Destiny Pharma—A clinical stage biotechnology company - lead asset (XF-73) targets antibiotic-resistant bacterial infections in hospitals. Offer TBA. Due early September.| Avingtrans (AVG.L) Sch1 on its Reverse Takeover of Hayward Tyler (HAYT). Combined market cap of c.£75m. Expected 01 September 2017 | 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. Expected valuation £200m to £250m. | Kosmos Energy— Secondary listing, currently on NYSE. Oil and gas exploration and production company focused on frontier and emerging areas along the Atlantic Margins. During the first half of 2017, gross sales volumes from Ghana averaged approximately 132,000 barrels of oil per day (net: 26,900 bopd). Due 21 August. No offer. NYSE:KOS. Mkt Cap £2.54bn. | Myanmar Strategic Holdings—Intention to float from the independent developer and operator of consumer-focused businesses in Myanmar, one of the fastest growing economies in the world. Expected Mkt Cap $22.7m at $10 per share. $4.2m gross raise. Due 22 August. | Hipgnosis Songs Fund investment Company offering pure-play exposure to Songs and associated musical intellectual property rights. Offer raising £200m at 100p. The Company has decided to extend the closing date for the Placing, Offer for Subscription and Intermediaries Offer to 1 August 2017. The Company may bring forward this closing date at any time. Admission 15 September 2017
Companies: MMC RLH MCL ARTL SRT PCA VAST SYS1 BOS
QUIZ— omni-channel fast fashion womenswear Company intention to float. Due July 2017. Offer TBA | Ethernity Networks—Schedule 1 from Israeli based specialist in data processing technology used in high end carrier ethernet applications across the telecom, mobile, security and data centre markets . Expected late June. Offer TBA. | Jangada Mines—Schedule 1 advanced stage PGM exploration project containing what the Directors understand to be the largest PGM resource, as well as being the only pre-development PGM project, in South America. Offer TBA. Expected late June. | Phoenix Global Mining— US Brown field copper play. Expected late June. Offer TBA Touchstone Exploration— Oil exploration and production company active in the Republic of Trinidad and Tobago. Interests of approximately 90,000 gross acres. Production c. 1,300 boepd. Raising £1.45m. Expected mkt cap £7.5m. Due 26 June. | I3 Energy –Schedule 1. Independent oil and gas company with assets and operations in the UK. Offer TBC, 7 June admission | Verditek— Schedule 1 update. On Admission, the Company's subsidiaries will be involved in advanced solar photovoltaic, filtration and absorption technologies specialising in providing environmental services. Issue price 10p. Admission in late June | Tiso Blackstar Group—Schedule 1 update. Media, entertainment and marketing solutions group/ £160m mkt cap. Admission only. Expected late June | Residential Secure Income - social housing REIT raising up to £300m Admission due c.12 July.
ScotGems—Admission due 26 June. Seeking £50-£100m. To investing in a diversified portfolio of Small Cap Companies listed on global stock markets | DP Eurasia—Intention to float from the exclusive master franchisee of the Domino's Pizza brand in Turkey, Russia, Azerbaijan and Georgia . £20m primary raise plus a partial vendor sale | Film Finances—Sky News reports that ‘movie financing company with credits including the Hollywood hits La La Land and Nocturnal Animals is plotting a blockbuster premiere on the London stock market that will value it at several hundred million pounds.’ Expected ‘during the summer’. | AIB—Intention to float from AIB, Ireland's leading retail and commercial bank . The Minister for Finance intends to sell approximately 25% of the Ordinary Shares of AIB. Valuation range €10.6-€13.3bn. Admission end June | Curzon Energy—Report on Proactive Investors of intended LSE float this year with acquisition of coal bed methane assets in Oregon. Looking to raise £3m plus | NLB Group—financial and banking institution based in Slovenia, with a network of 356 branches. Seeking Ljubliana Stock Exchange listing with GDRs on the LSE. Expected mid June | Kuwait Energy— $150m raise plus vendor offer. Admission due June. 2p reserves 810.0 mmboe
Companies: FAL BHRD EEP EUSP YGEN GWMO RLH AVN BOS TCM
Ultimate Sports Group plc (USG.L) – CORP: Placing | Active Energy Group (AEG.L) – CORP*: Appointment of Nobro | Premier African Minerals (PREM.L) – SPECULATIVE BUY*: RHA Update | Savannah Resources (SAV.L) – CORP: Mutamba/Jangamo update | Stratex International (STI.L) – CORP: Goldstone FY15 results | Arian Silver Corporation (AGQ.L) – CORP*: FY15 results | Connemara Mining Company (CON.L) – CORP: FY15 results | Red Leopard Holdings (RLH.L) – CORP: FY15 results
Companies: AEG PREM SAV ORR AGQ ARK RLH
PhotonStar LED Group (PSL.L) – CORP: Appointment as joint broker | Arian Silver Corporation (AGQ.L) – CORP: Signed MOU | Stratex International (STI.L) – BUY*: Thani Stratex update | Connemara Mining Company (CON.L) – CORP: Oldcastle update | Red Leopard Holdings (RLH.L) – CORP: Operational update | Premier African Minerals (PREM.L) – SPECULATIVE BUY*: Corp update
Companies: BOU AGQ ORR ARK RLH PREM
Politics will exert considerable influence on markets in 2016 with November’s US presidential election, the UK in/out referendum expected over the summer and the escalating tensions in the Middle East. In each situation, the outcome is not assured and this is likely to drive volatility. There is also scope for other surprises. As widely expected, the US Federal Reserve increased rates in December but the Fed’s rate forecasts (a full percentage point increase p.a. to 3.25% at the end of 2018) are more hawkish than market expectations (about 50bps higher for 2016 and 100bps for 2018). Were the Fed to raise rates per its forecasts, either the US and world economies are more buoyant than many believe or the Fed could imperil the recovery through tightening too quickly. The outlook for the US economy is reasonable with the lower oil price and increased employment benefiting consumer spending. The Eurozone countries will also enjoy the lower oil price as importers and growth is anticipated across many member states. The outlook for China and the countries that rely on exporting commodities to China is more mixed, however. Growth in China seems assured but many believe it will fall short of the official target of 6.5%. The first data points of 2016, the official PMI and Caixin China Manufacturing PMI, both came in below consensus and pointed to a further contraction in manufacturing. The news resulted in sharp falls in Chinese indices, triggering the market ‘circuit breakers’ that were created last September, and weakness in other global markets. India looks set to be the best performing large economy in 2016 up 7.8%, a slight improvement on 2015, another oil price beneficiary. The recessions in the other two BRICs countries (Russia and Brazil) look set to continue. Shifting from macro to micro, 2016 should prove the defining year for many AIM-listed resources companies and we expect the shake out that occurred in 2015 will continue as many micro-caps are unable to secure additional funding. Beyond resources, the outlook is more benign with a stable economic backdrop, further M&A activity and fund inflows looking for better returns.
Companies: ORR ADT AXM AMO AMP BOD CHL CLON ARK DCP EVG FISH FRM NAUT HDT KRS LTHM MRS MDZ MCC MTFB OCT PET PREM QRT RLH RDI SAV STAR SRES TAVI TECH VAL WRES SALV MARL THR URA ANR URU
Divergence looks set to dominate the final month of 2015 and set the tone for 2016. The European Central Bank is widely expected to extend its QE economic stimulus programme and could reduce its overnight deposit rate further in an attempt to boost inflation, and more stimulus could come from Japan and China. Meanwhile the Federal Reserve is now expected to lift rates from historic lows. Higher US rates will impact not only the cost of capital in the US but also emerging markets where growth remains much weaker and leverage high. The move by the ECB is unlikely to have a major impact, however, as it is an extension rather than a new tool and the headlines continue to be dominated by politics rather than financial markets (Isis, the refugee/migrant crisis, tensions between Russia and Turkey etc). The respective moves are likely to further weaken the euro in 2016. The UK sits somewhere in the middle. November’s Autumn Statement saw the Chancellor drop his tax credit reduction plans and benefit from a surprise £27bn improvement in the Office for Budget Responsibility’s five year public finances forecast, based on higher tax revenue and lower debt interest. The general shift away from austerity, the protection of tax credits and increased minimum wage should ensure further economic growth.
Companies: LTHM EVG TECH ADT QRT AMO AMP AGQ BOD CHL CLON ARK DCP KRS FISH FRM NAUT HDT MRS MDZ MCC MTFB OCT PET PREM RLH RDI SAV STAR ORR SRES TAVI VAL WRES SALV MARL THR URA URU
Red Leopard Holdings (RLH.L) –CORP: Interim results | Petrel Resources (PET.L) – CORP: Licence options application
Companies: Red Leopard Petrel Resources Plc
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To achieve YoY revenue growth over H1/20A despite the challenges of Covid-19 and its impact on the travel sector is testament to Equals' resilience and increasing focus on B2B and International payments services. While weaker gross profit and EBITDA margins have impacted profitability in H1/20, we see potential for an earnings recovery in H2/20 given cost reduction measures currently being undertaken. This should lead Equals to cash breakeven in Q4/20 and FCF positive by early FY21.
Companies: Equals Group Plc
Litigation Capital Management has announced FY20 results with gross profit up 7% to A$21.7m and PBT of A$9.2m, slightly behind expectations albeit the Group had already flagged that delays to 3 cases during the year would result in resolutions in FY21, thereby impacting FY20 results. That said, excellent strategic progress through the year and good news flow as well as increasing scale suggests more value to come. Reiterate buy
Companies: Litigation Capital Management Ltd.
In June, faced with the task of replacing its longstanding portfolio manager, Alistair Mundy, Temple Bar Investment Trust’s (TMPL’s) board reiterated its commitment to a value style of investing. The board has now opted to hand the management contract to Nick Purves and Ian Lance of RWC Partners, two managers with considerable experience of managing income portfolios using a value-style approach. Value investing, where managers buy stocks that are valued more cheaply than market averages – based on measures such as price/earnings, price/book and yield – is deeply out of favour. The RWC team says that value stocks have never looked more unloved in the 30- odd years that they have been managing money. In their view, this makes it imperative that TMPL investors keep faith with the strategy and it also means this is an attractive entry point for new investors. One important change, however, is a cut to TMPL’s dividend to a level that the RWC team believes will be more sustainable.
Companies: Temple Bar Investment Trust
FY20A results largely reflect a period prior to the Covid-19 lockdown, yet show Duke entering a more challenging FY21E with momentum. Yesterday's trading update demonstrated another notable rise in quarterly cash receipts for Q2/21, as royalty partner trading continues to improve. As some partners' forbearance measures will expire this month, Q3/21 receipts should continue this upwardly momentum. This opens the door to a return to cash dividends at some future point. Today, Duke also confirms it is now seeking new royalty partners, alongside follow-ons.
Companies: Duke Royalty
HSBC’s future should be clarified as soon as the US and China come back to the negotiation table. This will not happen before the US elections are over. In the meantime, HSBC will continue to be instrumentalised and its share price will remain under pressure.
Companies: HSBC Holdings Plc
Mercia’s FY20 results reflect continued progress, delivering on management’s three-year strategy. AUM climbed 58% to £0.8bn, while FUM rose 73% to £658m. Following the acquisition of the NVM VCT fund management business, the company is operationally profitable on a monthly basis, with annual revenues exceeding operating costs for the first time in FY20. Net assets rose 12% to £141.5m, with the direct investment portfolio stalled at £87.5m reflecting the impact of COVID-19 fair value adjustments and a £15.7m net investment. The group remains well-placed for a downturn with £30m of unrestricted balance sheet cash and £320m of group cash. Post period end the group exited The Native Antigen Company, with £5.2m in cash (8.4x return, 65% IRR) expected. Despite the group’s progress, Mercia’s shares continue to trade at a material discount to NAV (0.60x), even before considering the embedded value of the third-party fund management business (> 4.5p at 3% of AUM).
Companies: Mercia Asset Management 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
S4 Capital had an extraordinary week with strong interims and an impressive CMD accompanied by a further merger and topped off with winning its third Whopper. Interims were ahead of our expectations and we were particularly encouraged by LFL Gross Profit growth of +18% in July. The group announced the merger with Dare.Win, an award-winning digital creative agency which extends the geographical presence of MediaMonks to France. BMW and MINI consolidated its Pan-European account into a team led by MediaMonks, which is the third whopper account for S4 Capital, and notable in our view for being won in a pitch, rather than by land & expand, and being an automotive rather than technology client. The group held a three day CMD and our summary would be i) Day One demonstrated the compelling strategic logic and strict financial discipline underpinning the group ii) Day Two illustrated the already formidable partner/client list of S4 Capital, including Adobe, Amazon, Google and CAA and iii) Day Three highlighted the chemistry between the individual agencies brought together to form S4 Capital and the outstanding work that they produce. To reflect BMW and Dare.Win we raise our FY21 EPS forecast by +8% to 10.8p (was 10.0p) and continue to view 15p as a realistic target with further whoppers in prospect and the balance of the recent equity raise to deploy. On a 30x multiple, we raise our target price to 450p (was 375p) and retain our Buy recommendation.
Companies: S4 Capital Plc
Today's news & views, plus announcements from VOD, POLY, SMDS, BLND, BYG, WEIR, DC, SNR, SHI, INTU, IHR, CNC, ARE, INCE
Companies: INTU SHI INCE
The impressive full year 2019 results included some eye-catching numbers, including a record PBT of £40.1m (nearly 3x FY18 @ £14.3m), £620m of reserves acquired over 16 legacy deals, and $842m of (estimated) Contracted Premium in the Program business – on track to breach $1bn in FY20 as previously guided and $1.5bn-$2bn in 2022-2023.
Companies: Randall & Quilter Investment Holdings Ltd.
The COVID-19 pandemic has had a significant impact globally in many areas. While primarily a health issue, it has had wide-ranging implications for stock markets, which have now rallied after the plunge in share prices in mid-March when the full severity of the emerging pandemic became more widely appreciated. Nonetheless, the FTSE 100 Index remains almost 20% off its late February 2020 figure.
Companies: AVO ARBB ARIX CLIG DNL GDR ICGT NSF PCA PIN PXC PHP RECI STX SCE TRX SHED VTA YEW
Secular stagnation refers to the economic theory that growth will be persistently low for some time to come, due to an imbalance between savings and investment. If capital is saved rather than invested productive capacity lies idle, while the drag on consumption reduces demand in the economy. As a result GDP growth is reduced. As we have previously discussed, there is no historical evidence that GDP growth has a direct impact on stock market growth – in contradiction of the theorised linkage via earnings. However, in a world of secular stagnation in which there is a glut of savings, corporate earnings will be muted as demand for companies’ wares remains sluggish, which should negatively impact stock market growth. High rates of savings would also push equity valuations higher than they would otherwise be and thereby reduce future returns. Investors can respond to this situation in a number of ways. One is to try to find active strategies, which either seek to harness certain factors likely to boost returns or to generate high stockspecific alpha. In the first case this could mean looking to harness the small cap premium or to the emerging markets which should see greater earnings growth over the long run. It could also mean looking to the tech sector, where earnings are dependent more on secular changes within the economy than the growth rate of the economy. In the second case this would mean looking for highly active stock pickers who run concentrated portfolios and aim to pick the winning companies which can steal market share from competitors. We believe the investment trust universe is the perfect place to find such strategies, as the structure allows managers to focus on managing their strategy and not inflows and outflows, while being able to take exposure to relatively illiquid assets and harvest the premium for doing so. Another way of responding is to look for alternative assets which offer comparable or superior returns to the equity market as a whole. In our view, when we look at likely equity returns over the next ten years, some alternatives look compelling. In the below we sketch a rough idea of likely equity returns over the next decade and then introduce some trusts we think have the potential to generate similar returns from more predictable cash flows and potentially less volatile NAVs.
Companies: USF HICL NESF TRIG UKW NBLS
Activity was limited by housebuilding shutdown in H1 as a result of COVID. Sigma remained profitable and, with a strong balance sheet, has weathered the storm. With yesterday’s launch of the £1bn EQT London fund, a material step change is expected for the coming financial year. We reinstate forecasts; updating for EQT and revised expectations post-COVID. We revisit our valuation: a “sum of the parts” approach, assuming no additional AuM, implies an intrinsic value of 200p/share.
Companies: Sigma Capital Group Plc
Trident Royalties Plc (AIM: TRR) has, this morning, announced the acquisition of a 1.5% Net Smelter Royalty (NSR) over the resourcestage Lake Rebecca Gold Project located in the highly prospective Eastern Goldfields province in Western Australia. The royalty package is being acquired from a private seller for a total consideration of A$8.0 million (c. US$5.63 million), comprising of A$7.0 million in cash and A$1.0 million in new ordinary shares in Trident. The acquisition is Trident’s fifth overall and its third gold deal. As per strategic guidance the company is moving fast assembling a diversified portfolio with a paying cashflow stream from iron ore and copper production and several strategic gold royalties with the potential for near term revenues. The market is paying attention with TRR shares up 49.8% since its IPO on AIM in June this year. There is clearly more to come with c. US$7.5 million of uncommitted cash as well as the potential for debt funding and the ability to use equity as acquisition consideration. The Lake Rebecca Gold Project operated and wholly owned by Apollo Consolidated (ASX: AOP), is located 150km ENE of Kalgoorlie in the Eastern Goldfields Province of the Yilgarn Craton. The Project, envisaged as a simple open pit operation, is close to existing gold infrastructure namely Saracen Mineral Holdings Limited’s (ASX: SAR) Carosue Dam Operation whose processing plant is in the process of being upgraded to increase throughput to 3.2 Mtpa.
Companies: Trident Royalties Plc
Top decile total returns continue.
Financial results. The March 2020 NAV increased by 3% to 285p, continuing the company's strong NAV record since flotation in 2016 (compound growth rate of 16% or total return CAGR of 18%). Adjusted PBT rose by 10% to £2.41m, benefiting from last August's purchase of Concorde Park in Maidenhead, partly offset by higher irrecoverable service charge costs. The final dividend of 2p gives a total of 5.3p, 16% lower than 2018/19, reflecting the Board's decision to maintain liquidity.
Investment Portfolio. 99% of the £140m portfolio is invested in regional offices, with more than 50% by income and value in business parks close to Milton Keynes, Bristol and Maidenhead most notably. We believe that high quality, well located business parks are likely to outperform in terms of rental and capital values during the COVID pandemic as tenants focus on the combination of easier transport access and the well-being of their employees.
Robust rent collection. The company has collected almost 90% of its rent roll in respect of H1/20-21, 91% in Q1 and 87% in Q2. This positive data reflects the quality of both its portfolio and its diverse tenant base. The portfolio has been individually selected, based on asset location and letting prospects, and the company's strategy is to minimise voids by letting at economic rents with minimal tenant incentives.
Forecasts. H1/20-21 has been positive in terms of rent collection but we are withholding our PBT and DPS forecasts for now. Further positive rent collection following next Tuesday's Rent Quarter day will provide additional confidence for the current year. The statement refers to the target of reducing gearing by selling assets where significant value has been added – sales at close to Savills latest valuation will provide confidence in the robustness of the NAV.
Share Valuation. The shares are trading on a 48% discount to NAV yielding 3.6%. Regional REIT and Palace Capital are peer companies which focus primarily on regional offices and both have reported NAV falls in their most recent results, yet trade on lower NAV discounts (but with higher yields and greater liquidity). Circle shares look undervalued, trading just below their IPO price despite a near doubling of NAV since early 2016.
Companies: Circle Property Plc