Churchill China (CHH LN) Continuing to dish out premium growth | IFG Group (IFP LN) Operational progress, but still no clarity on HMRC investigation | Xaar (XAR LN) Trading below expectations; reviewing partnering options for printheads
Companies: CHH IFP XAR
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 (PATH) -RTO of a 50 per cent. participating interest in the producing Alfeld-Elze II gas field located 22 kilometres south of Hannover in Germany. Offer TBA. Due late Aug.
Kropz PLC-Intention to float by the emerging plant nutrient producer with an advanced stage phosphate mining project in South Africa and exploration assets in West Africa
Companies: IFP KETL EME BBB GWMO SYM FIH CRAW RBD SSY
Cello Health (CLL LN) AGM | Gresham Technologies (GHT LN) Clareti win with global tier 1 bank | IFG Group (IFP LN) Q1 update shows some progress, cost review in progress | Microsaic Systems (MSYS LN) 3rd small molecule agreement signed this year | Renishaw (RSW LN)
Strong Q3 update with modest increase in guidance
Companies: CLL GHT IFP MSYS RSW
Team17 Group -video games label and creative partner for independent developers. Since 2014, delivered a revenue CAGR of 69% (31 December 2015 to 31 December 2017), with revenues of £29.6m and Adjusted EBITDA of £12.9m. Offer TBA
Serinus Energy -international upstream oil and gas exploration and production company. Its principal assets are located in Romania (development phase) and Tunisia (production phase). Raising c.£10m. Offer TBA. Due mid May.
Companies: IFP NMRP LME IGAS MSYS CLL GWI VLG FFI TYR
Edison Investment Research is terminating coverage on IFG Group (IFP). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant.
Companies: IFG Group
2016 saw growth in revenues, as well as a further increase in client numbers and assets under advice and administration (AUA), both positive indicators for future performance. However, accelerated investment aimed at further enhancing IFG’s ability to serve clients and deliver further sustainable growth was a drag on earnings in addition to the well-flagged negative impact of reduced interest rates. A platform repricing initiative to be phased in will ameliorate the ongoing impact from low rates in the current year. Investment in improving the customer proposition should better position IFG to benefit from an ageing population and pension freedom, while balance sheet strength supports organic and inorganic growth opportunities.
In its trading update IFG reported that performance has been in line with management expectations. The cooling effect of market uncertainty on growth in James Hay and financial advice client numbers, together with the impact of low interest rates, remain a near-term head wind for revenues. Even so, with Saunderson House continuing to increase profits, IFG expects to match 2015 earnings. The long-term growth opportunity presented by an ageing population and pension freedoms remains in place and to address this IFG is continuing investment to enhance its service and increase operational gearing.
Uncertainty surrounding the EU referendum and the accompanying reduction in base rate has resulted in lower earnings estimates for IFG, although the longer-term outlook for its two businesses remains promising. Both the retirement wealth platform and financial adviser stand to benefit from an ageing population and pension freedoms. Meanwhile, IFG continues to invest to address these opportunities and has sufficient capital and net cash to support growth while maintaining a progressive dividend policy.
IFG’s Q1 trading update reports the group trading in line with expectations with both James Hay and Saunderson House continuing to attract new clients and assets, and maintain strong levels of retention. Revenues and profits are ahead of the same period in 2015 with a continued emphasis on margin and costs discipline. The refocused IFG is well positioned for further progress, supported by a strong and liquid balance sheet, in markets that offer good long-term growth potential and consolidation opportunities.
First Derivatives (FDP LN) No surprises expected from full year results on 17 May | IFG Group (IFP LN) Positive start to the year, 21% upside to target price
Companies: First Derivatives Plc IFG Group
IFG Group released a Q1 update yesterday lunchtime which illustrated a positive start to FY16e, in-line with our current expectations. AuA grew by 2.1% in JHP whilst c.50 new clients were added in Saunderson House; both indicative of organic growth momentum. We are encouraged by reported performance but, at this early stage in the year, leave our forecasts unchanged. We retain our BUY recommendation underpinned by a 215p 12m TP, set using a SOTP using prudent divisional multiples.
A review of other platform businesses leads us to increase our valuation of JHP and drives a positive shift in our group sum-of-the-parts ‘relative’ valuation to €2.45, (was €2.15). Our DCF ‘absolute’ valuation is now €2.33. The mid-point is €2.39.
IFG Group delivered strong final results for 2015 (reported 22/3) with returns on investment beginning to become evident. Notably, the operating margin in the group’s James Hay (“JHP”) pensions business grew by 670bps leading to a 20% beat vs our EPS forecasts. Whilst maintaining some caution in our forecasts, we expect further earnings growth on an operationally geared platform. Given two distinct business units, we set our 12m Target Price at 215p using a SOTP valuation – equating to 12.7x FY16e EV/EBITDA – and we reiterate our BUY recommendation.
Brewin Dolphin Holdings (BRW LN) Shares undeservedly lagging key benchmarks | First Derivatives (FDP LN) Full year comfortably ahead of expectations | IFG Group (IFP LN) Upgrading forecasts, improving returns | Instem (INS LN) SEND momentum building
Companies: BRW FDP IFP INS HYVE
IFG Group (“IFG”) has reported strong final results for FY15. Revenues were broadly in line with our forecast, however, as a result of improvement in the underlying margin performance in James Hay, IFG has delivered 8.1p adj. EPS for the period – ahead of our 6.7p forecast. The balance sheet remains strong and net cash has grown to £27.3m on strong operating cash flow and consideration from disposals. We expect IFG to continue to deliver strong shareholder returns from further growth in an operational geared model, with a strong balance sheet underpinning.
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Trading in the royalty partner portfolio over Q1/21 shows a material rebound from May, which has been sustained to date, as the portfolio as a whole returns to more normalised trading. Consequently, Duke's cash receipts, while down 20% YoY currently, are set to step up in H2/21 as forbearance measures largely expire and deferred royalties realised. This bodes well for a rebound in earnings and a return to cash paid dividends. A share price down over 55% since Feb 20, standing at p/book of 0.56x H1/20A's NAV p/s thus appears overdone. We await further clarity on the portfolio before reissuing forecasts, thus leave our recommendation U/R.
Companies: Duke Royalty
Acquisition of Berkeley Burke (Financial Services) Ltd and Berkeley Burke Employee Benefit Consultants Ltd for £2.9m maximum consideration (£1.4m initial plus £1.5m deferred and contingent on revenue hurdles). In addition to the acquisitions announced today, the company has received credit committee approval from RBS International for a new £5.5m acquisition facility, further strengthening the potential for STM’s acquisitive growth strategy. The execution of both the due diligence and the deal itself is impressive in the current climate, and the deal adds £0.3m of PBT in 2021E, with a minimum of £0.6m expected from 2022E. We reiterate our 53p price target.
Companies: STM Group Plc
We believe now is an interesting time to invest in Northgate, with a new executive board and a capable management team in place who have already delivered progress on an ongoing turnaround as we await a full strategic review. The group now has a clear and well communicated capital allocation strategy in place and improved earnings quality, in our view. We believe that the growth opportunity in the UK, the value of the Spanish business and the progress made to date with the turnaround are not being reflected in the share price, which is currently 15.9% below book value (414p per share in FY19A rising to 468p in FY22E). We use a variety of valuation methods including P/B, SOTP, DDM and DCF modelling and arrive at an average implied share price of 450p, 29.0% above the current share price.
Companies: Redde Northgate Plc
Opportunities which have presented themselves in the wake of the COVID pandemic have been too good to ignore. Two assets have been acquired for £17m with 5%+ NIY; one having material reversionary potential. An attractive forward funding opportunity has been born out of COVID uncertainty with ULR stepping in to fund the £20m development of two assets pre-let to Amazon and DHL. March’s equity placing has now been fully deployed, and a new £151m loan facility provides additional £40-50m headroom. The structural trend towards e-commerce has been catalysed by COVID. ULR offers exposure to this resilient, attractive segment with a 5%+ yield and potential capital gains from rent reversion.
Companies: Urban Logistics REIT Plc
L&G reported an operating profit from continuing divisions (excluding Mature Savings and General Insurance businesses) of £1,128m, -2.2% yoy. The COVID-19-related cost was £129m. LGR posted a growing operating profit to £721m. Net profit amounted to £290m vs. £874m a year before, being affected by the reduced discount rate used to calculate LGI reserves. The Solvency II ratio stood at 173%. The Board recommended an interim dividend of 4.93p/share, stable relative to H1 19.
Companies: Legal & General Group Plc
For this Monthly, we are delighted that Rooney Nimmo and 24Haymarket have allowed us to reproduce a recent report they jointly published, entitled An analysis of UK exits (2015-2019), which provides a granular analysis by sector of the activity in our dynamic private companies world. We hope you find the insights of interest.
Companies: AVO AGY ARBB ARIX CLIG ICGT NSF PCA PIN PXC PHP RECI SCE TRX SHED VTA
29 July interims showed a 7.1% EPRA EPS increase, rising NAV and a continued rise in DPS. Illustrating the growth, rents rose 20.4%, and adjusted EPRA earnings rose 29.0%. On 9 July, PHP launched a £120m proposed placing, at a point in the REIT’s development that is underpinned by a strong and broad pipeline. The placing was expanded to £140m as a result of investor appetite. The short-term pipeline stands at £128m, and there is also growth from active management of existing assets. We consider this REIT has significant per share value growth potential, through capital deployment, rent rises and financing cost efficiencies.
Companies: Primary Health Properties Plc
S&U motor finance sales are recovering even as credit criteria have been tightened. There is still uncertainty about the impact of the wind down of employment support schemes and how collections will recover following repayment holidays, but S&U expresses cautious optimism on the latter point. The current year results will be significantly affected by lower sales and higher arrears but management indicates the group is still profitable, is maintaining its high customer service levels and has liquidity headroom to respond once it is sensible to target stronger growth.
Companies: S&U Plc
Duke delivered significant YoY growth in H1/20A results, as earlier efforts to broaden the royalty portfolio came through this year. This strong growth will continue with recent debt & equity raises forward funding investments to income levels of £15m by FY21E. Met with an enhanced, but now stabilised cost base, operational leverage should drive continued strong adj EBIT growth (to £13m, at a c85% margin) and further DPS rises.
Vacancy strongly increased in Q2 20. LTV surpassed the 50% mark on 30 June 2020 due to strong value destruction in H1 20. Hammerson announced a £550m cash capital increase coupled with a disposal of £270m. Its ex-post pro forma net debt should be £2.2bn, i.e. LTV of 42% on a proportionate basis. Too high?
Companies: Hammerson Plc
Frontier IP has announced it has invested £50k in a £500k convertible loan financing of PulsiV. Frontier IP has a 18.9% equity holding in PulsiV, which was last valued at £0.9m on the balance sheet. Whilst the commercial terms of the loan are unknown, it is not expected to have any material difference to the balance sheet at this stage. This direct investment by the Group is in line with a wider strategy to use proceeds of the recent fundraising to support portfolio companies financially to accelerate portfolio growth. PulsiV is taking significant steps to commercialising its technology and a solar microinverter prototype developed in collaboration with Bosch is expected to move into field trials of the “Engineered by Bosch” product in the nearfuture. Funding will enable PulsiV to step up development of its technology for use in a wider range of industrial applications, at least one of which is nearer to market. The potential of the micro-inverter market is vast, estimates of the global solar inverter market ranges from $2.4bn to $7.3bn per year.* Proceeds are expected to fund the development of its technology into a wider range of industrial applications. We note that PulsiV continue to be in discussions with potential investors to raise further funding in the form of equity, an event outlined in our January initiation as a near-term catalyst for Frontier IP’s valuation of its equity holding. Frontier IP expect this equity fund raise to be at a substantial valuation premium to the current book value of PulsiV (last reported at £0.9m on Frontier IP’s balance sheet). There is no indication given as the size of any potential uplift, but any increase in the Company’s book value will be reflected in the Group’s results to 30 June 2020 financial year. If achieved it would demonstrate that positive momentum from an excellent FY’20 period has continued into the new financial year.
Companies: Frontier IP Group Plc
With 90% of contracted rental income paid directly or indirectly by the UK or Irish governments and the balance primarily coming from co-located pharmacies, rent collection remained robust through H120, contributing to a strong H120 financial performance. Primary Health Properties (PHP) is well on track to meet its fully covered 5.9p (+5.4%) FY20e DPS target, which will mark the 24th year of uninterrupted growth.
What’s new: Purplebricks Group results for the year to 30 April 2020, show the Australian and US units as discontinued; but include the Canadian unit sold for C$60.5m (i.e. £35m) in July. Investors will focus on the UK unit which revealed:
11% fall in UK revenue to £80.5m (FY19: £90.1m), as the number of instructions fell 23% (impacted by early Covid uncertainty and lockdown), but the average revenue per instruction “ARPI” rose 12% to £1,394;
UK gross profit margin improved to 64.1% (FY19: 63.0%);
UK marketing costs to revenue improved to 25.6% (FY19: 29.6%);
Spend on Digital capacity pushed UK operating costs 32% to £26.2m (FY19: £19.9m), as new management team pursued initiatives which are being “delivered at pace with significant opportunity for further innovation.”
UK adjusted EBITDA fell 53% to £4.8m (FY19: £10.2m).
Companies: Purplebricks Group Plc
Tinexta’s Q220 results were much better than consensus expectations, as all business units produced improved organic growth trends versus Q120, in the face of the COVID-19 lockdown, and cost control helped improve profitability. The group is well positioned to benefit from structural growth drivers, including the digitisation of economies. We increase our EBITDA forecasts for FY20 by 7.6%, taking us 6.6% above management’s reiterated and recent guidance for FY20.
Companies: Tinexta SpA
The Biotech Growth Trust (BIOG) is managed by Geoff Hsu, who is able to draw on the considerable resources of specialist healthcare investor OrbiMed Capital. While biotech stocks have rallied strongly following the coronavirus-led stock market sell-off earlier in 2020, the manager believes they could have further to go. He is confident that a successful COVID-19 vaccine will be developed and positive fundamentals are supportive for the biotech sector’s future performance. Repositioning of BIOG’s portfolio during FY20 has been accretive to the trust’s returns in recent quarters; it has now outperformed its benchmark NASDAQ Biotechnology index over the past one, three, five and 10 years, and investors have also enjoyed very solid absolute total returns of more than 20% pa over the past decade.
Companies: The Biotech Growth Trust