We believe Vianet has sufficient cash resource to see it through into a post COVID-19 vaccine world. The new lockdown measures may impact profitability and cash flow in H2 but probably not worse than that seen in the interim results. While our forecasts remain withdrawn, the balance sheet shows demonstrable strength which should encourage investors and we reinstate our recommendation at Buy.
Companies: Vianet Group plc
The Smart Zones customer base is expected to reopen, to a large extent, this weekend. The reopening of pubs will bring forward a revised billing profile and markedly improve the Smart Zones revenue base. Smart Machines continues to operate profitably and the group's Business Interruption Loan should buttress the balance sheet through this year. While our forecasts remain withdrawn we can see an encouraging pathway to normalised trading next year.
Entering the new fiscal period, the majority of Smart Machines units are operating as normal. The Smart Zones customer base has largely contracted to remain live and connected, albeit at a reduced unit rate. Vianet has received a business interruption loan and is adequately financed well into next year. By then it is anticipated that trading will have normalised. Our forecasts remain withdrawn for now.
FY20 results: low visibility, withdrawing rating
The prospective 2020E results will show good growth and cash generation but the last few weeks of the fiscal period were negatively impacted by COVID-19 pub closures. This limited access for new installations and technology upgrades in March and we anticipate these conditions will continue into the new fiscal period. We withdraw our forecasts and place our recommendation under review until macroeconomic conditions stabilise.
COVID-19 Trading Update
The organic growth rate and progress seen in the interim period is underpinned by the meaningful contracts signed over the last couple of years. The stock price rise is beginning to discount this growing momentum and we see further upside potential for the share price from multiple expansion and continued organic earnings growth.
Interim Results
African Export-Import Bank a supranational financial institution w hose purpose is to facilitate, prom ote 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 adm ission of its Shares to the premium listing segment of the Official List of the FCA and to trading on the London Stock Exchange's main market for listed securities. The Offer will be comprised of new Shares to be issued by the Company (to raise expected gross proceeds of £150m). Admission is expected to take place in November 2019.
Companies: THR HAYD FAB ADT VNET ODX KRPZ CREO OBC SWG
Following continued delays of a Brexit agreement, few sectors within the UK market have remained attractive to investors despite low valuations. One sector which has continued to outperform despite the political drama has been the UK video gaming sector (henceforth UK gaming), which we are fans of. We believe a combination of sector-leading growth, strong cash conversion and timely cyclical positioning support our positive view on the UK video gaming sector.
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Vianet has released a business update this morning confirming trading for the first four months of FY20E has been as anticipated and the Group remains on course to meet market expectations. The Group has also successfully concluded negotiations on three long term contracts in its Smart Machines division; set to generate c.£10m of revenues over the next three to five years and underpinning forecasts. The shares have drifted back from recent highs of 147.5p to trade at just 118p (2.0 EV/Sales, 11.2x FY20E P/E) offering a compelling entry point yielding 4.8%. PT 185p. Buy.
Companies: THR TRX KIBO VNET PGR OCI JAN KRS IHC
In January, we provided a list of 11 stocks for 2019 that we believed would perform strongly with attractive catalysts that could lead to material outperformance. In this Quarterly Research Outlook, we revisit these views, analysing what has happened and how the remaining six months of the year could play out.
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We release FY21E forecasts for Vianet, underpinned by the Group’s AGM statement confirming a positive start to the year. We also revisit our valuation methodology to align our TP better with the technology sector, looking at the relationship between margin and EV/Sales multiple. With 94% RR, supported by recent contract wins and EBITDA margins of 29.3% for FY20E, we suggest the shares could easily support an EV/Sales multiple of 3.0x FY20E (17.6x P/E). We move our TP to 185p and remain buyers.
The AGM statement points to a new fiscal period that has started well. The momentum seen in the second half of the year is continuing with strong growth opportunities in Smart Machines underpinned by new long term contract wins. Given this growth profile we reiterate our view that this recurring revenue stock is undervalued. Buy.
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The group’s year-end update points to stronger than expected Q4 trading, boosted by robust sales in North America that translated efficiently to upside on profitability expectations. Cash performance has once again been stellar, resulting in net cash of $35m, considerably higher than forecast, partly profit drop-through and partly from tight working capital management. We are therefore upgrading our FY 2020 EPS by 25% to 33.2ȼ. The strong cash position also results in a boost to the total dividend, giving a dividend yield of 6.7%. We raise our price target from 285p to 435p, based on a target P/E of 17.0x offering upside to the current P/E of 13.8x.
Companies: Somero Enterprises, Inc.
Today’s update confirms a strong recovery in H2 FY2020E as expected and a full year adjusted PBT at least in line with FY2019, despite a material impact from Covid and the depressed oil price resulting in a decline in Augean’s North Sea Services business. The FY2020E outturn demonstrates the resilience of the Group and the strong attractions of its growing EfW activities that now account for c.70% of Group profit. Augean is very well positioned in the EfW residue market and with c.40% of the UK’s hazardous landfill capacity. We forecast Group earnings growth of 15% and 21% for FY2021E and FY2022E, and expect further strong cash generation. EV/EBITDAs for FY2021E and FY2022E are 5.7x and 4.5x respectively, substantially below sector constituents and transaction multiples.
Companies: Augean PLC
2020 ended with two positive moves for carbon capture and storage (CCS) which should benefit Velocys clients. In the US, the signing of the COVID 19 stimulus bill extends and adds support for CCS in the US where the Bayou project is working with CO2 offtaker Occidental to deliver a negative emissions project. The UK government has also published guidance on CCS funding making this option an additional opportunity for the Altalto project. Velocys remains one of the very few opportunities for investors to play negative emission technology. We see both these moves improving the operating environment for the company’s clients and their projects, stimulating demand for the Velocys technology.
Companies: Velocys plc
Although 2020 will probably go down in history as one of the most challenging years experienced during our lifetime, it will also likely be chronicled as one of the best years for the recognition and appreciation of science. As we entered 2020, the COVID-19 pandemic was in its infancy. However, it rapidly evolved through the exponential rise in infections and mortality globally. Much has been achieved during the past 12 months in the fight against COVID-19, but, as we enter 2021, there are considerable concerns about the emergence of a mutant version of the virus and the second wave that we are now facing.
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Augean has proven to be resilient throughout the pandemic. In particular, the growth in processing incinerator ash residues from energy from waste (EfW) facilities continues unabated and additional new contract wins should drive improved returns in FY21. Management expects FY20 adjusted PBT to be slightly ahead of last year and we have marginally reduced our FY20 adjusted PBT and EPS estimates by 1%. Our FY21 estimates are maintained. Cash flow has been stronger than we expected, underpinning the indication that dividends should resume in FY21.
Capital Limited has released its Q4 and FY2020 trading statement this morning. Overall it shows 2020 was a strong year for the company with revenue growing 18% and most other operating metrics growing positively with it – see Fig 1. We have adjusted our forecasts accordingly and also to take into account the mining services contract for the Sukari Mine which the company won late last year. The latter is a game changer for Capital and its investment case in our view; turbo charging revenue growth, enhancing margins and diversifying cashflow all of which should lead to materially higher valuation multiples. We raise our PT to 127p.
Companies: Capital Limited
A £10m fundraising expedites the Protos project and opens the way for the £10.2m Peel warrant exercise in the current year. The funding will also give the company additional resources to pursue international opportunities. Adjusting for the raise and some timing differences, our UK only base valuation rises from 5.0p to the raise price of 5.5p and we see existing international opportunities taking this to 7.5p (from 6.9p) and including opportunities in Europe this could rise to 12.1p (from 11.2p).
Companies: Powerhouse Energy Group PLC
XPD is a well-established pan-European freight management and logistics operator. We have selected the Group as one of our Top Picks for 20211. The Group is based in the UK and focused primarily on providing integrated supply chain solutions for customers operating in the UK and Central & Eastern Europe (“CEE”). Trading has been resilient through the Covid crisis, and the benefits of acquisition integration and recent cost reductions are now coming through. Management has guided to an 18% y-o-y improvement in profit for 2020e. The balance sheet is strong with £4.3m of net cash reported at H1.
Companies: Xpediator Plc
Foresight Group , the award-winning infrastructure and private equity investment manager to IPO on the Main Market (premium). The Offer will primarily comprise a sale of shares by existing shareholders (c.80% of the Offer) with a smaller offering of new shares (c.20% of the Offer) to be issued by the Company. Details TBA. Cornish Metals (TSX-V: CUSN) intends to list on AIM. The Company is proposing to raise £5 million by way of private placement of new Common Shares (the "Fundraising") to advance the United Downs copper-tin project. The Company expects that Admission will become effective in February 2021. The Company's Common Shares will continue to be listed and trade on the TSX-V in Canada. 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: TYM W7L BEG CRPR EUZ IRR CMCL FARN KETL AUG
Today’s positive trading update provides further encouragement for investors. The shares have been appreciating steadily on the back of last month’s fund raise and acquisition, followed by a major contract win and the £2.5m sale of the remaining RTLS stake, which had previously been largely written off. Both FY20 revenue and adj. LBITDA are better than forecast and YE net cash is particularly healthy. The integration of OSPi is underway, with all staff already transferred. We adjust FY20 forecasts and reiterate future forecasts. Future cash expectations are lifted by the higher YE balance as well as the sale of the remaining RTLS holding.
Companies: IQGeo Group PLC
Velocys has announced a change in the partnership developing the Altalto sustainable aviation fuel project with Shell moving on and Velocys now splitting the project 50/50 with British Airways. Despite being no longer formally involved, Shell remains supportive of the project in broad terms. British Airways continues to view the project as vital to its net zero target.
The group has announced an extremely positive trading update as it completes its first half. Following a positive Q1, Q2 has maintained momentum resulting in a record profit for the half year, significantly more than we had forecast for H1 and almost achieving the full-year expectation. Restructuring cost savings have also assisted gaining double-digit RoS. It also signalled a return to the group’s previous dividend policy. As a result, we upgrade our FY21 forecast with a 39% in in EPS to 19.9p. We also raise our PT from 130p to 178p, in line with the uplift in EPS, which remains a conservative target P/E of 9.0x. ALU is currently one of the lowest rated in the sector, offering a currently very attractive 4.4% dividend yield.
Companies: Alumasc Group plc
Seeing Machines has announced that it has licensed its Occula® Neural Processing Unit to OmniVision Technologies Inc. This advances the relationship from the MOU announced in September 2020 and builds on a relationship that is over five years old, with the two organisations having worked on multiple automotive programmes with a number of Tier 1 customers.
Companies: Seeing Machines Limited
Cornish Metals (TSX-V: CUSN) intends to list on AIM. The Company is proposing to raise £5 million by way of private placement of new Common Shares (the "Fundraising") to advance the United Downs copper-tin project. The Company expects that Admission will become effective in February 2021. The Company's Common Shares will continue to be listed and trade on the TSX-V in Canada. 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. 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. Moonpig, the digital greeting card company, is planning an IPO with a potential valuation of £1bln, according to multiple media reports. Further details expected to be announced over the next two weeks.
Companies: ZPHR PANR PRSM SENS CYAN G4M ITX CRCL FEN ZIN
Journeo is a specialist provider of information systems and technical services to the transportation sector. This morning, the group has announced that under its existing Transforming Cities Fund framework contracts, it has received further orders for its advanced public transport information systems.
Companies: Journeo plc
