This Week's AIM Highlights 9th December

Vianet Group - Initiation - December 2022

We have today initiated on an exciting, market leading business with >85% recurring revenues from blue chip customers, >90% cash conversion, multiple growth opportunities, and net debt that we estimate will fall well below 1x EBITDA in the next 2 years. Vianet uses connected devices to collect and analyse data from pubs/leisure venues and “unattended retail” assets such as snack & can and coffee vending machines. This data is used to provide insights into potential operating efficiencies, waste

Cenkos: Vianet Group Plc- -- Strong growth drivers

Vianet has reported earnings for H1/23, with trading in line with the update issued on 26 October. We examine the key features of the results on p5. In light of the company's continued progress, in this report we offer a detailed overview of Vianet's growth model, market positions, and financial outlook. We maintain a BUY rating with 110p fair value.

Hybridan Small Cap Feast 25/11/22

Dish of the day Joiners: No joiners today. Leavers: Euromoney Institutional Investor has left the Premium Segment of the Main Market. What’s cooking in the IPO kitchen?** Conviction Life Sciences, a newly established closed-ended investment company managed by Plain English Finance Limited, is seeking to list on Premium Segment of the Main Market of the London Stock Exchange, to invest in a conviction portfolio of life sciences and medical technology businesses, primarily in the UK, Europe and Au

Cenkos: Vianet Group Plc - Trading update

Vianet has released a trading update for H1/23. The company reports strong revenue progress in both divisions and provides commentary on cost pressures which were highlighted in the AGM statement of 13 July. We maintain a BUY rating.

Cenkos: Vianet Group Plc -- Rebound and path to sustained growth

Smart Machines is trading above FY20A levels, as investment in technology and sales resource has driven material new contract wins. Smart Zones has rebounded as the rate of site closures has faded and new sales opportunities grow. Vianet is on track for shortly reaching pre-pandemic levels of profitability on a run-rate basis and surpassing it in FY24E. The share price should be trading close to 2019 levels implying 100%+ upside.

Cenkos: Vianet Group Plc -- Building sales momentum

The strength of re-opening from Q2A onwards has extended through H2E and Group earnings will be in line with expectations. Higher component costs are a feature of the technology market and artificially high prices will curtail a dividend until they recede. While we are yet to initiate a forecast for the new fiscal year, the current trajectory suggests the Group could achieve pre-pandemic run rate profitability within 6-12 months.

Cenkos: Vianet Group Plc -- Strong rebound

With Q2 stronger than Q1, the exit run rate and momentum from H1A suggests Vianet is on track to meet our forecasts. New Contactless sales are above pre-pandemic levels at Smart Machines and there are greenfield opportunities opening up at Smart Zones. The Group is on track to reach pre-pandemic profitability in early 2023 and grow steadily thereafter.

Cenkos: Vianet Group Plc -- Reopen

Both divisions have traded strongly in H1E. Almost all Smart Zones sites are now operational and the recovering momentum at Smart Machines continues. With a stronger Q2E and improving outlook thereafter, a sequential recovery profile is consistent with our expectations of an H2E weighted FY22E. Depending on cash flow and debt levels, management hopes and expects to return the company to dividend paying status in July.

Cenkos: Vianet Group Plc -- Forecasting the recovery

The robustness of the operating model and management's action to support customers and manage the cost base led to Vianet generating positive operating cash flow in FY21A. There is a strong pathway to recovery but the full extent is somewhat caveated on a full reopening profile that is yet to be confirmed. We are forecasting the Group to be free cash flow positive this year and see upside in the price as new order momentum returns.

Cenkos: Vianet Group Plc -- The reopening v2.0

Trading in H2 was better than H1A, albeit by a small margin, despite a more restricted trading period for its customer base as a result of the Government's policy of enforced lockdowns. Continued investment in the business we believe will see net debt slightly higher at the full year but this leaves the business very well placed to capitalise on opportunities in both existing and new markets.

Cenkos: Vianet Group Plc -- Strong runway to recovery

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.

Cenkos: Vianet Group Plc -- The reopening

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.

Cenkos: Vianet Group Plc -- Leading the return to normal

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.

Vianet

FY20 results: low visibility, withdrawing rating

Strix Group plc (KETL LN) - Chinese covid policy impacting trading, Billi acquisition closes

Strix has issued a trading update today following a disrupted period due to China’s continued Zero Covid policy approach and ongoing macro uncertainty. This has so far restricted business activity for two of Strix’s top five major OEM customers, with further disruption expected. Revenues for the full year will be below initial expectations whilst profitability is impacted more heavily due to the operational gearing in the business. These difficult market conditions see Zeus full year revenue for

Invinity Energy Systems - 15MWh order, largest to date

Invinity has announced a record new order, for 15MWh of its vanadium flow batteries (VFB) for Everdura Technology in Taiwan with 255MWh of follow-on-order potential. This marks Invinity's sixth announced sale this year and its fifth in 2H22. For the YtD that brings total firm orders to 37.7MWh, almost 3.5x the previous annual record. The evidence continues to mount that Invinity has a commercially competitive product, yet it trades at well under half the market capitalisation to book value accor

Invinity Energy Systems - More Traction In Taiwan

Invinity have announced their largest single battery sale to date through a 15MWh contract with Taiwanese industrial technology company Everdura. This comes on the back of another recent deal in the Taiwanese market, as well as notable sales in the US and Europe. We see sales momentum for Invinity’s flow battery accelerating as renewable penetration increases creating urgency for proven, low-cost, safe Long Duration Energy Storage (LDES) technology.

LIBERUM: Yü Group* - Strong growth and dividend on the cards

SDI Group - Interims

SDI reported a strong set of interim results to 31 October, with 14% and 28% increases in adjusted pre-tax profit and EPS, driven by 28% revenue growth. Organic growth of 4% reflected some timing issues relating to component delays, with acquisitions contributing £6.1m (+25%) to revenue growth. We have made minor changes to pre-tax profit and EPS in FY 23 (-3% to £11.9m and 9.1p) and FY 24 (-1% to £12.4m) to reflect higher net debt (working capital) and therefore higher finance charges. Acquisit

LIBERUM: ATOME Energy * - Flagship Villeta project doubles to 120MW capacity

Everdura ignites interest

LIBERUM: Currys* - Setting our H1 expectations cautiously

Invinity Energy Systems - 2.2MWh sale, entry into Taiwanese market

Invinity has announced a further sale of its vanadium flow batteries (VFB), this one comprising 2.2MWh of its VS3 model. The purchaser is Bei Ying International Corporation, a Taiwanese industrial equipment wholesaler which is acting as a reseller for Invinity. This brings total sales announced since the interims to 14.3MWh and to 22.7MWh for the year to date. Given the run rate, we believe there is a high likelihood of further sales before year end, confirming solid demand for Invinity's VS3 pr

DX Group (DX/ LN) - Back on the (supply) chain gang*

DX Group has reported strong full year earnings; we reinstate our estimates and valuation following the relisting of the shares in October. Trading has been resilient despite widely reported, but now resolved, corporate governance issues. Growth was healthy in DX Freight driven by the 1-Man delivery service, and with higher parcel revenues in DX Express. Current trading is reportedly in-line with expectations, and the medium-term operating margin target of 7.5%-10.0% (FY22a: 5.8%) has been reite

AB Dynamics (ABDP) - Highway star

There is not much wrong with the investment case for ABD currently. Earnings are resilient, acquisitions look sensible, and the Group has a net cash position. Many investors will simply not like the valuation (PE c.30x forward), but ABD has always been expensive, priced as a rare provider of value-added testing equipment and services for vehicle active safety and autonomy. Some will worry about supply chain constraints, but we have not heard anything different or particularly concerning from ABD

Full year results and additional debt finance

EAAS has announced its full year results (to June ’22) alongside news that it has secured further debt finance of £2.5m in order to support the growth of the business and strengthen the Group’s balance sheet. Last Friday’s update confirmed a strong start to the new year and reiterated expectations of material year on year revenue and EBITDA growth for FY23. We expect to update our valuation analysis following the upcoming AGM (20th Dec).

SHORE CAPITAL - Ultimate Products+ (UPGS, House Stock at 149p)

Morning Note – 16 November 2022

Hybridan Small Cap Feast 16/11/22

Dish of the day Joiners: BWP REIT joins the Wholesale Segment of the International Property Securities Exchange (IPSX). BWP REIT is a newly formed single asset company and has raised £35m by issuing 35m new ordinary shares at 100 pence per share to acquire Bridgewater Place, an office-led mixed use property in central Leeds and valued at £63m. The property is one of the tallest buildings in Yorkshire, comprising 234,000 sq. ft of office space, and is close to 90% let to EY, as well as multinatio