Redde

Proposed share-for-share merger with Northgate

In line Q1 performance, value clear with 10% yield

Redde’s brief AGM statement outlines an in line Q1 performance. We do not make changes to our forecasts ahead of the key Winter trading period, and will review our estimates at the HY update in December. We believe that the valuation – 9x fwd PER and 10%+ dividend yield – remains at too great a discount, with the recent contract loss overplayed against a backdrop of developing relationships. A 12x fwd PER would point to a 160p/share intrinsic value, with an accompanying 7% yield.

Small Cap Feast

African Export-Import Bank a supranational financial institution whose purpose is to facilitate, promote and expand intra- and extra- African trade, of its potential intention to publish a registration document, the Bank hereby confirms its intention to proceed with an Initial Public Offering. The GDRs are expected to be admitted to the standard listing segment of the Official List of the FCA and to trading on the Main Market of the LSE. DNEG Limited intends to apply for admission of its Shares

The legal services read across from recent bids on CTR and MUR

At a time where UK public market valuations remain subdued, especially given GBP weakness, it seems reasonable to assume the potential for opportunistic private bids may increase. We have long argued the merits of certain business services companies with exposure to the legal sector, and we believe recent private interest in the space supports this. In our view, the demonstrable private intrigue may provide a floor to valuations, leaving significant upside risk; if the public market does not cor

Finals in line, valuation too deeply discounted

We appreciate that Redde’s contract loss earlier this year has caused some consternation, but we cannot reconcile the current 8x PER valuation which we think is too deeply discounted. Finals are in line, and several events reinforce the quality and integrity in the business model. We make no material change to earnings and observe the indication that the dividend will be maintained until working capital has been released – resulting in a flat progression. We see considerable shareholder return;

Forecast updates & customer analysis

Last week’s pre-close statement provided several updates, with the two main items being that H2 trading was in line with the Board’s expectations and there will be a five-month extension to the large contract that was lost in March.

In line FY update, contract run off prompts upgrade

Redde has issued an in line FY trading update, with case volumes as expected through H2. There have been a number of contract wins and a significant renewal. The run off on the lost contract (previously announced) will now be better than expected – prompting a 4% upgrade to our FY20e PBT forecast. Redde trades on 8x PER and an 11% dividend yield, with the reaction to the contract loss having persisted.

Contract lost, 8-9% earnings impact in outer years

Redde has lost a large insurer contract. This has no impact on FY19e earnings, but prompts an 8-9% reduction in outer years. Working capital will be released as a result. The reduction in earnings increases the payout ratio but our dividend forecasts remain covered and we leave them unchanged. The dividend is flat yoy in FY19e, before resuming growth. The valuation is at a new low since optimisation began in 2012 – with an 8.0x FY20e PER with a 1.1x covered 11.7% dividend yield.

Small Cap Feast

United Oil & Gas (UOG.L) an oil and gas exploration and developm ent com pany 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 1 March 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. Polemos, to be ren

Earnings in line, maintaining dividend to fuel growth

Redde has reported in line H1, however the dividend is lower than expected – maintained at 5.5p (vs N+1Se 6.0p). Strong growth continued, funded by FCF, driving 8% growth in adj. PBT to £23.6m (48% of FY19e). In order to fund further growth, dividend cover will be increased to rebuild cash. We leave our earnings forecasts unchanged – noting a strong start to H2 – but reduce our DPS forecast to flat yoy in FY19e, before resuming growth trajectory FY20e. Even after our changes, Redde offers a rich

In line, forecasts unchanged: growth sustained

Redde has issued an in line trading update covering H1 to date. Revenues and trading profits have grown year on year. We already assume some growth in our forecasts, and so leave our estimates unchanged. We will review our model again at the interims (27/2) once the key winter trading period has been completed. Redde continues to offer a strong 7%+ dividend yield which we feel does not reflect earnings quality. At a 6% yield, this would imply a >200p/share intrinsic value.

Morning Song

Redde (REDD LN) Positive start to FY19e, forecasts unchanged | Xaar (XAR LN) Appointments of CFO and Company Secretary

Positive start to FY19e, forecasts unchanged

Redde has maintained a positive trajectory into the new financial year. The finals in September reported a solid performance in the first months of FY19e, with today’s AGM statement now indicating this has continued through the Autumn months too. Redde continues to trade on a 7% dividend yield – unwarranted in our view given the repeating case flow from blue chip insurers and the value of the protocol relationship to insurers. At a closer yield to the market, a 5% dividend yield would imply a 25

Morning Note – 22 April 2024

Benefits of scale set to materialise

Frenkel Topping - Resilient with strong growth potential

FY 2023 was a challenging year for Frenkel with higher interest rates encouraging clients to place money into lower margin money market funds. Despite this, sales grew +32% (supported by recurring revenue +9% and +51% in non-recurring), EBIT margins remained strong at 22% and adj. EPS grew +17% (taking into account the higher number of shares). FY 2024 has seen a solid start to transactional business and there is a strong pipeline of new FUM opportunities both of which support further growth. Wi

LSL Property Services (LSL LN) - Transformation & market recovery

2023 results are, as indicated in its February pre-close update, “slightly ahead of market expectations”. Current trading continues to improve, with 1Q24 underlying operating profit up yoy, “reflecting the benefits of the Group’s transformation programme completed in 2023 as well as improving market conditions.” With net cash of £35m at end 2023, the Board approved 7.4p final DPS and £7m buy back.

Bluefield Solar Income Fund – Fundamentals shine despite discount

The manger comments that, in common with the other trusts in the renewable energy sector, the last six months have continued what has been a challenging period for the Bluefield Solar Income Fund (BSIF). It adds that the trust’s ongoing fundamental performance has failed to reverse a steady slide in its share price which began back in May 2023. Despite this, it says the company has continued to deliver solid NAV growth and market-leading shareholder distributions thanks to a range of contractual

S&U - PBT ahead, encouraging volume trends

S&U reported FY24 PBT of £33.6m, down from £41.4m in FY23 on higher funding and regulatory costs and higher impairments in Advantage in H2. PBT was 2% ahead of our forecast as stronger revenues – up 12% to £115.4m – and better costs offset higher-than-expected impairments. Net receivables grew to a record at both Advantage and Aspen and management noted particular strength in Q4 and a good trading environment in the current year. Having absorbed a significant rise in funding cost as well as addi

Henderson Far East Income - Repositioning to raise total returns

Henderson Far East Income (HFEL) has consistently delivered on its objective to provide a rising dividend. However, like many investors, HFEL’s managers overestimated the potential for a post-pandemic rebound in China. The trust’s resultant overweight to Chinese consumer and other cyclicals led to a fall in portfolio revenues and underperformance in the financial year ended 31 August 2023 (FY23). With a view to improving future returns, HFEL’s board has since indicated an increased willingness t

Hardman & Co Insight: 2023 was an annus horribilis for Quoted UK Infrastructure and Renewable Energy

The focus of Hardman & Co Research is on the nine quoted Infrastructure Investment Companies (IICs) and on the 22 Renewable Energy Infrastructure Funds (REIFs): the stocks analysed are all members of the Association of Investment Companies (AIC). We are updating our publication of January 2023, assessing both the lacklustre share price performances during 2023 and the key issues, including interest rates, inflation and power prices. As a 31-strong group, its combined market capitalisation is no

Foresight Solar Fund - Termination of coverage

Edison Investment Research is terminating coverage on ABC Arbitrage (ABCA), paragon (PGN), Foresight Solar Fund (FSFL), Kendrion (KENDR), Lithium Power International (LPI), Triple Point Energy Transition (TENT), 4iG (4IG), e-therapeutics (ETX), Pharnext (ALPHA) and Shield Therapeutics (STX). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant. Previously published reports can still be accessed via our web

LIBERUM: PensionBee: Strong start to the new financial year

International Public Partnerships - Consistently and responsibly delivering

International Public Partnerships’ (INPP’s) FY23 results show that it continues to deliver consistent and predictable returns for investors, while delivering environmental and social benefits for the individuals and communities that are served by its assets. Despite this strong performance and a substantial need for private infrastructure funding, the macroeconomic environment has weighed on INPP’s share price, in common with the wider sector. Regardless, attractive returns are available from th

LIBERUM: NewRiver: Q4 trading update: Continued operational momentum

Regional REIT - Performing as expected ahead of refinancing

In a challenging market, Regional REIT’s (RGL’s) FY23 operational and financial performance was robust, in line with expectations and previous guidance. Investor focus remains on the company’s loan to value (LTV) reduction and bond refinancing plans, explored in detail in our previous note and RGL will provide an update on this in due course.

Witan

Business as usual for WTAN’s executive team, while the board reviews investment management arrangements…

LIBERUM: PayPoint: On track for £100m of EBITDA in FY 26