Kindred Group’s all cash offer for 32Red marks a meaningful and well-priced entry into the UK online casino market. With robust FY results and 20% growth in Q117 net gaming revenues, our standalone 32Red forecasts are largely unchanged, underpinned by continued margin expansion and high cash generation. Within an enlarged group, there should be additional revenue and cost synergies, suggesting upside to our numbers. Consideration is expected to be paid in mid/late May.
IQE and Next Fifteen Communications are entering the FTSE AIM UK 50 index later this month, while Primary Health Properties could be the next former AIM company to join the FTSE 250 because it is included on the reserve list for that index. Semiconductor wafers supplier IQE and PR group Next Fifteen, both of which have benefited from the decline in sterling because of their international operations, are replacing Gemfields and Arbuthnot Banking. The IQE share price has trebled since its low last July. The business is highly cyclical and in the past has been dependent on demand from the mobile sector. More recently, though, photonics has been a growing contributor. IQE is highly cash generative. Next Fifteen is growing on the back of investment in digital marketing services. Primary Health Properties joined AIM in March 1996 when it was valued at £16m, having raised a similar amount. The healthcare properties investor did not stay on AIM for long, moving to the Main Market in November 1998. It is currently valued at £636m and offers a yield of nearly 5%. One former AIM company appears set to leave the FTSE 250 in the coming months. That is if Tesco’s £3.7bn cash and shares merger with Booker is successful. The food wholesaler moved to the Main Market on 1 July 2009 when it was valued at £525m at a share price of 33p.
Companies: ANCR TLY PURP QTX TTR
Offer represents a 16% premium, and is all but confirmed with Kindred securing 71% of votes
32Red has agreed an all cash takeover by Kindred, at 196p per share. Together with an approved 4p dividend, this represents a 32.4% premium to last month’s average. This equates to 10.6x EV/EBITDA and 14.3x P/E for 2017, a small premium to the larger peer group. Given 32Red’s brand strength, regulated bias and growth momentum, this appears justified.
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32Red's growth was driven by Roxy Palace acquisition and Italian operations
32Red has announced a positive 2016 post-close trading update and strong current trading with a 21% increase in January revenues (to 30th). We expect 2016 EBITDA to have doubled to £10.5m (a marginal reduction on our previous forecast due to lower win margins), helped by the highly accretive Roxy acquisition. Our unchanged 2017/18 forecasts are for continued very strong profits growth as the business scales up, with more favourable supplier agreements and Italy now in profit. The 2017e EV/EBITDA of 6.8x looks much too low for a high growth, 77% regulated, cash generative gaming business in a consolidating market.
32Red’s brand punches above its weight in the UK online casino market. Management has adopted a more aggressive stance since mid-2015, both in terms of marketing and with the highly accretive £8.4m Roxy Palace acquisition. Interims show H116 EBITDA rising to £4.5m (H115: £1.2m) and we initiate with forecast EPS more than doubling in 2016 and growing by over 65% between 2016 and 2018. Yet the 2016e P/E is only 13.5x and our peer group comparison and DCF suggest a value of 193-247p per share, 46-86% above the current share price.
TTR Agreement, 7DIG Contract, ALSP Director Change*, CLIN Agreement, CRX Launch, DEMG New Accounts, DSG Partnership, GLID Share Sale, HZD Agreements, LID Agreement, MDZ Placing*, SAR Board Changes*, SEE Term Sheet, SNTY Contract Win, TAL Trading Update, VRS MoU
Companies: TTR 7DIG ALSP CLIN CRX DEMG DSG GLIF HZD LID MDZ SAR SEE CALL ZIN VRS
Arian Silver Corporation (AGQ.L) –CORP: Financing update | 32Red (TTR.L): Interims | RapidCloud International (RCI.L): Interims
Companies: AGQ TTR RCI
Motif Bio plc (MTFB.L) – BUY*: £22m placing to be completed | Alexander Mining (AXM.L) – BUY*: Australian patent | 32Red (TTR.L): 1H trading update | Mi-Pay (MPAY.L): Trading update
Companies: AXM TTR MPAY
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FY20 results – All Focus on Resuming Operations
Companies: Dart Group
Independent review launched: The Boohoo Group has announced the launch of an immediate independent review of its UK supply chain, intended to identify any areas of risk and non-compliance and to further strengthen the Group’s compliance procedures to ensure similar allegations will not recur in the future. The review is to be led by Alison Levitt QC, a highly experienced advocate who has previously reported on complex issues, including safeguarding enquiries. Boohoo has also announced an initial additional £10m investment in ensuring any supply chain malpractice is eradicated and is accelerating its independent third-party supply chain review with ethical audit and compliance specialists Verismo and Bureau Veritas.
Companies: Boohoo Group Plc
Vertu has reported a strong performance for the month of June, following the reopening of all showrooms in England from 1 June and 12 Scottish showrooms reopening on 29 June. Adjusted PBT of £9.0m for the month is ahead of prior year and above the Group’s pre-Covid business plan of £8.6m whilst net cash of £9.7m at 30 June reflects impressive working capital management.
Companies: Vertu Motors
DWF has issued a trading update showing positive momentum during the first two months of the new financial year. We are re-instating our financial forecasts assuming modest organic growth of 2% in 2021E.
Companies: DWF Group
In this note and following the SMMT June data released earlier this week, we look at the key dynamics of the sector during H1 2020, and the prospects for the rest of the calendar year. While no direct stimulus for the sector was announced in the recent summer statement, customers who were considering their purchasing options now have the clarity to move ahead with buying decisions that were potentially on hold.
Companies: CAMB LOOK MMH PDG VTU
Today’s statement reveals incredibly robust Q1 trading across the Group’s brands and regions, with a positive outlook and guidance reinstated for the remainder of the financial year and beyond. In addition, the Group has announced the acquisitions of Oasis & Warehouse, bringing two well-recognised and complementary brands onto its platform. We believe the unprecedented disruption resulting from the COVID-19 pandemic has accelerated the channel shift to online where we see BOO as the clear winner, with an established and leading model positioned to consolidate the market.
We note this morning’s announcement from Boohoo Group strongly refuting several allegations made in a short-selling note published yesterday afternoon. In our opinion arguments made in the short selling note are flawed and do not disclose any new or unexpected information about the Group. The unprecedented market backdrop resulting from the COVID-19 crisis has only acted to highlight the strengths of Boohoo’s agile, pure play, e-commerce model and we see current share price weakness as offering an attractive entry point.
Edison Investment Research is terminating coverage on ADMIE Holdings (ADMIE), AJ Lucas Group (AJL), Australis Capital (AUSA), Elbit Medical Technologies (EMTC), Focusrite (TUNE) and PPHE Hotel Group (PPH). 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 website.
Companies: PPHE Hotel Group
Gaming Realms is a creator and licensor of innovative games for mobile, with operations in the UK, U.S. and Canada. Through its unique IP and brands, Gaming Realms brings together media, entertainment and gaming assets in new game formats.
Companies: Gaming Realms
AFC Energy is a global leader in the fuel cell sector. It has a proven fuel cell technology which it is commercialising through its H-Power™ product, an off-grid electric vehicle charging system which is run on hydrogen and produces no emissions. The company's core fuel cell technology is a liquid alkaline fuel cell called HydroX-Cell(L)™. The company is also developing a solid alkaline fuel cell called HydroX-Cell(S)™ , the critical component of which is a is a solid electrolyte which upon validation will be marketed under the AlkaMem™ trademark. We expect the AlkaMem™ product to have multiple electro-chemical applications outside of fuel cells. The purpose of this note is to compare AFC Energy's products, markets and business strategy against its listed peers Ceres Power and ITM Power. The note also assesses the state and outlook of the hydrogen market in addition to the proton exchange membrane market, which is relevant for AFC Energy's AlkaMem™ product. As a reminder, we believe AFC Energy has a fair value of 27p/sh.
Companies: AFC AFC AFC
The final results revealed adjusted PBT up 99% year-on-year, which was 10% better than forecast despite four upgrades during the financial year. This strong performance reflects the financial benefits that have accrued following the shift in the business model to online only, as well as management’s strategic decision to significantly increase marketing spend. A second special dividend for the 2020 financial year has also been announced, reflecting the strong cash flow characteristics of the business model. Our 2021 profit forecast implies continuing momentum and a year-on-year increase in PBT of 86%. We raise our target price to 1050p.
Companies: Best Of The Best
Air Partner has issued a further shareholder update, confirming PBT of at least £10m in the first five months of the year to June, an increase of £2.5m since the last update to May. The Group continues to deliver impressive results despite a challenging market backdrop. As has been the case throughout the COVID-19 crisis, performance has been driven by strong activity in the Freight and Group Charter divisions. Crisis driven activity is expected to reduce in H2, with an anticipated recovery in the Group’s core activities, where the update reports positive early indications across the Group’s divisions. The balance sheet is very well supported, with net cash at 30th June standing at £13m post the recent £7.5m fund raise. The Group continues to have access to total debt facilities of £14.5m. Whilst visibility for H2 remains limited, we believe the Group is well placed to deliver a strongly profitable FY21 result.
Companies: Air Partner
7DIG Trading Update, ALSP* Loan Draw Down, AAU Placing, COG* Contract Win, CHAL New York Wheel, CBUY Contract Win, CGNR* New Gold Zones, DGS Trading Update, MSG* JV, NET Trading Update, OPTI* New Patent, SEE Trading Update, TPG Contract Win
Companies: 7DIG ALSP AAU COG CBUY DGS NET OPTI SEE TPG CGNR CTEA
Share prices are built on expectations - expectations about all sorts of things, such as a company’s future sales growth, the trend in margins and the profits it can return. Understanding those expectations and how they move is critical to share price formation. Listing rules require quoted companies to update investors on progress relative to expectations. What managements often fail to understand is that many of their key investors do not have access to brokers’ research and, thus, cannot put management statements into context. It is these very investors that can cause shock movements in share prices on announcements in limited trading.
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Despite all the hullaballoo of the Brexit vote and the subsequent election of Donald Trump as the next US President, the UK stock market prospered last year, especially in the latter few months of 2016. The combination of a depreciating currency – making $ earnings more valuable in relative terms - and the Trump emphasis on infrastructure expenditure drove the stock market higher
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