now see the pathway to 20 whoppers. S4 Capital is in a growth sweetspot and has already started to deploy the funds from the July placing to build capability in eCommerce (Orca Pacific) and econometrics/media optimisation (Brightblue). There are a number of moving parts in our forecasts and overall we retain our EPS estimates of 7p for this year, rising to 10p in 2021. We believe landing the whoppers combined with further M&A as the group deploys its recent equity raise & increased debt facility could see EPS of 15p next year.