UK Defence Budget spend and four Small Cap players
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Cohort has delivered a resilient H121 performance, with operating profit rising on 10% lower revenues. There will be a significant second-half weighting as management still expects to deliver a similar overall performance from the continuing businesses to FY20, supported by a record order backlog. In addition, ELAC SONAR will makes its initial contribution in the second half. Our estimates are maintained and the shares trade at a c 5% FY22e P/E rating discount to UK defence peers.
Companies: Cohort plc
Cohort has completed the acquisition of ELAC Nautik from Wartsila for a headline consideration of €11.25m, as previously announced. ELAC extends Cohort’s maritime offering and has attractive medium- to long-term prospects. It will make an initial five-month contribution and should be modestly earnings enhancing. More detail should be available with interim results next week, but the lack of a trading comment suggests the ongoing activities remain on track to meet market expectations.
Cohort has reported FY20 results with no major surprises following the close period trading update in May. Despite some COVID-19 impact in Q420 in terms of customer orders and delivery acceptances, sales increased 8%, generating double-digit improvements in adjusted operating profit and EPS, all of which represent record levels for the group. While the immediate outlook remains subject to pandemic effects, management expects to deliver FY21 performance in line with FY20.
Cohort has released a year-end trading update that reflects the impact of COVID-19 on its activities in the final two months of FY20, usually the busiest period for the group. As a result, management has provided guidance that has led us to reduce our sales and profits estimates by 9% for FY20, with a lower tax charge limiting the impact on EPS to just over 2%. Cohort’s best current guidance is for FY21 performance to be in line with FY20. The resultant P/E ratio of 15.4x for FY21, the current year, allows for no enhancement from the expected acquisition of ELAC Nautik in the summer. In our view, the rating remains undemanding.
Cohort has delivered a strong first half performance, with healthy like-for-like growth in revenues, and adjusted operating profit augmented by the initial first half contribution from Chess. With a record period-end order book of £207m, prospects remain bright and management expects to meet market expectations for FY20. The strong balance sheet supports the agile growth strategy and is facilitating the proposed €11.3m acquisition of ELAC Nautik from Wärtsilä Corporation which, we estimate, should enhance EPS by around 7% in a full year following completion. Even before the potential uplift from ELAC, the FY21e P/E of 15.8x does not look demanding against defence peers given the progression of the strategy.
Companies: ABDP IHC BIRD JWNG MACP RBD FARN MIND EQLS CHRT
Cohort’s AGM statement indicates the current year has progressed well, with order cover of sales for the year rising to 76% following recent September orders compared to 60% at the same point of FY19. The order backlog at 31 August 2019 increased by over 10% since the year end to a record £210.9m (FY19 £190.9m) and the pipeline of potential business remains healthy. We maintain our earnings estimates, which means the shares are trading on an FY21e P/E of 12.6x, a significant and unwarranted discount to UK defence peers.
SEC S.p.A. Adm ission is follow ing a reverse takeover under Rule 14 by SEC S.p.A of Porta Com m unications plc, another AIM quoted company. No funds being raised. Due 4 September. Mkt cap c £9.9m. The merger will create a business with global fee income of around €80m and a host of PR agencies, including Newgate, Publicasity and Newington.
Companies: TIME STKR MATD RENX JSG SOLI QIL ECHO LVCG CHRT
Cohort delivered another year of growth in what remained quite a constrained defence spending environment in its domestic markets. The recently acquired Chess Technologies delivered a stronger than expected performance in its initial period of consolidation, helping to mitigate the slippage of profits into FY20 at EID as an export contract was signed too late to be shipped in FY19. The record order intake and stronger backlogs across the group provide a solid foundation for growth, enhanced by a full-year contribution from Chess. Our EPS estimates are marginally reduced for FY20, but we expect stronger growth and cash flows in FY21. The FY21e P/E of 11.3x remains below UK defence sector peers despite the continued positive progress of the group.
Interswitch, a Nigeria-based payments firm, has hired advisers to resurrect plans for a stock-market listing in London and Lagos later this year, which may value the financial technology company at $1.3 billion to $1.5 billion. Voyager AIR The Company will focus on the acquisition, leasing and management of primarily widebody aircraft, with asset management services to be provided by Amedeo Limited the IPO will comprise a Placing and Offer for Subscription of Shares to raise up to approximately US$200m. Roxi Music UK music streaming service plans London IPO as it goes up against Spotify. They have appointed investment bank Arden Partners for an initial public offering (IPO) on the London Stock Exchange later this year.
Companies: DX/ BKS SIR SMRT DOTD SEE GAN UOG RENX CHRT
SDX Energy plc—a North Africa focused oil and gas company, announces its intention to complete a Canadian plan of arrangement under section 192 of the Canada Business Corporations Act and will have shares de-listed from the TSX-V and admitted to trading on AIM. Expected 28 May 2019, anticipated market cap of £76m Renold plc—a leading international supplier of industrial chains and related power transmission products, announced that it will cancel the listing of the Company from the premium segment and apply for admission on AIM. Expected 06 June 2019. Distribution Finance Capital Holdings plc — specialist lender which builds relationships with manufacturers and then provides working capital solutions up and down their supply chains to drive their growth is looking to join AIM. No raise, secondary offering of £19.8m at 90p, expected market cap of £95.98m. Expected 09 May 2019. Alumasc Group plc, the premium building products, systems and solutions group, has announced its intention to move from the Premium Segment of the main market to AIM. Expected market cap of £33.4m. Expected 25 June 2019
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As anticipated at the H119 results, order intake for Cohort remained strong through the second half of the year. With the addition of Chess, the backlog at the year end should stand at more than £175m, comfortably a record for the group. It represents c 1.3 years of revenues based on our FY20 expectations and while many of the contracts are multi-year, it does provide increased sales cover for the medium term. Cohort continues to deliver against its growth strategy, appears to be largely insulated from Brexit concerns and still trades on an undemanding P/E multiple.
Network International Holdings—Pleading enabler of digital commerce across the Middle East and Africa region, operating across over 50 highly underpenetrated payment markets that contain a total population of 1.5 bn. 2018 rev $298m, underlying EBITDA $152m. Due April. No new funds to be raised. Secondary sell down. Targeting 25% of at least 25%. 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: INSE GOAL SLN DEST CHRT BMV UKOG GTC GHT
Following a challenging first half, Cohort has seen excellent order intake in recent months. These underpin anticipated sales for H219 and provide longer-term visibility through some significant multi-year agreements. In addition, the company has bought Chess Technologies, broadening the geographic reach and product range while augmenting growth prospects. The purchase is aligned with the agile growth strategy and was financed through cash and the recently renewed bank facility. Having strongly outperformed its UK defence peers over the last 12 months, the FY20e P/E of 10.7x represents a discount of around 18% to its UK defence peers.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Cohort plc. We currently have 149 research reports from 5 professional analysts.
Final results from AFC are very close to our projections, with net cash slightly ahead of our expectations. There is no new news in this announcement, and we marginally edge up the losses in 2021E and 2022E due to increased activity levels as the Group looks to capitalise on the vast opportunities available. We remain excited about the long-term investment thesis we set out recently and maintain our target valuation of 191.5p per share. As we have previously highlighted, our valuation excludes what we consider to be significant growth opportunities highlighted in the note.
Companies: AFC Energy plc
AFC Energy's Final Results for the year ended 31 October 2020 indicate the company is in a position of strength and at inflection point of sales growth. Results were better than we had forecast with a reported loss of £4.2M (WHIe £4.5M) and cash flow from operations of £4.3M (WHIe £4.2M). Most importantly, the company ended the period with a stronger cash balance than we had expected of £31.6M (WHIe £29.9M) reflecting the capital light strategy the company is applying. The year-end confirmed order book of £1.1M indicates that AFC Energy, after decades of investment, is past the inflection point that is translating its globally unique technology into a highly-compelling, long-term commercial growth opportunity.
Results were well trailed in January’s trading update. In the event, adjusted PBT emerged marginally ahead of FY2020, despite material impacts from Covid-19 and a depressed oil price. Although biomass incinerators were closed for much of the second quarter, the Group grew sales from residues from Energy from Waste (‘EfW’) by 15% and signed a further 6 new contracts, maintaining its high win rate. The outlook for EfW remains very strong with c.40 plants in planning or construction that provides the opportunity for Augean to double its current EfW revenues and profits of c.£20m and c.£14m over the longer term. Group operating margins are forecast to reach 25% and cash generation is strong, supporting a 3.5% yield on a resumed forecast dividend. EV/EBITDA multiples for FY2021E, FY2022E and FY2023E are 6.2x, 5.3x and 4.3x, which are well below established industrial sector metrics.
Companies: Augean PLC
Proposed move to AIM from the main market (standard) by Emmerson (EML.L) to provide Emmerson with access to a market and environment which is more suited, in the Board's view, to the Company's current size and strategy ahead of pivotal period for the Company with the commencement of mine construction at the Khemisset Potash Project expected by end of 2021. Follows recent award of Mining Licence granting Emmerson exclusive right to develop and mine the potash deposit and £5.5m raise to fund ongoing project development work. Subject to EGM on 21st March. Rogue Baron plc have announced its application for admission to the AQSE growth market. Rogue Baron owns five subsidiaries, namely: Shinju Spirits, Inc., Shinju Whiskey LLC, Mazeray Corporation, STI Signature Spirits Group LLC and Legacy Retail Group LLC. The Company’s goal is to build each of its brands that makes them a buyout target. Deal size TBC an expected admission date 12th March 2021. Global review platform, Trustpilot has announced its intention to float on the premium list of the LSE. Trustpilot provides an open platform, which creates a place where businesses and consumers can gain actionable insights and collaborate. Consumers are able to share feedback, at any time, about any business with a website and review feedback left by other consumers. Total revenues were US$64.3 million, US$81.9 million and US$102.0 million for the years ended 31 December 2018, 2019 and 2020, respectively. The Offer would comprise new Shares to be issued by the Company (raising gross proceeds of approximately US$50 million to support Trustpilot's growth plans and repay indebtedness) and an offer of existing Shares to be sold by certain existing shareholders, directors and employees. Timing TBC. In The Style, the e-commerce womenswear fashion brand with an influencer collaboration model, announces their intention to float on AIM. In The Style is a pure-play e-commerce fashion brand with a l customer base of women predominantly aged between 16 and 35. Founded in 2013, the group has delivered £35.4 million net sales and £3.6 million Adjusted EBITDA in the nine months to 31 December 2020, with sales up 159% from £13.7 million for the nine months to 31 December 2019. Admission is expected to take place on or around 17 March 2021. Deal size TBC. Media reports video game firm, Catalis is mulling a London IPO, just over a year after being bought by a private equity firm. Catalis’s accounts are reportedly expected to show revenues increasing to £60m in 2020, up from £43m, with adjusted earnings of £15m. Deal details and timing TBC. tinyBuild— a leading video games publisher and developer with global operations. tinyBuild's strategic focus is in creating longlasting IP by partnering with video games developers, establishing a stable platform on which to build multi-game and multimedia franchises is to join AIM. Offer details TBC. Due mid-March. AMTE Power, a developer and manufacturer of lithium-ion battery cells for specialist markets, announced its intention to seek admission to trading on AIM. Admission is expected to take place during March 2021. The Company intends to raise approximately £7m by way of a placing of new ordinary shares in the capital of the Company. Timing TBC. Samarkand Group Limited, the cross-border eCommerce technology and retail group opening up the world's largest market for brands and retailers, intends to IPO on the Apex Segment Aquis Stock Exchange Growth Market. Admission is targeted for March 2021. NextEnergy Renewables to launch an IPO on the Main Market. NREN is a differentiated renewables investment Company that aims to capture the most attractive private renewables and energy transition infrastructure investment opportunities globally. Targeting a £300m raise. NREN is targeting total returns of 9-11 per cent. per annum (net of all fees and expenses but including the Target Dividend and capital appreciation) . The Company's target dividend yield for the first full financial year to 31 December 2022 is 5.5 pence. Due Early March 2021. Digital 9 Infrastructure launch an initial public offering on the Specialist Fund Segment of the Main Market of the London Stock Exchange, by way of an initial placing and offer for subscription for a target issue £400m. Digital 9 Infrastructure plc is a newly established, externally managed investment trust. The Company will invest in a range of digital infrastructure assets which deliver a reliable, functioning internet. The IPO Prospectus is expected to be published in March 2021. Team PLC announced their plans for an AIM IPO. Team owns Theta Enhanced Asset Management Ltd, trading as Team Asset Management. This is a Jersey-based active fund manager providing discretionary and advisory portfolio management services to private clients, trusts and charities. Assets under management were GBP291m in November, up from GBP140m in December 2019 . The Company is seeking to raise no less than £5m. The Placing will be priced on a pre-money valuation for the Company of £7m. Targeting March Admission. Fix Price announces its intention to float on the Main Market of the London Stock Exchange. Fix Price is one of the leading variety value retailers globally and the largest in Russia, with more than 4,200 stores. Fix Price has revenues of RUB 190.1bn, RUB 142.9bn and RUB 108.7bn for 2020, 2019 and 2018, respectively. Adjusted EBITDA for the same years was RUB 36.8bn, RUB 27.2bn and RUB 14.2bn, respectively. The Offer would consist of an offering of GDRs by certain existing shareholders of the Company. Great Point Entertainment Income Trust PLC announced its prospectus has been approved by the FCA. Great Point Entertainment Income Trust PLC is a newly established, externally managed closed-ended investment company. The Company will provide project finance to content makers and commissioners in the global television and film production industry via senior loans secured against pre-sold intellectual property (IP) rights. GPEIT's investment objective is to provide Shareholders with dividend income and modest capital growth through exposure to media content finance. According to media reports, Deliveroo is expecting to release its IPO plans on 8th March. The company raised more than $180m in January with a valuation of more than $7bn.
Companies: LND GDR GAMA SOLI SHED RLE CRU WRES SBI MNO
UK railway privatisation, which was launched in the mid-1990s, has finally turned full circle: the Department of Transport has recently confirmed that its controversial railway franchise system will be scrapped. In this month's feature article, Nigel Hawkins, the Infrastructure analyst at Hardman & Co, examines the 25-year history of railway privatisation and chronicles its ups and its downs. The successes of railway privatisation, such as new rolling stock, are addressed, along with the many shortcomings, which included minimal vertical integration. With the winding up of the franchise system, the UK railway sector is effectively reverting to its former status as a nationalised industry, a shift started with the renationalisation of the collapsed Railtrack – later re-badged as Network Rail – in 2001.
Companies: ARBB BBGI CLIG DNL FLTA ICGT OCI PCA PIN PXC RECI SCE TRX SHED VTA YEW
Bacanora Lithium (BNC LN) has fulfilled its funding requirements for the Sonora project in Mexico and is on its way to being a major lithium producer. With equity raises totalling US$96m in the form of a placing after which BCN’s strategic partner opted to exercise its pre-emptive rights and then increase its stake to 28.8%. The support from investors and Ganfeng Lithium, one of the world’s top lithium producers, is a major validation of the project and confirms our long-held view that Sonora would be built.
Companies: Bacanora Lithium Plc
SMS has announced new contract wins with two of the fastest growing independent energy suppliers in the UK to provide meter installation and Meter Asset Provider (MAP) services. Minimum contracted order commitments will see the SMS contracted pipeline increase to 2.5m (December 2020: 2.0m), indicating an addition of at least 500k smart meters. SMS has also announced the acquisition of a portfolio of 15,000 I&C electricity meters and 20,000 meter point data collection contracts, adding £3.1m ILARR for a cash consideration of £8.25m.
Companies: Smart Metering Systems PLC
DX has reported a strong H1, building on the return to profit last year. High service levels and improved operational efficiency have enabled continued volume growth at DX Freight, which has supported H1 group sales growth of 7.4% and an increase in adjusted operating profits from £0.4m to £5.9m − all achieved despite Covid. We have left our FY 2021 EPS unchanged (maintaining some caution on the impact of the lockdown) but upgrade FY 2022 by 11% (which assumes the share price exceeds 40p and consequently maximum dilution from option schemes). With the £10m capital investment programme providing support for continued strong long-term growth, the June 2023 PER of 12.4x and free cash flow yield of 7.4% offer significant share price upside (our new target is 42p).
Companies: DX (Group) Plc
XP Power reacted quickly to pandemic-related disruption early in 2020, so well positioned to benefit from a sustained uptick in orders as COVID-19 generated demand for critical care equipment and semiconductors. The company reported a record year for revenue and earnings while reducing net debt; the dividend was reinstated from Q220 as visibility improved. Despite expecting demand to normalise, XP still expects growth in underlying revenues in FY21.
Companies: XP Power Ltd.
Today's news & views, plus announcements from RIO, TW, CRDA, TPK, PHP, MGGT, SHI, WHR
Companies: PHP RIO SHI TPK
Further media reports that Dr Martens, the British Boot brand is planning an IPO on the LSE. It is currently owned by PE group, Permira who is expected to sell down its stake at the IPO. March 2020 YE the group had revenues of £672m and EBITDA of £184m. Deal size TBC. Upon Admission to AIM, Nightcap will acquire The London Cocktail Club Limited (the "London Cocktail Club"), which is an award winning independent operator of ten individually themed cocktail bars in nine London locations and one location in Bristol. Offer TBC Due mid Jan. HSS Hire Group, HSS.L transfer from Main to Aim. Mkt Cap c. £70m. Recently raised £52.6m. Leading supplier of tool and equipment for hire in the United Kingdom and Ireland and has provided equipment hire services in the United Kingdom for more than 60 years, primarily focusing on the B2B market. Due 14 Jan. VH Global Sustainable Energy Opportunities plc, a closed-ended investment Company focused on making sustainable energy infrastructure investments, today announces intends to launch an initial public offering of shares on the Official List (Premium) of the Main Market of the London Stock Exchange. Due by Early Feb.
Companies: SAG DXRX CALL BBSN ASTO DNL FIPP IIG GROW TCN
Accrol Group Holdings plc (ACRL LN) Bango plc (BGO LN) Brickability Group plc (BRCK LN) Norcros plc (NXR LN) OnTheMarket (OTMP LN) Ricardo (RCDO LN) UP Global Sourcing Holdings (UPGS LN) Watkin Jones (WJG LN) Xpediator (XPD LN) ZOO Digital (ZOO LN)
Companies: ACRL BGO BRCK NXR OTMP RCDO UPGS WJG XPD ZOO
tinyBuild— a leading video games publisher and developer with global operations. tinyBuild's strategic focus is in creating longlasting IP by partnering with video games developers, establishing a stable platform on which to build multi-game and multimedia franchises is to join AIM. Offer details TBC. Due mid-March. AMTE Power, a developer and manufacturer of lithium-ion battery cells for specialist markets, announced its intention to seek admission to trading on AIM. Admission is expected to take place during March 2021. The Company intends to raise approximately £7m by way of a placing of new ordinary shares in the capital of the Company. Timing TBC. Samarkand Group Limited, the cross-border eCommerce technology and retail group opening up the world's largest market for brands and retailers, intends to IPO on the Apex Segment Aquis Stock Exchange Growth Market. Admission is targeted for March 2021. Cellular Goods a UK-based provider of premium consumer products based on biosynthetic cannabinoids announced its intention to join the main market (standard). Has raised £13M in an oversubscribed placing. £25m mkt cap. Due 26 Feb. NextEnergy Renewables to launch an IPO on the Main Market. NREN is a differentiated renewables investment Company that aims to capture the most attractive private renewables and energy transition infrastructure investment opportunities globally. Targeting a £300m raise. NREN is targeting total returns of 9-11 per cent. per annum (net of all fees and expenses but including the Target Dividend and capital appreciation) . The Company's target dividend yield for the first full financial year to 31 December 2022 is 5.5 pence. Due Early March 2021. Digital 9 Infrastructure launch an initial public offering on the Specialist Fund Segment of the Main Market of the London Stock Exchange, by way of an initial placing and offer for subscription for a target issue £400m. Digital 9 Infrastructure plc is a newly established, externally managed investment trust. The Company will invest in a range of digital infrastructure assets which deliver a reliable, functioning internet. The IPO Prospectus is expected to be published in March 2021. Team PLC announced their plans for an AIM IPO. Team owns Theta Enhanced Asset Management Ltd, trading as Team Asset Management. This is a Jersey-based active fund manager providing discretionary and advisory portfolio management services to private clients, trusts and charities. Assets under management were GBP291m in November, up from GBP140m in December 2019 . The Company is seeking to raise no less than £5m. The Placing will be priced on a pre-money valuation for the Company of £7m. Targeting March Admission. Virgin Wines UK Plc has out their plans for an AIM IPO. Virgin Wines is a direct-to-consumer online wine retailer that sells products to retail customers in the UK through two subscription schemes and a pay-as-you-go offering. The Group also sells a range of beers and spirits and operates a B2B sales channel for corporates. Anticipated mkt cap £110m. Raising £13m in new money and vendor sale of £34.9m . Due 2nd March. Fix Price announces its intention to float on the Main Market of the London Stock Exchange. Fix Price is one of the leading variety value retailers globally and the largest in Russia, with more than 4,200 stores. Fix Price has revenues of RUB 190.1bn, RUB 142.9bn and RUB 108.7bn for 2020, 2019 and 2018, respectively. Adjusted EBITDA for the same years was RUB 36.8bn, RUB 27.2bn and RUB 14.2bn, respectively. The Offer would consist of an offering of GDRs by certain existing shareholders of the Company. Great Point Entertainment Income Trust PLC announced its prospectus has been approved by the FCA. Great Point Entertainment Income Trust PLC is a newly established, externally managed closed-ended investment company. The Company will provide project finance to content makers and commissioners in the global television and film production industry via senior loans secured against pre-sold intellectual property (IP) rights. GPEIT's investment objective is to provide Shareholders with dividend income and modest capital growth through exposure to media content finance. According to media reports, Deliveroo, are expecting to release their IPO plans on 8th March. The company raised more than $180m in January with a valuation of more than $7bn.
Companies: YEW IKA UPR WYN ENW BWNG TRAK DBOX HZM G4M
Xeros has raised £8m (gross) to productise the extremely promising XFiltra product and to assist with some pandemic-induced licence slippage.
Companies: Xeros Technology Group (XSG:LON)Xeros Technology Group Plc (XSG:LON)
An upbeat trading statement (for the four months to 7 February) points to very strong like-for-like revenue growth in both the UK and South Africa. Higher volumes and revenues most likely with an improving mix are all supportive of rising profitability and margins. Our FY21 PBT estimate is now c 16% higher and consistent with updated guidance. We have also increased subsequent years modestly. Gaining market share and virtually de-gearing the business in the last year are notable group achievements.
Companies: Norcros plc
