Defensive in uncertain times
Instem has released a trading update in lieu of FY 19 results scheduled for March 30. The announcement confirms the FY 19 outcome was in line with both the Jan-20 trading update and our forecasts. With COVID-19-driven disruption to the global economy ongoing, the release provides no commentary on outlook - we therefore maintain FY 20E and FY 21E forecasts at this stage and will revisit estimates in due course. We continue to consider Instem well placed to weather macro turbulence and note the £6m cash position – the business is, in our view, defensively positioned.
25 Mar 20
In line FY update, strong momentum continues
Instem has delivered a year of double digit revenue growth with EBITDA in line with expectations. Good momentum was in evidence across all areas of the business, underpinned by ongoing buoyant market conditions. Recurring revenues continue to increase, driven by the ongoing transition to hosted SaaS solutions, and renewal rates remain at a high level. Technology-enabled outsourced services grew strongly as expected, with the SEND market continuing to be a major growth driver, complemented by good progress from the Informatics business as AI-based solutions gain greater acceptance across the pharma industry. We make no change to our forecasts at this stage. Instem was one of our Best Ideas in 2019 and performed well over the year (and since). We look forward to further strong progress as the rest of the year progresses (29% EPS growth in FY20E).
13 Jan 20
Shore Capital Technology Bytes
SPIRENT^ (SPT, NR, CNP) – Trading update. Full year revenue +6% to $503m, adjusted operating profit is expected to be in the range of $91 to $93m, up from $77.1m in 2018.| INSTEM^ (INS, NR, CNP) – Trading update. Organic revenue growth was c.12% with EBITDA “in line with management's expectations”. Confident outlook.
Instem Spirent Communications
13 Jan 20
Firing on all cylinders
Instem’s trading update for the twelve months ending December 2019 confirms that all three key business areas (Data Collection, Regulatory Solutions and Informatics) are performing well. The business is expected to deliver revenue growth of c12% for the year – in line with our forecasts, and the closing cash balance well ahead of our expectations. Management commentary on the outlook is positive; we make no changes to earnings estimates following the announcement but upgrade cash forecasts.
13 Jan 20
Acquisition in safety assessment
Instem has announced the acquisition, for up to $4.6m, of a US-based provider of software for safety assessments. Leadscope’s software provides computer models that predict toxicity of chemical compounds – the systems are so advanced that the FDA allows them to replace animal testing in certain limited situations. A strong fit with Instem’s existing safety assessment business and its KnowledgeScan offering, this deal appears a well-considered and useful extension to the group’s position.
18 Nov 19
Acquisition of Leadscope
Instem has bolstered its Informatics offering with the bolt-on acquisition of US-based Leadscope for up to $4.6m. The deal looks highly complementary, adding a leading player in the field of computational toxicology, an area with significant structural growth potential and strong regulatory drivers. We upgrade our FY20 and FY21 EPS forecasts by 6.5% and see scope for material revenue synergies over time. Instem remains one of our best ideas for 2019 and we see the addition of Leadscope as adding to an already strong organic growth outlook.
15 Nov 19
Shore Capital Technology Bytes
NANOCO^ (NANO, NR, CNP) – FY2019 Results – a year of extreme contrasts. Revenue more than doubled to £7.1m and loss after tax reduced to £4.4m - though still challenges and uncertainties to be managed in trying to transition from an R&D services business. | INSTEM^ (INS, NR, CNP) - Informatics Update - Currently a relatively small part of the business but growing rapidly (orders up 58% in first nine months).
Instem Nanoco Group
16 Oct 19
Informatics in focus
We recently met with the divisional management of one of Instem’s businesses – Informatics. Despite its relatively small scale, the unit has an interesting platform, is experiencing significant growth, and some of its services offer both material cost savings and process improvements to major players in the pharma market. It therefore offers Instem a greater degree of value than might be apparent simply by looking at its current scale – today’s RNS highlights informatics order intake up c60% YoY to £0.84m during the first nine months of 2019. This note summarises the mediumterm potential of the unit, both in its own right, and to Instem as a whole.
16 Oct 19
Instem has announced solid H1 2019A results in our view. All three business areas performed well during the period, with the group once again reporting strength across the board. The Provantis and Notocord suites recorded impressive growth, as did SEND services. We make minor revisions to estimates following the announcement, reflecting the adoption of IFRS16, the ongoing transition to SaaS delivery and revised cost expectations.
23 Sep 19
Strong strategic progress
Double digit first half revenue growth was driven by SEND services revenues doubling, Informatics sales up nearly 50% and a record number of new Provantis clients signed up in the period. This strong demand across the board and an increasing willingness to adopt hosted SaaS solutions bodes well for the outlook and leads to modest outer year upgrades, albeit with a small impact on PBT this year. In our view, the valuation remains undemanding given the significant growth opportunities ahead and the increasing quality of earnings. Our estimate of fair value is 425p.
23 Sep 19
SEND, SaaS and strength of pipeline
Instem has published a trading update for H1 2019E – the group is trading well, and we make no changes to estimates. Highlights include a faster-than-expected transition to SaaS for new deals, a doubling of SEND-related sales, and a strong pipeline for H2. Cash collections appear robust, and the business is seeing strength across the board. FY 2019E will be H2-weighted (especially at the profit level, given the SaaS transition) but appears to be shaping up well.
15 Jul 19
Strength across the board
Instem has announced a positive H1 update, with all three areas of the business performing well in the period with new customer wins in Data Collection and increased volumes in Regulatory Solutions and Informatics. The move towards a SaaS model by both new and existing customers is accelerating, which bodes well for the future. Similarly, there is confirmation that Instem continues to capitalise on the opportunities afforded by the FDA’s SEND standard, with outsourced service revenues more than doubling YoY. Overall trading is described as in line with a positive outlook and we make no change to our forecasts this morning. Instem is one of our Best Ideas for 2019 and is successfully executing on a number of fronts, building strategic value along the way.
15 Jul 19
Another year of solid delivery
Instem has announced FY 18 results in line with our forecasts. The group has made strong commercial progress during the year, with significant contract wins being recorded across the group. SEND performance remains a major driver of growth, and management commentary on the outlook is positive. Overall, a solid release and we make modest upward revisions following the announcement.
01 Apr 19
Reaping the rewards of investment
Instem is now beginning to see the benefits of years of investment to support the FDA’s SEND initiative with strong demand in evidence for its tech-enabled outsourced services. The focus on driving SaaS and other recurring revenues is also improving margins and quality of earnings. FY18 results were in line with expectations after adjusting for IFRS15. Headline forecasts are unchanged and we continue to believe the shares offer a compelling opportunity. Instem remains a Best Idea for 2019.
01 Apr 19
All business areas performing well
Instem’s trading update for the twelve months ending December 2018 confirms that all three key business areas (Data Collection, Regulatory Solutions and Informatics) are performing well, with underlying group EBITDA in line with management’s expectations. Momentum in SEND Services remains strong, with order value +500% YoY. Management commentary on the outlook is positive, and we make no changes to earnings estimates following the announcement.
22 Jan 19
In line update, strong outlook
Instem, one of our Best Ideas for this year, has delivered good growth for 2018 and enters 2019 with a strong outlook. We make no changes to our forecasts, which look for double digit revenue growth and 29% PBT growth in FY19, driven by growth in SEND services, where visibility is constantly improving. The shares look particularly good value in the context of improving quality of earnings, a structural growth opportunity and margin expansion.
22 Jan 19
Small Cap Feast
Circassia Pharma (CIR.L) - specialty pharmaceutical company focused on respiratory disease transferring from the Main Market. No funds being raised. Due 4 Feb. Greenfields Petroleum (TSX-V:GNF) production focused company with operated assets in Azerbaijan seeking AIM dual listing including $60m private placement. Mkt cap $12.6m CAD. Expected late January 2019. Chaarat Gold Holdings—RTO, the Company intends to acquire Kapan Mining and Processing CJSC, which owns the Shahumyan medium-sized polymetallic mine in Kapan in the Republic of Armenia. No raise, market cap of £110.1m, due early Feb
INS CRN MIDW KETL IGAS IGR LTG STX DSG DOTD
22 Jan 19
We are introducing our Best Ideas for 2019 and also review the performance of last year’s picks. We suggest ten solidly financed stocks with good business dynamics that ought to be considered for core portfolio holdings and six UK domestically focused stocks that our analysts believe should perform strongly in the event that uncertainties unwind. We also introduce a new style of research from N+1 Singer which presents a Company’s dynamics and metrics in a clear and concise manner and concentrates on the pivotal issues affecting that Company and an investment decision.
INS BCA CLIN CLG CBP DNLM EAH STU FCRM FUTR GTLY GLE NICL SDL SPR TRI
14 Jan 19
Strong margins and cash performance
Instem has reported interim results consistent with the July trading statement. Revenue grew to £10.5m, with outsourced services revenues more than trebling to £1.1m. Margin performance was strong (opex fell 6% YoY) and cash generation solid. Net operating cash inflow saw a £3m turnaround to £1.9m and the closing net cash balance was confirmed at £3.7m. Delivery seems to have been strong across the board, with particular strength in SEND. We leave estimates unchanged following the release and believe H1 2018 results provide grounds for optimism regarding the H2 and beyond.
24 Sep 18
Poised for accelerated growth
Interim results show a significant improvement in profitability and cashflow, aided by the restructuring exercise carried out last year. The focus on increasing the quality of earnings is also paying off, with a gradual migration from traditional annual support fees towards SaaS in evidence. Instem continues to win the majority of outsourced SEND service contracts and is well set for a period of accelerated growth having invested in capacity in H1. Our estimate of intrinsic value is now 397p.
24 Sep 18
Instem (INS LN) Poised for accelerated growth | Miton Group (MGR LN) Interims reflect AuM momentum, small upgrades | River and Mercantile Group (RIV LN) Sunshine through parting clouds? | Tufton Oceanic Assets (SHIP LN) Fully invested and looking to grow | Zinc Media Group (ZIN LN) Channel 5 and BBC Scotland commissions
INS RIV ZIN PMI
24 Sep 18
FY 18E has started well, SEND accelerating
Instem’s trading update for the six months ending June 2018 reveals that FY 18E has started well and that the board is confident that their full-year expectations will be met. Most businesses made a positive contribution to group financial performance. SEND was the standout performer, orders more than doubled during the period. In our view, the overall tone of the update is optimistic and the outlook statement positive. We make no changes to estimates following the release.
23 Jul 18
Small Cap Breakfast
CentralNic-Schedule 1 from the business operating in proprietary retail platforms selling domain names and associated web presence services including hosting and email on a subscription basis, has acquired KeyDrive S.A which constitutes a RTO. Raising £24m at 52p, combined market cap of £88.7m Trackwise—established business that manufactures specialist products using printed circuit technology. Offer TBA. Due Late July Ovoca Gold (to be renamed Ovoca Bio PLC) - RTO of IVIX, a Russian company developing a drug candidate for the treatment of female sexual dysfunctions. No monies to be raised, market cap of £8.5m, due 30 July Nucleus Financial—independent wrap platform provider . FYDec17 revs £40.36m and PBT of £5.1m. Offer TBA. Due late July. 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
INS MCLS FLYB MXF STEM BIOM TMG BXP MTPH APTD
23 Jul 18
Amino Technologies (AMO LN) Full year expectations unchanged | Findel (FDL LN) Year of progress and delivery to instill confidence | Instem (INS LN) Contract win for Samarind RMS | Microsaic Systems (MSYS LN) Clear path to commercial success | Summit Therapeutics (SUMM LN) Q1 results: Phase II DMD trial on track for Q3 data release
INS AMO STU MSYS SUMM
06 Jun 18
Small Cap Breakfast
Anexo -specialist integrated credit hire and legal services group. Offer TBA. Due 19 June. i-nexus—develops and provides strategy execution software to assist global enterprises in effective execution of their strategic plans and initiatives looking to jon AIM. Offer TBC, expected 19 June Yellow Cake will use its expertise to generate value through the ownership of physical U3O8 (Uranium) together with a range of activities and opportunities connected with owning physical U3O8. Acquiring supply contract for up to $170m. Offer TBA. Tekmar— technology provider of protection systems for subsea cable, umbilical and flexible pipes and offshore engineering services—Offshore wind farms and Oil & Gas. Revenue of £21.9m and Adjusted EBITDA of £4.9m Offer TBA Knights Group— UK regional legal and professional services businesses. FYApr18 rev £34.9 million and adjusted operating profit was £6.8 million excluding Turner Parkinson (acquiring on IPO). Offer TBA Aquis Exchange—a founder-led, pan-European Multilateral Trading Facility and exchange and regulatory technology developer and service provider is looking to join AIM. Offer TBC, expected 20 June. TransGlobe Energy Corporation—an independent international upstream oil and gas company with headquarters in Calgary, Canada is looking to join AIM. No Capital to be raised, market cap of £131m. Expected 29 June Block Energy— UK based oil exploration and production company whose main country of operation is the Republic of Georgia. Raising £5m at 4p. Mkt cap £10.3m. Due 11 June. Strongbow Exploration (TSX:SBW) intends to dual list on AIM. Holds rights to the South Crofty underground tin mine, a former producing tin mine located in the towns of Pool and Camborne, Cornwall . The project is estimated to require the Company to raise £25 million over the next 18 months to progress to a production decision. Offer TBS. Due June. Yew Grove REIT—newly formed Company will pursue its investment objective by investing in a diversified portfolio of Irish commercial property. Raising €75m at €1. Due 8 June
INS MIN EMH APGN HVN POLX SAA ELCO AMO MSI
06 Jun 18
SEND motoring ahead
Instem has announced 2017 results in line with our forecasts and consistent with the January trading update. SEND continues to deliver strong commercial traction and the group’s other businesses are also performing well. Instem continues to demonstrate strong cost discipline, with 2018E financials set to benefit from £1.5m of annualised opex savings. Overall, a solid release and we make minor upward revisions to forecasts.
26 Mar 18
Leader in rapidly burgeoning market
Delivery of FY17 results in line with expectations and a revenue upgrade should both reassure that Instem is now capitalising on the long expected SEND market opportunity. Outsourced service revenues are now increasing rapidly, reflecting Instem’s unparalleled domain expertise. With a $130m market opportunity by 2020, the opportunity is substantial and completely at odds with the current lowly valuation.
26 Mar 18
Brady (BRY LN) New contract win in Nordic energy | Instem (INS LN) Leader in rapidly burgeoning market | Northgate (NTG LN) Depreciation change prompts low quality upgrades | ReNeuron Group (RENE LN) Pipeline update; stroke Phase IIb due to start mid-2018, RP data H1 2019 | Restore (RST LN) Ticking all the boxes | Verona Pharma (VRP LN) Second transformational data of the year: Positive Phase IIb in COPD
INS BRY NTG RENE RST VRP
26 Mar 18
Cloud platform delivering
Instem has announced that an existing client - one of the world’s largest chemical companies - has adopted its SaaS delivery model for the group’s Provantis® suite. We make no forecast revisions following the announcement. In our view, the deal demonstrates the value of the Instem Cloud platform and is a win-win for both the client and Instem. Furthermore, with recurring revenues representing over 60% of turnover (H1 2017), there remains a material opportunity for Instem to further increase both revenue visibility and earnings quality from additional SaaS sales.
08 Mar 18
Structural growth in a complex landscape
Pharmaceutical Services is a vast and varied landscape, reflecting the complexities in the discovery, development, manufacturing and monitoring of drugs and devices, all within a stringent regulatory environment. The overall growth prospects are highly favourable: drug development activity globally is on the up, led by smaller companies, which is driving demand for outsourced services. In this report we provide a breakdown of the sector into its main activity segments, and identify biologics, increasing service specialisation and consolidation as important value drivers. Finally, we present 15 companies (9 of which are publicly listed) that, in our view, are well placed to benefit from the sector’s secular growth trends.
INS ABZA BQE CSRT UDG CLIN ABZA HZD ERGO OXB
07 Mar 18
Anpario (ANP LN) In line FY results, strong balance sheet | Bagir Group (BAGR LN) Prelims and strategic partnership with Shandong Ruyi pending | Bioquell (BQE LN) Strong in line results, outlook remains positive | Hill & Smith Holdings (HILS LN) FY17 ahead; positive outlook for FY18 | Instem (INS LN) SaaS expansion | Lookers (LOOK LN) Resilient performance in key segments but further small d/grades | Pharmaceutical Services Structural growth in a complex landscape | River and Mercantile Group (RIV LN) H1 in line, small impact from provision, investment case unchanged | St Ives (SIV LN) H1 results drive upgrades
INS ANP BAGR BQE HILS LOOK RMMC KCT
07 Mar 18
A decade in perspective …and opportunities in technology-enabled outsourced services
The past five years have seen a gradual but dramatic transformation of Instem’s position, and an expansion of the addressable market. The next five years appear to hold equal promise, with the added benefits that the group has a proven ability to deliver such change, that it is “starting” from a better position, and that the end-market environment appears more positive. This note describes the last five years’ achievements, and speculates as to what the next five might deliver.
22 Jan 18
Strong end to 2017 & great start to 2018…
Instem this morning released an in-line trading statement for the 2017 year. The group is seeing traction across a number of fronts, including a recovery in the Clinical business, with two Alphadas orders in the period. The company has also today announced a material SEND contract win with a top-5 global non-clinical CRO. We make no changes to estimates for 2018 and beyond, but look forward to seeing further detail on progress at the time of results in March.
16 Jan 18
Curtis Banks Group (CBP LN) In line FY update, growth in SIPP numbers during H2 | Dunelm (DNLM LN) Recovery + online gathering momentum, albeit adverse margin mix | Gym Group (GYM LN) Positive YE update but no beat | Instem (INS LN) Pre-close update in line with expectations, major SEND contract win | Midatech Pharma (MTPH LN) IND approval for paediatric brainstem cancer programme MTX110 | NCC Group (NCC LN) Operating improvements starting to come through |
INS CBP DNLM GYM MTPH NCC
16 Jan 18
Strategic progress; strong underlying trading
Instem reported double-digit revenue growth in the first half of 2017, although profitability was reduced by ongoing investment in the business. Underlying trading remains strong, and the group reported an impressive improvement in revenue visibility vs H1 16. The group consolidated global operations during the period, expected to deliver £1.5m annual cost savings going forward. We make modest reductions to revenue expectations to reflect caution in the earnings release, but leave profitability estimates unchanged.
26 Sep 17
N+1 Singer - Morning Song 26-09-2017
A G Barr (BAG LN) Mixed interims | Horizon Discovery Group (HZD LN) Interims in line; well placed post Dharmacon acquisition | Instem (INS LN) Strong strategic position for looming inflection | MySale Group (MYSL LN) Growth accelerating, forecasts upgraded | Zinc Media Group (ZIN LN) Results confirm momentum
INS BAG HZD MYSL ZIN
26 Sep 17
FY 16A results: Solid performance ex-Clinical
Instem’s FY 16A results were line with the Jan-17 trading update and our forecasts. Excluding the Clinical business, performance remains solid, particularly in pre-clinical and the SEND businesses. Management has taken decisive actions to address the weakness in Clinical and a further positive is the emerging services story. We make downward revisions to FY 17E earnings forecasts following the results reflecting additional investment in the business.
13 Apr 17
BlackRock Smaller Companies Trust is considering ending the restriction on AIM investment in its portfolio. Currently, the trust is not allowed to invest more than 40% of its portfolio value in AIM-quoted companies. If the required consents and regulatory approvals are received, a resolution may be put forward at the annual general meeting in June. Vets practices owner CVS is currently the largest investment in the trust’s portfolio and wound management firm Advanced Medical Solutions is also in the top ten. The rest of the top ten are fully listed companies. The best performer in February was telematics equipment and services provider Quartix. BlackRock is considering this change at a time when the Small and Mid-Cap Investors Survey 2017 suggests that there is a positive change in attitude towards AIM. Overall, investors believe that AIM is better than it has ever been. The average size of companies continues to rise and this is taken as an indication of maturity but there is still concern about the lower end of the market. There is little pressure on AIM companies to move to the Main Market even if they are relatively large for AIM. There are currently eight companies on AIM valued at more than £1bn, accounting for around one-sixth of the total market value of AIM.
INS MANX FRAN ACSO NAH GMAA TCM
10 Apr 17
N+1 Singer - T2 Trend spotting - Strategy update
In our second edition of “Trend spotting” we note how in the last three weeks the defensive rotation trend has gathered pace and further evidence has emerged of the “relative fading” in the UK economy. However we now see early signs of the “risk on” trend starting to reassert itself in equity markets and we look at small cap laggards plus European exposure as ways to play this.
INS GNS NTG SPH TRI XAR BOY VCT GHH CHH DPH HILS RPS LWB EKF UDG SYNT MYSL IMO BCA JUP KMK
31 Mar 17
N+1 Singer - Morning Song 28-03-2017
A G Barr (BAG LN) Share buybacks the main news around FY17 finals | Churchill China (CHH LN) An excellent set of 2016 results and more upgrades | Ergomed (ERGO LN) FY results show strong Services growth; Phase III Zoptrex® data ahead | Instem (INS LN) Investment to accelerate growth trajectory | Severfield (SFR LN) Strong H2 drives upgrades; CEO temporarily steps down due to ill health | Summit Therapeutics (SUMM LN) Strengthening the data package: planned extension of PhaseOut DMD | T. Clarke (CTO LN) Strong conclusion to FY16, record order book
INS SUMM BAG CHH CTO ERGO SFR
28 Mar 17
Small Cap Breakfast
Path Investments—Publication of prospectus from the Energy Investment Company. Raising £1.4m. Admission due on or around 30 March | Franchise Brands—Schedule 1 detailing £28m reverse takeover of Metro Rod. Admission expected 11 April | Alpha FX Group— Schedule 1 from the foreign exchange provider focused on managing exchange rate risk for UK corporates that trade internationally. Fundraise TBC. Admission expected 7 April. | K3 | Capital Group—Schedule 1 from the Group of business and company sales specialists across business transfer, business brokerage and corporate finance. Admission date and fundraise details TBC. | Integumen— Schedule 1 from the personal health company developing and commercialising technology and products for the human integumentary system. Raising £2.16m at 5p. Expected market cap £8.16m. Admission expected 5 April. Tufton | Oceanic Assets– Offer extended to 9 May to enable investors to complete further due diligence.
INS EGIC WAND PRM 9537 DANA TAST LID EBQ AMYT
28 Mar 17
2016 outturn as expected; SEND on track
Instem has published a short trading update for the year to December 2016. The outcome was in line with (and in some areas slightly ahead of) our expectations. The year was impacted by the slowdown in early phase Clinical, and a number of contracts being delayed into 2017, but strong performance in particular came from the SEND submit product range. We make no changes to our 2017 forecasts which should benefit both from the signing of the delayed contracts, and the ongoing (and growing) boost from adoption of the SEND standard.
16 Jan 17
Small Cap Breakfast
Global Energy Development (GED.L) — To be renamed Nautilus Marine Services. Schedule 1 from developer and seller of hydrocarbons and related products. Reverse takeover. Raising $10.5m via a convertible. Expected 9 Feb. Eco (Atlantic) Oil & Gas—TSX-V listed oil and gas exploration has announced its intention to float on AIM. Assets in Guyana and Namibia. Proposed £2m-£3m fundraise. Diversified Gas & Oil—According to LSE website first day of trading on AIM now expected for 30 January.
INS PTSG FDEV TAX EMH SQS ING GRA MBH
16 Jan 17
Clinical slowdown offsets strength elsewhere
Instem recently confirmed that its Instem Clinical business continues to be impacted by a slowdown in the early-phase clinical market and, despite other areas of Instem performing well, that this shortfall will impact group financial performance for 2016. Management is addressing the challenging clinical market conditions, and continues to expect revenue growth and a return to profitability for the Clinical business unit in FY 2017E. The group has also announced a renegotiation of the earn out arrangements. We reduce FY 2016E forecasts, but leave FY 2017E unchanged.
20 Dec 16
N+1 Singer - Instem - Interims again show strong growth
The momentum experienced in H2 last year continued into H1, with further strong top line growth in the period YoY. The core pre-clinical market remains supportive and momentum continues to build around the SEND initiative, where Instem has maintained its market leading position. Two acquisitions have now been completed following the £5.0m placing in February, strengthening Instem’s strategic position and adding materially to our growth forecasts. The valuation remains undemanding on an FY17 EV/EBITDA of 10.6x and an EV/Sales of 1.8x. We see fair value of 323-341p based on a composite EV/Sales analysis and a DCF.
19 Sep 16
Instem has announced solid interim results. Revenues grew by 21% YoY, accompanied by a 34% improvement in EBITDA. Activity in the pre-clinical segment remains strong, as evidenced by the multi-year Charles River Laboratories agreement. The group’s submit suite continues to deliver good commercial progress, with over $1.6m of new contracts signed in H1 16. We believe there are good grounds for optimism for the second half and beyond.
19 Sep 16
Strategic step in Safety
Instem, a leading provider of software and services to the earlystage drug development healthcare market, has announced the acquisition of France-based Notocord, a profitable software business active in the pre-clinical Safety Pharmacology market. With a maximum consideration of €4.2m (£3.5m) the deal is relatively small, but is consistent with the group’s strategy of pre-clinical software market consolidation. We make modest upgrades to earnings forecasts (EPS +14% 2017E).
08 Sep 16
Instem (INS.L) | OptiBiotix Health* (OPTI.L) | ReNeuron Group (RENE.L) | Mobile Streams (MOS.L) | Forbidden Technologies (FBT.L) | 1PM (OPM.L) | Ebiquity (EBQ.L) | Draper Esprit (GROW.L) | REDX Pharma (REDX.L) | C4X Discovery (C4XD.L)
INS OPTI MOS BIRD OPM EBQ GROW REDX C4XD RENE
06 Sep 16
N+1 Singer - Instem - In line trading update
Instem has issued a positive H1 update, indicating trading is progressing in line with expectations. The core preclinical market remains buoyant and opportunities around the SEND initiative continue to build ahead of the approaching first compliance deadline in December. Instem has also extended its contract with the market leader, Charles River Laboratories, until 2022, which helps underpin medium term expectations. We make no changes to our forecasts at this stage following the upgrades we put through on the Samarind acquisition in late May. Instem still has firepower remaining from the fundraising in February and we see further acquisitive and organic growth opportunities. The shares continue to look good value, on a FY17 EV/NOPAT of 14.5x.
24 Aug 16
CLOUDBUY PLC (CBUY LN) | CLUFF NATURAL RESOURCES PLC (CLNR LN) | GOLDPLAT PLC (GDP LN) | IMPERIAL INNOVATIONS GROUP (IVO LN) | INSPIRATION HEALTHCARE GROUP PLC (IHC LN) | INSTEM PLC (INS LN) | MARIANA RESOURCES LTD (MARL LN) | METAL TIGER PLC (MTR LN)
INS CBUY IHC CLNR GDP MTR IVO MARL
24 Aug 16
Instem has acquired a small software business, Samarind, which is active in the market for Regulatory Information Management – helping pharmaceutical companies deliver required details about products actually being sold (ie post-approval) as well as those in the later stages of development. This is a major move for Instem, and we believe it fits well with, and extends, the successful expansions already under way.
02 Jun 16
Hybridan - Small Cap Wrap
ALSP* Board Changes, COMS Contract Win, CNS Contract Win, CCS University Partnership, DEMG announces results of ODM trial, ESP acquisition in Leicester, EZH Interim Results, EVG results, FEVR Trading Update, FDEV Update, INS acquisition, MMH Acquisition, MMX Launch, MXCP Placing, OPTI* Patent Filling, PINN Acquisition, PLI* Bought Deal, SAR* Clinical Trial, STOB Deal Completion, TERN Acquisition, TMT* Investments
INS ALSP CNS DEMG EZH ESP EVG FEVR FDEV IVO MMH MMX MXCP OPTI CLCO PLI SAR STOB TERN TMT SMRT
01 Jun 16
Acquisition of Samarind
Instem has acquired Samarind, a UK-based supplier of Regulatory Information Management solutions to the global life sciences industry. It is paying up to £2.5m largely from existing cash resources and we expect the deal to be materially earnings enhancing. We upgrade our FY16 EPS forecasts by 5% and by 14% in FY17. The acquisition looks a good fit with Instem’s existing regulatory submission expertise and broadens the offering into post-marketing regulatory affairs services. The shares look good value on an FY17 EV/NOPAT of under 14x for a 3yr CAGR in EBITA of 20%.
31 May 16
A day to remember
On Friday, Instem held an analyst and investor event at its UK headquarters in Stone. The presentation was well attended and gave a good opportunity to meet members of the broader Instem management team, as well as some useful insight into the product suite and customer relationships. We make no changes to forecasts, but the day was reassuring in terms of both the range and applicability of the current platforms, and also the group’s strategic positioning for future developments in the marketplace.
25 Apr 16
Strong FY15, expecting more in FY16
Instem has delivered a strong set of FY15 prelims, in line to slightly ahead of expectations. Strong organic revenue growth of 22% translated into a 49% increase in operating profits, driven by increased activity across the group. The outlook remains very positive, particularly around the FDA’s SEND initiative, but also supported by buoyant conditions generally in the early drug development market. Recent contract wins leave our forecasts looking increasingly well underpinned, with further potential upside to come from acquisitions.
05 Apr 16
Strong FY15 results
nstem has delivered a strong set of FY15 results. Revenues grew by 22% YoY, accompanied by a 43% improvement in EBITDA and a strong improvement in cash generation. The Provantis and ALPHADAS suites remain the key growth drivers, with the submit product also reporting solid commercial progress. We make no material changes to estimates, but believe the growth outlook to be increasingly bright.
05 Apr 16
Cranswick (CWK LN) In-line YE trading update. We move back from Buy to Hold | Earthport (EPO LN) Contract win with Ria Money Transfer | Futura Medical (FUM LN) Eroxon® data ahead | Gooch & Housego (GHH LN) H1 trading in line and FY16 guidance reiterated | Instem (INS LN) Strong FY15, expecting more in FY16
INS CWK EPO FUM GHH
05 Apr 16
SEND momentum building
Instem has announced a further four SEND submit contract wins, adding to the two announced in March, and reflecting the building momentum around the initiative ahead of mandatory implementation. No change to our forecasts, but as we said in March, the fact these contract wins are coming though in earnest relatively early in the year is clearly supportive to estimates. Prelims are due tomorrow and we expect more news on the general market backdrop and the pipeline of opportunities then.
04 Apr 16
Lifesciences Review - Down but not out
Stocks in the life sciences industry have struggled to regain their sparkle following the autumn 2015 sell off triggered by Hilary Clinton’s comments on drug pricing with the NASDAQ Biotechnology Index down some 22% since the beginning of the year. Indeed both sides of the presidential race have now targeted pharmaceutical companies with Donald Trump campaigning for price negotiations between drug manufacturers and Medicare
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21 Mar 16
SEND contract wins
Two contract wins early in the year point to gathering momentum around the SEND initiative and confirm Instem’s leading role in this emerging opportunity. Its solutions are the most licensed set of SEND tools around the world and are now installed in 34 sites across 12 countries. Whilst we make no changes to our forecasts at this stage, these wins are clearly supportive of our estimates. We see substantial upside potential from the SEND opportunity and from deploying the proceeds from the recent placing on accretive acquisitions.
15 Mar 16
Fundraising to accelerate consolidation strategy
Instem has successfully raised £5.0m in an over-subscribed placing with new and existing investors at 200p. This will provide additional firepower to accelerate its consolidation strategy of what remains a fragmented industry, supplementing its already attractive organic growth prospects. We see the potential for material earnings enhancement as the proceeds are deployed.
03 Feb 16
Material fundraising to drive growth
Instem has announced a proposed £5m fundraising via the placing of 2.5m new shares. Monies raised will accelerate the group’s consolidation strategy and fund organic growth. The outlook for organic expansion remains favourable, as evidenced by record levels of potential new drugs in early stages of the R&D pipeline. Management has provided meaningful colour on the acquisition strategy, and we note the company’s solid track record of successful M&A.
03 Feb 16
In line FY trading update
Instem’s trading update for the year ending Dec-15 caps a strong year for the group and should be well received. The outlook remains positive both in terms of the general market backdrop, which is undergoing a robust recovery, and specifically Instem’s position within it. Recurring revenue (representing at least £9.6m of the c. £15.8m total for the year) continue to increase and the order backlog entering the new year is healthy. We continue to see potentially material upside over the next few years on the back of the FDA’s new SEND initiative in particular. The shares remain good value on a FY16 EV/NOPAT of 16x for a forecast 3yr CAGR in EPS of 17%.
13 Jan 16
Instem has accelerated its payment of the Logos Technologies earnout, in a move that suggests performance in both businesses is strong. The mid-2013 acquisition of Logos and its ALPHADAS product suite marked a bold but potentially well-timed move into the early phase clinical market. It expanded the group’s portfolio of study management software (like the preclinical flagship Provantis product), but the entire clinical space is larger and has significant additional potential. This note describes the likely rationale behind the acceleration of the process, and more generally the scale of the opportunity.
08 Dec 15
Accelerated earn out payment
Instem has agreed with the vendors of Logos (now Instem Clinical) an early settlement of the outstanding deferred consideration. This is positive news as it cleans things up and is a reflection of the strong performance of Logos since it was acquired in 2013. No changes to our forecasts at this stage and we look forward to the full year trading update in January.
01 Dec 15
Poised for lift off
H1 revenue growth was an impressive 31% and is all organic. This is testament to the actions taken by management in recent years to broaden the offering and to focus on emerging growth areas such as early phase clinical and electronic regulatory submissions. The outlook remains very positive and we see potentially material upside over the next few years on the back of the FDA’s new SEND initiative in particular.
29 Sep 15
Strong interims, confident outlook
Instem has delivered a strong set of interim results. Revenues grew by 31% YoY, with EBITDA showing a £0.8m improvement to £0.9m. The company continues to benefit from strengthening R&D pipelines in the pharma industry, with strong demand in both the pre-clinical and clinical segments. The Provantis and ALPHADAS products are performing well, with solid growth seen in the submit pipeline. Following today’s announcement, we increase FY15 revenue forecasts, and introduce FY16 and FY17 estimates.
29 Sep 15
Trading in line
H1 trading is reported to be in line with expectations, with market conditions improving across the group’s areas of focus. We make no changes to our forecasts as a result, but continue to see medium term upside potential, particularly from the SEND initiative. The shares remain good value on an FY16 EV/NOPAT of 13.5x and an EV/EBITDA of 8.5x, supported by a 7.5% FCF yield. Our current forecasts assume a 3 year CAGR in EPS of 19%.
30 Jul 15
Bodycote (BOY LN) H1 decline | Centaur Media (CAU LN) Interims – profit better than expected | Findel (FDL LN) Reassuring AGM statement | Instem (INS LN) Trading in line | Minds + Machines Group (MMX LN) Domain sales growing, cash position strong | Skyepharma (SKP LN) Supportive GSK Q2 2015 results | Spectris (SXS LN) Downgrade to expectations
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30 Jul 15
SEND for the cavalry
Instem stands to benefit from a December 2014 FDA mandate requiring pre-clinical study submissions to comply with SEND (the Standard for Exchange of Nonclinical Data). This note describes SEND, details its impact on the industry, and quantifies the potential value for Instem. Recent wins provide clear evidence that SEND is starting to drive sales; we suggest that the FDA’s move provides a long-term positive growth driver of which investors should be aware.
19 Mar 15
Instem sells software products to a variety of customer types involved in the early drug development segment of the healthcare market, and to other life sciences R&D organizations. The group came to market in 2010 with a compelling story based on dominance of a niche market, good recurring revenues and strong cash generation. Instem, along with many other pharma services companies, has weathered an unforeseen market slowdown, which now appears to be abating. There is clear potential for consolidation in the marketplace (three deals have already been concluded), and Instem has exposure to attractive elements of SaaS delivery and “Big Data” in the pharma markets
29 Jan 15
Momentum beginning to build ?
Instem has this morning provided an update on trading for the year to December 2014 – the result for the full year is in line with market expectations (and we assume our estimates). A good level of order intake has resulted in 2015 having the highest-ever opening backlog. In conjunction with the FDA’s recent (December 2014) timeline announcement for the SEND data standard, this suggests that momentum may be about to return to a number of market areas
12 Jan 15