Hybridan Small Cap Feast - 28 Feb 23
28 February 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objectives, financial situation or needs of any specific entity and is not a personal recommendation to anyone. Recipients should make their own investment decisions based upon their own financial objectives and financial resources and, if any doubt, should seek advice from an investment advisor. The information contained in this document is based on materials and sources that are believed to be reliable; however, they have not been independently verified and are not guaranteed as being accurate. 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Any reference to a partner in relation to Hybridan LLP is to a member of Hybridan LLP or an employee with equivalent standing and qualifications. A list of the members of Hybridan LLP is available for inspection at the registered office, 2 Jardine House, The Harrovian Business Village, Bessborough Road, Harrow, Middlesex HA1 3EX. *A corporate client of Hybridan LLP ** Arranged by most recent first *** Alphabetically arranged Dish of the day Joiners: Dar Global (DAR.L) has joined the Standard Segment of the Main Market via a direct listing. The market capitalisation of Dar Global on Admission amounts to c.US$600m, based on its pre-Admission private placement price of US$3.33 per share. Leavers: No leavers today. What’s cooking in the IPO kitchen?** MBH Corporation plc, an investment holding company with subsidiaries in multiple industries including the construction, education, leisure, healthcare, food & beverage, property, engineering and transport sectors, intends to join the AQSE Growth Market. MBH is currently traded on the Dusseldorf and Frankfurt Stock Exchange. Expected 13th March 2023. PanGenomic Health Inc, currently traded on the Canadian Securities Exchange market intends to dual list on the AQSE Growth Market, as a springboard to expand footprint of its personalised and self-care digital health platforms in the UK/EU markets. The Company has three platforms: Nara App, Mindleap.com and the PlantGx Platform. PanGenomic Health Inc is currently traded on the CSE. 88.6% of the total issued shares will be floated. Admission is delayed. Our daily digest of news from UK listed Small and Mid caps Banquet Buffet*** Abingdon Health 5.75p £7.0m (ABDX.L) A lateral flow contract development and manufacturing organisation (CDMO), provides its half-year trading update for the six months ended 31 December 2022. The company has transitioned its activities away from Covid-19 and is now operating as a fully integrated CDMO maintaining its full focus on lateral flow testing. Revenues decreased to £1.1m (H1 21: £1.7m). The Company has expanded to 11 different contract service projects. Cash as of 31 December 2022 was £4.4m which was in line with Board's expectations. The Board believes the Company will deliver strong revenue growth in FY 2023. Brandshield Systems 5.8p £9.9m (BRSD.L) A provider of cybersecurity solutions for brand oriented digital risk protection (DRP), provides a trading update for the year ended 31 December 2022. Brandshield revenue grew by 53% to $6.39m (2022: $4.13m) and annual recurring revenue increased 60%. The Company ended the period with available cash reserves of $2.6m. In October, BrandShield launched a bespoke AI solution to monitor, detect and remove digital asset fraud, NFT ShieldTM . Throughout the period BRSD expanded its client base and now services 183 companies across a range of sectors. CAP-XX 2.65p £13.5m (CPX.L) The developer, manufacturer, and marketer of supercapacitors and energy management systems, announces its interim results for the half-year ended 31 December 2022. Revenue decreased 34% to A$1.61m and EBITDA loss increased to A$966k compared to an EBITDA loss of A$305k for the corresponding period last year. As at 31 December 2022, cash reserves were A$495k with no debt and before the Company utilised its existing line of credit. The order book is improving and at 31 December 2022 was 47% higher than at the start of the current financial year and 85% higher than its low point at the end of August 2022. The sales pipeline has increased by 30% to more than US$65m compared to 12 months ago. The Board remains optimistic about the short and long-term growth prospects of the Company. Chamberlin 4p £5m (CMH.L) The Company engaged in the production and sale of iron castings and light engineering products announces its interim results for the six months ended 30 November 2022. Revenue increased by 32% to £10.5m (2021: £8.0m), reflecting growth across all operations. Revenues in the second half of the year are expected to continue on a similar path. Operational performance was impacted by inflationary cost pressures, with the Groups underlying loss before tax increasing to £0.3m (H1 2022: £0.1m). These cost pressures have now been addressed through price increases and further cost savings. The Group is continuing to preform in line with market expectations, with all businesses profitable in January 2023. ECSC Group 25p £2.5m (ECSC.L) The provider of cyber security services, announces an unaudited trading update for the 12 months ended 31 December 2022. Following a stronger second half of trading, the Group expects to report revenues for the year ended 31 December 2022 of £5.8m (2021: £6.1m), though it is now expected that the Group will have incurred a small loss at the adjusted EBITDA level. During the year, the Group won significant contracts in its Managed Detection and Response (MDR) division across a range of sectors. When combined with MDR renewals, the MDR order book has grown to £2.3m as at December 2022 (31 December 2021: £2.2m). As at the end of December 2022 cash was £0.6m and the Company had net borrowings of £0.9m. Image Scan Holdings 1.8p £2.5m (IGE.L) The specialists in the field of real-time X-ray imaging for the security and industrial inspection markets provides a trading update ahead of its Annual General Meeting being held later today. Trading for the year ending 30 September 2023 has reportedly begun with a strong momentum, with attendance and interest at trade shows, events and conferences beginning to return to pre-pandemic levels. The new ThreatScan®-AS1 is experiencing improved enquiry levels and being widely demonstrated to positive reviews. Image Scan's industrial business continues to perform in line with management expectations. Revenues are transitioning away from North America and the UK to Eastern European and Asian territories. Kitwave 235.5p £164.9m (KITW.L) The delivered wholesale business, announces its final results for the twelve months ended 31 October 2022. Revenue grew to £503.1m (FY21: £380.7m) and operating profit increased to £20.4m (FY21: £6.4m). Profit before tax increased to £17.8 (FY21: £2.1m). Throughout the period the Company, open a new distribution centre; acquired M.J. Baker Foodservice limited; and launched a new online trading platform across all divisions to improve customer relationships. Post-year end, Kitwave completed the acquisition of Westcountry Food Holdings Limited. The Company has reported to starting FY23 well and expects a positive outcome for the year. NetScientific 79p £18.5m (NSCI.L) The investment and commercialisation group with a portfolio of innovative life science, sustainability, and technology companies, announces that, on 27 February 2023, its wholly owned portfolio company, respiratory diagnostics specialist, ProAxsis, entered into an unsecured £500k six month loan agreement with AB Group Limited. The interest rate is 10% per annum, payable on repayment of the loan. In addition, ProAxsis has granted to AB Group warrants over shares in ProAxsis equal to the value of £150k at an exercise price determined by reference to a future third party fundraising of at least £500k such price to be discounted by 30%. Safestay 25.5p £16.5m (SSTY.L) The owner and operator of an international brand of contemporary hostels, announces a trading update for the 12 months to 31 December 2022. Revenues are expected to be £19.0m (2021: £6.4m- trading restricted), ahead of market expectations. Adjusted EBITDA is expected to be in line with market expectations of £5.9m (2021: Loss of £1m). A key driver behind the Group's trading performance was the 20% increase in the average bed rate. As at 31 December 2022, the Group had cash of £4.8m. Various Eateries 28.5p £25.4m (VARE.L) The owner, developer and operator of all day club, restaurant and hotel sites in the United Kingdom, announces its results for the 52 weeks ended 2 October 2022. Group revenue increased by 82% to £40.7m (FY21: £22.3m), resulting in an increase in adjusted EBITDA to £3.5m (FY21: £1.2m). The loss before tax increased to £7.2m (FY21: £3.6m). The Group incurred impairments to goodwill and right-of-use assets of £2.5m. Furthermore the Group's depreciation charge has increased by £0.7m and pre-opening costs have increased by £0.5m, as the Company continues to invest in new sites. Steps have been taken to manage margin pressures including comprehensive menu re-engineering exercise at period end. With a growing pipeline and diverse mix of brands, the Company is confident in delivering progress in FY 2023. If you would like to unsubscribe, please email email@example.com with “unsubscribe me”. Chef: Emily Liu 0203 764 2344 firstname.lastname@example.org Chef: Sacha Morris 0203 764 2345 email@example.com
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28 Feb 23
LIBERUM: Safestay* - Small revenue beat, confident outlook
Safestay’s trading update points to a small beat with FY22E Revenue expected to come in at c£19.0m (Lib est £17.9m). Encouragingly, this has been driven by faster recovery in Occupancy across its 16 hostels, which has improved from 55% at interims to 63% for FY22E, and with ABR also increasing to £23.70 (from £21.50 at 1H22E). As a result, and despite additional inflationary pressures, EBITDA is expected to be in line at c£5.9m (Lib est. £5.9m), with cash at bank of £4.8m. We nudge up revenue forecasts in line with this trading update but leave EBITDA and our TP of 35p unchanged for now. We believe Safestay is well placed to take advantage of the structural growth in hostel demand, having enhanced its brand and increased its direct bookings. The return of Group bookings should give an extra boost to recovery this year.
28 Feb 23
LIBERUM: Safestay* - Interims on track and building
Interim results show a steady recovery across all 16 hostels in 12 countries, with revenue building back to £7.3m and on track to meet our forecast of £17.9m for the full year. Occupancy recovered to 51% (2019: 71%), with ABR at £21.50 (2019: £19.50). This resulted in EBITDA of £2.5m, with cash at bank of £5.2m, and reported NAV of 44.6p per share. We leave our forecasts and TP unchanged. We believe hostel demand will continue to grow, with its value offer making it resilient in the face macro uncertainty. Safestay is well placed to take advantage, especially as Group bookings return, given its strong brand and increases in direct bookings. BUY
29 Sep 22
LIBERUM: Safestay* - Hostels recover to c81% of pre Covid
Safestay has emerged from the pandemic with 16 high quality hostels and with proceeds from two disposals providing liquidity to manage the recovery. To that end, progress has been encouraging with revenue running at c81% of pre-COVID levels over the first five months of FY22E and net bank debt reduced to £25m. Following the delayed publication of the FY21 accounts, we increase FY22E forecast revenue by 3%to £17.9m, and EBITDA by 12% to £5.9m. We believe that hostel demand will continue to grow and should be resilient in the face of an uncertain economic climate. Safestay is well placed to take advantage having enhanced its brand and increased its direct bookings. Our TP of 35p (unchanged) is based on a combination of DCF, comparative and TNAV metrics with further upside to come as debt falls and trading continues to recover.
07 Sep 22
LIBERUM: Safestay* - Formal sale process comes to an end
Safestay has terminated its formal sale process and strategic review after five months of negotiations with no firm offer materialising. Clearly this is a disappointing outcome following constructive discussion with several interested parties. Nonetheless, the fundamentals of the business remain attractive with revenue levels tracking ahead of management’s expectations YTD and liquidity headroom in place to manage the recovery and then resume expansion. We reinstate forecasts and TP at 35p, offering 100% share price upside.
02 Mar 22
LIBERUM: Safestay* - Ready for the rebuild
Safestay has reopened 16 hostels in line with the easing of restrictions across Europe. We forecast a steady recovery in occupancy levels in 2H21E and into FY22E, resulting in a 10% cut to FY22E EBITDA. The recent disposal of the Edinburgh and Barcelona Sea hostels have provided capital to restart operations, with an eye on resuming its investment and expansion strategy when appropriate. Market cap is c.40% below pre-Covid levels, with the shares trading at a c.46% discount to trough FY21E NAV. BUY
02 Aug 21
LIBERUM: Safestay* - Edinburgh disposal addresses financing position
The £16m sale of the Edinburgh hostel removes any funding concerns, and allows the business to prepare for the reopening of its remaining hostels later this year. The sale is attractive at a 22% premium to book value. The additional capital should support a return to Safestay’s proven cash generative model and its expansion in the medium term. We adjust our forecasts to reflect the disposal and a reopening and gradual recovery in occupancy in 2H21E. BUY
26 Mar 21
LIBERUM: Safestay* - Temporary closures to manage cash flow
Safestay has temporarily closed eight of its hostels in order to minimise cash outgoings in light of the continued challenges facing the European hostel market. A reduction in available bed stock to 45% has coincided with further rental and labour cost savings, resulting in no change to our cash flow forecasts. We expect Safestay to navigate the market challenges ahead, returning to its proven growth and expansion strategy in time. Valuation is supported by recent NAV per share of 48.2p. BUY
13 Oct 20
LIBERUM: Safestay* - Trading towards higher end of scenarios
Safestay has reopened nearly all of its 18 hostels, seeing steady improvement in trading towards the higher end of its forecast scenarios. Losses are being contained and extra liquidity obtained through an additional £5m overdraft facility (agreed in April) and £0.5m of government backed loans. It continues to evaluate additional sources of liquidity to ensure it can survive its downside case, and in order to recommence its pipeline development. No change to forecasts. Challenges remain, but we expect Safestay to overcome the crisis and resume its growth trajectory in time. Meanwhile NAV per share of 48.2p should provide some valuation comfort.
24 Sep 20
LIBERUM: Safestay* - Initial recovery underway, exploring new financing arrangements
Safestay is poised to have 16 of its 18 hostels back open by 28 August, with initial occupancy levels improving week on week as demand slowly begins to return. We adjust our forecasts based on the base case scenario analysis provided by management, which assumes a gradual recovery in occupancy in 2020/2021. With minimal liquidity headroom forecast by the start of 2021 (<£1m), management is exploring additional financing arrangements to ensure that sufficient cash-to-hand is maintained. Despite significant market challenges, we expect Safestay to resume its proven cash generative model following the current crisis.
24 Aug 20
LIBERUM: Safestay* - Short term pain, long term gain
FY19 was a transformational year, with the addition of seven new hostels to the estate/pipeline and strong growth in Revenue (+26%) and adj EBITDA (+11%) demonstrating that the model can work across European cities. Significant liquidity headroom remains following the RCF extension and £5m overdraft facility recently agreed.
29 May 20
LIBERUM: Safestay* - Liquidity headroom secured
Safestay has addressed any immediate liquidity concerns via an additional £5m overdraft facility and via reducing cash burn to £300k a month for the next three months. All hostels were temporarily closed as of 1 April 2020 with the majority of staff furloughed and all capex suspended.
15 Apr 20
LIBERUM: Safestay* - COVID-19 impacting bookings and cancellations
Safestay had a momentous FY19 and start of FY20E as it significantly grew its brand and network across Europe. Unfortunately, the virus outbreak will likely have a material impact on the travel sector with Safestay already seeing an increase in group booking cancellations over the last week and subdued demand in the near-term.
10 Mar 20
LIBERUM: Safestay* - Bratislava and Warsaw acquisitions complete, Prague cancelled
Safestay has completed on the previously announced acquisition of the Bratislava and Warsaw hostels from Dreamgroup for €2.7m, expanding its network across Europe. The acquisition of the third hostel, ‘Prague Museum’, has been cancelled however and will not proceed.
02 Mar 20
LIBERUM: Safestay* - Trading in line, momentum building
Safestay grew revenues by +25% to £18.3m in FY19, EBITDA in line with expectation at £3.8m (pre-IFRS 16). Both occupancy (+170bps) and average bed rates (+5%) contributed to top line growth as Safestay benefited from good demand and efficient revenue management.
03 Feb 20
LIBERUM: Safestay* – Initiation - Unique boutique bunks
Safestay is poised for rapid growth as it takes advantage of secular tailwinds in a fragmented hostel market ripe for consolidation. Having established a platform of 18 hostels, Safestay has reached an inflection point with critical mass allowing it greater access to capital, property and people to deliver on its ambitions to become the leading boutique hostel chain in Europe.
22 Nov 19
Small Cap Breakfast
Green Man Gaming—pure play e-commerce and technology company in the digital video games industry. revenue CAGR growth of 26.7% in the last three years to £47.5m. Due 28 Sep. EBITDA Profitable. Offer TBA 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—an oil and gas company focused on the acquisition of production, or near production, oil and gas assets looking to join AIM. Offer TBC, expected early October 2018.
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25 Sep 18
Small Cap Breakfast
Hydrominer GmbH, An Austrian cryptocurrency miner, is considering an initial public offering (IPO) on the London Stock Exchange AIM during 2018 according to an article on Bloomberg. Block Energy—a NEX Listed UK based oil exploration and production company whose main country of operation is the Republic of Georgia, looks to join AIM end of February 2018. Offer TBC OnTheMarket—Intention to float on AIM to raise c.£50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Offer raising £30m at 165p with market cap of £100m . Due 9 February.
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30 Jan 18
Northland Capital Partners Morning Report
Business doubled in size in FY15, though did not see the benefits of a full year of trading from Holland Park and Edinburgh which will be the case in FY16. Management seeks to double the size of the business again in FY16 and has appointed Philip Houghton as CEO and Mark Beveridge (former InterContinental Hotels Group) as FD to help support the senior management team in its preparation to accelerate growth into key European cities.
11 Apr 16
Successful FY15e check-in and positive momentum going into FY16e
An inline YE trading update should come as relief to investors given the shares have been soft over recent months on fears of downgrades. Commentary around the portfolio is positive and there appears to be good momentum going into FY16. With the shares effectively trading at FY16e NAV of 57p, there is deep value at current levels. Overall, we see today’s update as a further step in validating the niche hostel model in a hugely fragmented sector. We stay positive and estimate fair value >100p on DCF analysis.
15 Feb 16
Edinburgh continues growth strategy
With the completion of the Edinburgh hostel deal Safestay will have more than trebled the number of beds in the group since its IPO in May 2014. We have updated our forecasts for the impact of Edinburgh, the delay in the Holland Park opening and the investment in group infrastructure. The full benefits of both Edinburgh and Holland Park will start to come through in 2016. With more of the foundations of a successful rollout in place we maintain our DCF-derived 120p TP having tweaked our WACC and L-T growth assumptions. Buy.
09 Sep 15