Small Cap Feast
African Export-Import Bank a supranational financial institution w hose purpose is to facilitate, prom ote and expand intra- and extra- African trade, of its potential intention to publish a registration document, the Bank hereby confirms its intention to proceed with an Initial Public Offering. The GDRs are expected to be admitted to the standard listing segment of the Official List of the FCA and to trading on the Main Market of the LSE. DNEG Limited intends to apply for adm ission of its Shares to the premium listing segment of the Official List of the FCA and to trading on the London Stock Exchange's main market for listed securities. The Offer will be comprised of new Shares to be issued by the Company (to raise expected gross proceeds of £150m). Admission is expected to take place in November 2019.
SSY VRE TCM SEE SDX BEG BSE OBD CPT
25 Oct 19
Small Cap Feast
Registration document approved for Helios Towers. The Group provides essential network services, flexible infrastructure solutions and reliable power supply to mobile network operators in five African growth economies. Revenue increased 7 per cent. year-on-year to US$191m (H1 2018: US$178m), with Adjusted EBITDA up 15 per cent. year-on-year at US$99m (H1 2018: US$86m) for the six months ended 30 June 2019. Pricing rumoured at 115p to 145p implying valuation of up to $1.8bn. Expected Oct 2019.
SSY SHED SYS1 CBOX OMG OMG PPS RMS RNO CER RENX
14 Oct 19
SCISYS Group - CGI to acquire SCISYS for 254.15p in cash
The Canadian IT services company CGI is acquiring SCISYS for 254.15p in cash. The offer price represents a 24.6% premium to Thursday’s closing price and values the entire issued and to be issued ordinary share capital of SCISYS at c £78.9m. In addition, SCISYS shareholders will receive the final dividend of 1.73p. The offer price translates to c 20x our FY19 earnings forecast, which falls to c 19x in FY20e and 18x in FY21e. Alternatively, the offer values the business at 1.2x FY20e revenues and 11x EBITDA.
14 Jun 19
SCISYS Group - Confident, in line, on record opening order book
In an in-line update, SCISYS says it has made a positive start to FY19, with all divisions continuing to expand. Consequently, we are maintaining our forecasts. Management expects FY19 performance to revert to the traditional pattern of a significantly stronger H2 after the more balanced profile in FY18. Noting management’s new goal to achieve revenue of £75m and operating profit of £7.0m by the end of FY22, we believe the stock is attractive on c 14x our FY20e EPS.
07 Jun 19
Morning Note – 6 June 2019
Amino Technologies (AMO): Corp Positive interim trading update | eServGlobal (ESG): Corp HS drawdown begins as its A2A business grows | Ideagen (IDEA): Corp Capital Markets Day | PPHE Hotel Group (PPH): Corp Into the FTSE 250 | SCISYS (SSY): Corp Positive start to 2019 highlights the value in the stock
SSY AMO IDEA PPH WJA
06 Jun 19
Small Cap Feast
Renold plc—a leading international supplier of industrial chains and related power transmission products, announced that it will cancel the listing of the Company from the premium segment and apply for admission on AIM. Expected 06 June 2019. Alumasc Group plc, the prem ium building products, system s and solutions group, has announced its intention to m ove from the Premium Segment of the main market to AIM. Expected market cap of £33.4m. Expected 25 June 2019
SSY ANR AMO TPG XPD AAU DELT PANR THR AUTG
06 Jun 19
Morning Note – 30 April 2019
Anglo African Oil & Gas (AAOG): Corp Formal offer of new Tilapia licence | PPHE Hotel Group (PPH): Corp Strong start to the year | SCISYS (SSY): Corp Additional orders cement SCISYS position with the ESA | Solid State (SOLI): Corp Encouraging FY trading update
SSY PPH SOLI AAOG
30 Apr 19
Well set for future growth with a record order book
SCISYS delivered another good year and slightly beat our FY 2018 revenue and earnings expectations. Adopting IFRS 15, headline revenue rose 10% YoY on a LFL basis but – driven by strong performances in the ESD, Annova and Space businesses – core Professional Services fees actually enjoyed 16% YoY organic growth to deliver a record year. Ignoring IFRS 15, SCISYS would have hit its mid-term sales target of £60m well ahead of plan and now looks to target revenue of £75m. Stripping out £1.3m exceptional costs of re-domiciling to protect Space against Brexit, the Annova earn-out and German restructuring, we see adj. operating margin edged forward to just under 9%, in line with the long-term aspiration of over 9%. Operational gearing translated that into 40% uplift in adj. FD EPS at the bottom line, while the usual healthy cashflow further reduced net debt and underpinned a 10% uplift in dividend. The outlook is for continued strong growth with the order book just short of £100m; notably the re-domiciliation triggered a raft of Space contracts totalling over €20m. We expect a significant element of low-margin 3rd-party revenue in Space this year, so we nudged forward the FY 2019 revenue forecast although earnings are unchanged. We have released FY 2020 forecasts and reiterate our 210p target price.
10 Apr 19
SCISYS Group - Outlook is 'very encouraging'
SCISYS reported strong performance in FY18, led by the UK-focused Enterprise Solutions and Defence (ESD) division, which benefited from a reinvigorated sales team. We expect the Space division to lead growth in FY19, following the recent spate of contract wins, while the enlarged Media Solutions division has strong potential for margin recovery. We have upgraded our revenue forecasts but maintained profits as the group needs to invest in its infrastructure to sustain growth. Noting management’s new goal to achieve revenue of £75m and operating profit of £7.0m by end FY22, we believe the stock is attractive on c 13x our FY20e EPS.
28 Mar 19
SCISYS Group - GBP23m of new business since mid-December
SCISYS has released a confident trading update and we are maintaining our forecasts. Cash flow was healthy, with net debt of £3.1m slightly better than the £3.7m we expected. The order book (c £100m at end-FY18) has been bolstered by c £23m of contract wins since mid-December, of which c £8m were after the period end. The move to redomicile to an EU country before the final Brexit deal is already paying off, as c £18m of this business was only winnable if the group parent company was based in an EU country, due to Brexit. With Space and ESD showing solid organic growth, and the full benefits from the M&B/Annova merger yet to flow, we believe the stock is attractive on c 14x our FY19e EPS.
28 Jan 19
Morning Note – 25 January 2019
Destiny Pharma (DEST): Corp UK-China AMR £1.6m grant award | Elecosoft (ELCO): Corp FY 2018 results comfortably in line | Europa Oil & Gas (EOG): Corp And the fight goes on | Mporium Group (MPM): Corp Strategic collaboration | SCISYS (SSY): Corp FY 2018 meets guidance with strong order book at YE
SSY ELCO EOG DEST MPM
25 Jan 19
Morning Note – 16 January 2019
Allergy Therapeutics (AGY): Corp Trading update – strong rebound | President Energy (PPC): Corp Building critical mass | SCISYS (SSY): Corp Another contract win in Space | Somero Enterprises (SOM): Corp Trading ahead of expectations, 5% EPS upgrade | Tracsis (TRCS): Corp Acquisition
SSY AGY SOM PPC TRCS
16 Jan 19
Morning Note – 10 January 2019
Anglo African Oil & Gas (AAOG): Corp Funding secured to complete TLP-103C | InnovaDerma (IDP): Corp Trading update – Boots purchase order expected shortly | Proactis (PHD): Corp Board changes; trading in line | Quartix (QTX): Corp FY 2018 results in line with forecasts | SCISYS (SSY): Corp Contract wins underpin wisdom of Brexit protection
SSY IDP PHD QTX AAOG
11 Jan 19
Morning Note – 17 December 2018
Anglo African Oil & Gas (AAOG): Corp TLP-103C hits oil and gas at the first target | K3 Business Technology (KBT): Corp Positive year-end trading update | LiDCO (LID): Corp Full-year trading update and HUP progress | Savannah Resources (SAV): Corp Exploration update – Portugal | SCISYS (SSY): Corp New contract win
SSY KBT LID SAV AAOG
17 Dec 18
SCISYS Group - Move protects the group's space business
After obtaining shareholder approval and subsequent court sanctioning, SCISYS has re-domiciled in the Republic of Ireland. The change will ensure that its German-based space business can continue to work on EU-funded space programmes, such as EGNOS, Galileo and Copernicus. SCISYS decided to finalise the move in Q4 as it is too risky to wait for the final Brexit deal. We have added the expected £0.75m re-domiciliation costs into our model as an exceptional. Hence our forecast year-end net debt rises by £0.75m to £3.7m. As management’s goal of achieving £60m in sales and double-digit margins within the next few years looks increasingly conservative, we believe the stock is attractive on c 12x our FY19e EPS.
28 Nov 18
SCISYS - Strong H1 but more balanced year is expected
SCISYS has reported a strong H1 with professional fees jumping 24%. However, this was off a weak H117 and some business was brought forward from H2. Consequently, we are forecasting a more balanced H1/H2 in FY18. We have increased our FY18 revenues by £3.0m to reflect this balancing, but we have maintained our profit forecasts. All divisions posted record revenues, the order book remains robust at close to £100m and net debt continues to decline. Management’s goal of £60m in revenues and double-digit margins within the next few years looks increasingly conservative and we believe the stock is solid on c 14.6x our FY19e EPS.
20 Sep 18
Morning Note – 20 September 2018
Armadale Capital (ACP): Corp Interim results | Cambridge Cognition (COG): Corp Interims – strong leading growth indicators and IFRS15 | Iofina (IOF): Corp Interim results – steady as she goes | Savannah Resources (SAV): Corp Drilling programme in Oman
SSY ACP COG IOF SAV
20 Sep 18
Small Cap Breakfast
Green Man Gaming—pure play e-commerce and technology company in the digital video games industry. revenue CAGR growth of 26.7% in the last three years to £47.5m. Due 28 Sep. EBITDA Profitable. Offer TBA 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. 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
SSY PEG MWG TIDE COG RBD NTBR AST NSCI FPO
20 Sep 18
Small Cap Breakfast
Green Man Gaming—pure play e-commerce and technology company in the digital video games industry. revenue CAGR growth of 26.7% in the last three years to £47.5m. Due 28 Sep. EBITDA Profitable. Offer TBA 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. Seeking £10m. Offer TBA. Due Mid September 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 Breakfast Buffet
SSY MDZ VRE FST ING TUNE CYAN JDG EML RM2
18 Sep 18
Small Cap Breakfast
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
SSY IFP KETL EME BBB GWMO SYM FIH CRAW RBD
30 Aug 18
An “impressive start” to 2018
SCISYS has released an upbeat AGM trading update, noting that progress has been made across all its four divisions. The order book has reached £100m, up from £91.3m at end-FY17, boosted in particular by the renewal of M&B’s BBC support contract. Cash flow was strong, with net debt declining by £4m over the first five months of the year, in what is typically a subdued period for cash generation. We have increased our FY18 operating cash flow forecast, while conservatively maintaining our other forecasts. Management’s goal to achieve £60m in revenues and double-digit margins within three to five years looks increasingly conservative, and we believe the stock looks attractive on c 12.6x our FY19e EPS.
29 Jun 18
Byotrol (BYOT): Corp Trading update and commercial agreement with Solvay | Horizonte Minerals (HZM): Corp Horizonte receives Water Permit | Intercede (IGP): Corp Appointment of CEO | SCISYS (SSY): Corp Space flying with Airbus | SRT Marine Systems (SRT): Corp Systems revenue boosts H2 and delivers FY earnings | Universe Group (UNG): Corp Prelims
SSY BYOT HZM IGP SRT UNG
11 Apr 18
Space division shines
SCISYS posted strong FY17 results, with revenues rising by 25%, including c 9% organic growth and c 5% at constant currencies. The Space division stood out, generating 18% growth in both revenue and contribution. Operating profit (excluding associates) rose by 41% to £4.5m, partly benefiting from hedging arrangements, and the operating margin expanded by 90bp to 7.9%. The outlook is encouraging with the order book 41% ahead at a record £91.3m. We have cautiously maintained our profit forecasts, mainly due to the uncertainties relating to Brexit on the Space division, while our FY19 EPS eases on higher tax rate assumptions. Management’s goal to achieve £60m in revenues and double-digit margins within three to five years looks increasingly conservative, and we believe the stock looks attractive on c 10x our FY19e EPS.
05 Apr 18
Space delivers a strong year
Assisted by the successful ANNOVA acquisition and continued strength in the Space division, SCISYS delivered a very good performance in 2017, beating our sales and cash expectations, and entering this year with continued optimism based on a record order book and falling net debt. We adjust 2018 forecasts for IFRS 15 and nudge our target price forward to 170p.
27 Mar 18
Artilium (ARTA): Corp Excellent interims lift FY expectations | Destiny Pharma (DEST): Corp Resisting resistance: funded to Phase IIb inflection point | Elecosoft (ELCO): Corp FY 2017 sees notable earnings and cash flow | eServGlobal (ESG): Corp Mastercard works with HomeSend | Horizonte Minerals (HZM): Corp 2017 annual results | K3 Business Technology (KBT): Corp Clarity and cash | Orchard Funding Group (ORCH): Corp 22% progress | Quartix (QTX): Corp AGM hears of insurance pressure | SCISYS (SSY): Corp Space delivers a strong year | STM (STM): Corp A watershed year
SSY ARTA DEST ELCO HZM KBT ORCH QTX STM WJA
27 Mar 18
Small Cap Breakfast
TruFin—holding company of an operating group comprising three growth-focused FinTech and banking businesses operating in three niche lending markets: supply chain finance, invoice finance and dynamic discounting. Offer TBC, expected late Feb | Polarean - The medical drug-device combination companies operating in the high resolution medical imaging market. Offer TBC. Due 22 Feb | Block Energy—a NEX Listed UK based oil exploration and production company whose main country of operation is the Republic of Georgia, looks to join AIM end of February 2018. Offer TBC
SSY PYC UKR SCLP TEG 7DIG ANGS PLUS NSCI SAVE
09 Feb 18
Space division is flying in spite of Brexit
2017 was a transitional year for SCISYS, with the key Space division flying and ANNOVA’s integration progressing in line with expectations. The attainment of an €18m prime contractor role in H2 is a significant endorsement of SCISYS Space’s proprietary PLENITER software suite, with which SCISYS is targeting the commercial space sector. In August, ANNOVA achieved a key milestone with its BBC contract, which means it is trading ahead of initial management targets. This comes on the back of H1 results, which revealed 6% organic growth across the group and a record half-year order book. Management’s goal to achieve £60m in revenues and double-digit margins within three to five years looks conservative, and we believe the stock looks attractive on c 11x our maintained FY18e EPS.
26 Jan 18
Elecosoft* (ELCO): FY meets growth expectations (CORP) | Velocity Composites* (VEL): Accelerating sales and development investment (CORP) | Flowtech Fluidpower* (FLO): Positive year-end trading update (CORP) | Ideagen* (IDEA): Interims: strong recurring revenue growth (CORP) | OptiBiotix* (OPTI): Further human taste studies for SweetBiotix (CORP) | dotDigital* (DOTD): positive trading update (CORP) | Castleton Technology* (CTP): Contract wins (CORP) | SCISYS* (SSY): SCISYS sitting comfortably (CORP)
SSY ELCO VEL FLO IDEA OPTI DOTD CTP
23 Jan 18
The Joy of Techs
This quarter we use finnCap’s Slide Rule to provide both top-down and bottom-up analysis of the UK’s Technology and Telecoms sectors. Our findings are very reassuring: the Tech sector scores the best (across all sectors) when considering Growth and Quality – Taptica*, Frontier Developments* and dotDigital* in particular stand out on these metrics. Given these attractive characteristics and growth prospects, the Tech sector is unsurprisingly one of the most expensive – currently trading at 17.2x FY1 EV/EBIT and 23.8x FY1 P/E, versus 15.0x and 18.5x respectively for the wider market. Despite valuations appearing high, we believe there are value opportunities. For example, Proactis* features in finnCap’s QVGM+ portfolio (ranked 17/462) – the company offers attractive organic and inorganic growth, with earnings forecast to grow by 26% CAGR over the next two years, but despite this, only trades on 15x FY1 earnings and offers 8% FCF yield in FY2.
SSY 7DIG ALT AMO ARTA BOTB BLTG CTP CITY D4T4 DTC DOTD ELCO FDEV GBG IDEA IDOX IGP IOM KBT KCOM KWS LRM MAI MMX NASA NET PHD QTX QXT RCN 932 SEE SIM SPE SRT STR TRMR TAX TEP TPOP TRAK UNG VIP ZOO CYAN ONEV SYME WJA
09 Nov 17
SCISYS* (SSY): Good heavens (CORP) | Solid State* (SOLI): Half-year update signals shift in business mix (CORP) | Petra Diamonds (PDL): Q1 trading update (BUY) | ANGLE* (AGL): New application for Parsortix harvesting cells from bone marrow (CORP) | Omega Diagnostics* (ODX): Half-year trading update (CORP) | Real Good Food* (RGD): Significant reduction in guidance (CORP) | Firestone Diamonds (FDI): Q1 trading update (U/R) | Trakm8* (TRAK): H1 is on Trak (CORP)
SSY SOLI PDL AGL ODX RGD FDI TRAK
23 Oct 17
Small Cap Breakfast
Novacyt S.A.—Sch1 from the international diagnostics group, generating revenues from the sale of clinical products used in oncology, microbiology, haematology and serology testing. Offer to raise £8.8m at 59.38p with a value of £22.4m. Expected 01 Nov. Footasylum Ltd—UK-based fashion retailer focusing on the branded footwear and apparel markets announced its intention to seek admission to AIM. Expected value between £130m and £150m. Due Nov 2017. Totally (TLY) - Sch 1 for £11m RTO of Vocare, a provider of integrated urgent care services to the NHS throughout the UK. £76.8 million rev in the y/e 31 Mar 2017. Totally to address Care Quality Commission concerns. Due 24 Oct. Mkt Cap £28.7m. Central Asia Metals (CAML) -RTO of Lynx Resources. Anticipated market capitalisation at Admission: £404.8m. Raising £113m at 230p. Acquiring the SASA zinc-lead mine in Macedonia from Solway Industries. Due 15 Dec. 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. Orogen plc, to be renamed Sosandar plc on Admission. Sosander is an online womenswear brand specifically targeted at a generation of women who have graduated from younger online and high street brands, and are looking for affordable clothing with a premium, trend-led aesthetic. Offer to raise £5.3m with market cap of £16.1m, expected 2 November 2017 OG Graphite, brownfield development-stage graphite company focused on the reactivation of its wholly-owned Kearney natural flake graphite mine and mill located 280 km north of Toronto, Canada. Offer TBA, expected late October .
SSY PHE TRAK ODX CNR SCHO MIO B90 SRB
23 Oct 17
ANNOVA’s success underpins a strong H1
A strong set of interims leaves the company comfortably positioned to deliver at the higher end of expectations for FY 2017. Assisted by six months of ANNOVA, acquired in December, H1 revenue grew 22% YoY (and 6% organic) to a record £27.2m. This delivered adj. PBT of £0.9m, down 12% on H1 2016 due to the increased interest from the acquisition loan. We are lifting our revenue expectation from £53.4m to £54.0m. SCISYS profits are traditionally H2-weighted, so we continue to expect it to deliver adj. PBT of £4.0m for 2017 thanks to the exceptional £64m order book and several large new contracts. We reiterate our 155p target price.
21 Sep 17
President Energy* (PPC): Initiation of coverage: Argentina has the best stakes (CORP) | SCISYS* (SSY): ANNOVA’s success underpins a strong H1 (CORP) | Cambridge Cognition* (COG): Interims – looking behind the numbers (CORP) | Hurricane Energy (HUR): H1 2017 results (BUY) | Quixant* (QXT): Exceptional H1 performance with H2 caveat (CORP)
SSY COG HUR QXT
21 Sep 17
Carclo (CAR): AGM statement in line, but greater H2 weighting (HOLD) | Shield Therapeutics (STX): Iron tired of being tired all the time (BUY) | Water Intelligence* (WATR): Building market presence (BUY) | Chariot Oil & Gas* (CHAR): Rig assigned for Rabat Deep drilling (CORP) | Frontier Developments* (FDEV): A stellar year, and it’s just the beginning (CORP) | Atalaya Mining (ATYM): Interim results (BUY) | SCISYS* (SSY): FY 2017 in line with guidance so far (CORP)
SSY CAR STX WATR CHAR FDEV ATYM
07 Sep 17
Small Cap Breakfast
Kosmos Energy (KOS.L)—Secondary listing (Standard), 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). No offer. NYSE:KOS. Mkt Cap £2.54bn. | Pembridge Resources (PERE.L) - the natural resource exploration and development company has today moved from AIM to the Standard List of the Main Market.
SSY PHE EAH SPSY FDEV MERC AVN MUBL ITM DCTA
21 Aug 17
Small Cap Breakfast
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. Wilmcote Holdings plc—Sch1 from the Company established with the objective of creating value for its investors through the acquisition and subsequent development of target businesses in the downstream and specialty chemicals sector. Offer raising £15m at 120p with market cap of £25m. Expected 17 August 2017 Xpediator Plc—Sch 1 from the holding Company for an integrated freight management business operating in the supply chain logistics and fulfilment sector across the UK and Europe with a strong presence in Central and Eastern Europe. Offer details TBC, expected Admission early August 2017. 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
SSY ADB MYSQ TAVI RAD CKT NKTN LID MVR BRD
10 Aug 17
Solid order book growth and pipeline strong
In an in line update, SCISYS reports that its order book grew by 4% over Q1, while net debt fell by £2.4m as at end-April. Cash flow was boosted by the receipt of overdue payments from the MOD and a tax credit from HMRC that were deferred from 2016. All business units have been performing well and we note that this year is likely to be more H2 weighted than is typical due to the acquired ANNOVA. Noting management’s goal to achieve £60m in revenues and double-digit operating margins within three to five years, we believe the stock looks attractive on c 9x our maintained FY18e EPS.
08 Jun 17
Small Cap Breakfast
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 Early June | Tiso Blackstar Group—Schedule 1 update. Media, entertainment and marketing solutions group/ £160m mkt cap. Admission only. Expected late June. | 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. Prospectus and announcement of the price range due in mid-June 2017. | 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. | Flying Brands (FBDU.L)—Prospectus approved by FCA. RTO of Stone Checker Software, supplier of technology solutions in the field of kidney stone analysis and prevention. Has raised £550k at 3p. Subject to GM on 15 Jun. | AEW UK Long Lease REIT—Intention to Float. Up to £150m raise. Admission early June. UK specialist and alternative property | Kuwait Energy— $150m raise plus vendor offer. Admission due June. 2p reserves 810.0 mmboe
SSY GBP CLON BOTB MPAC SPE PTCM CRU TRB CAB
08 Jun 17
Small Cap Breakfast
Shearwater Group—Schedule 1. Acquiring SecureEnvoy for £20m in cash and shares—a provider of multifactor authentication enterprise software solutions. RTO under the AIM rules. ADES International— Provider of offshore and onshore oil and gas drilling and production services in the Middle East and Africa, seeking raise up to $170m plus vendor sale under a Standard Listing of the Main Market. Admission due May 2017. Global Ports Holding—Intention to float on Standard List of the Main Market. International cruise ports operator. Seeking $250m raise including $75m primary offer. Dorcaster—Schedule One Update. Admission now expected on AIM 3 May. RTO of Escape Hunt raising £14m at 135p. 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 May. Tufton Oceanic Assets– Offer extended to 9 May on specialist funds segment of Main Market to enable investors to complete further due diligence.
SSY ALSP SUMM EUSP GLIF RRL AST PPH PURE ACC
02 May 17
SCISYS shows ‘bouncebackability’
It is not often that Iain Dowie is quoted in equity research, but the former Crystal Palace manager gave us a good turn of phrase for the ability to recover swiftly from setback, and that is precisely what SCISYS demonstrated last year. H1 2015 was affected by a problem contract but it was swiftly resolved in H2, and now we see FY 2016 has been a superb year for revenue and profit, even beating our November upgrades. The strong sales growth and margin improvement was entirely organic, spread across all three major divisions, albeit assisted by appreciation of euro earnings from Germany. FY 2016 ended with the debt-funded acquisition of the German newsroom software supplier Annova, which should continue to drive excellent growth and enhanced margins from the high-quality IT services business. There is no change to impressive FY 2017 expectations other than a recalculation of the share dilution that lifts EPS from 10.5p to 11.0p, but we issue FY 2018 forecasts and reiterate our 155p TP.
05 Apr 17
Real Good Food* (RGD): Acquisition of Brighter Foods (CORP) | SCISYS* (SSY): SCISYS shows ‘bouncebackability’ (CORP) | Gooch & Housego* (GHH): Encouraging H1 update, strong order book indicating a better H2 (HOLD) | Castleton Technology* (CTP): Full year trading update – on track (CORP) | Intercede* (IGP): More upbeat tone to year end trading update (CORP) | Firestone Diamonds (FDI): 110 carat diamond recovered at Liqhobong (BUY)
SSY RGD GHH CTP IGP FDI
05 Apr 17
Operating profit beats by 4%, solid outlook
Both FY16 revenue and adjusted operating profit were 4% ahead of our forecasts, while EPS beat by 8% on a favourable tax charge. The acquisition of ANNOVA Systems, a leading supplier of software-based editorial solutions to the television sector completed at the end of the period. ANNOVA underpins our financial forecasts and complements SCISYS’s dira! product offering for radio broadcasters, creating cross-selling opportunities. Management has reintroduced its goal to achieve £60m in revenues and double-digit operating margins within three to five years. Hence, we believe the stock looks attractive on c 9x our FY18e EPS.
04 Apr 17
The Joy of Techs
Enterprise-focused niche applications of tech illustrate how, while trends appear to be fluctuating away from the current poster children of fintech and the Internet of Things, in fact these developments are refining appropriate application of existing technologies.
SSY 7DIG AMO ARTA BVC BOTB CTP CITY D4T4 DTC DOTD ELCO FDSA FDEV GBG IDEA IDOX IGP IOM KBT KCOM KWS LRM MAI MMX NASA NET PHD QTX QXT RCN 932 SEE SIM SPE TAX TEP TPOP TRAK UNG VIP ZOO ONEV SYME WJA
27 Mar 17
Small Cap Breakfast
GBGI—Schedule One from the integrated provider of international benefits insurance focused on providing tailored insurance products. Looking to raise £32m with admission expected 22 Feb. Arix Bioscience — Intention to float on the main market from the global healthcare and life science company supporting medical innovation. Raised £52m in Feb 16 with investors including Woodford Investment Management Ramsdens Holdings –Schedule One from the financial services provider and retailer, operating in the core business segments of foreign currency exchange, pawnbroking loans, precious metals buying and selling and retailing of second hand and new jewellery. Expected admission to AIM 15 Feb raising circa £15.6m. Expected mkt cap £26.5m.
SSY PRM NBI WATR FARN NSCI WSBN ARS CYAN
09 Feb 17
Deal beefs up media & broadcast operations
SCISYS is acquiring Germany-based ANNOVA Systems for an estimated deal value of £15.3m. ANNOVA is a leading supplier of software-based editorial solutions to the media sector. It has a track record of generating strong revenue growth and in 2015 won a landmark contract with the BBC, which underpins financial forecasts for 12 years. ANNOVA complements SCISYS’s dira! product offering for radio broadcasters, extends the group’s capabilities into television and creates cross-selling opportunities. The deal significantly boosts earnings, aided by cheap debt financing costs, and is value enhancing on our assumptions. Consequently, we believe the stock continues to look attractive on c 10x our FY17e earnings.
28 Nov 16
Quixant* (QXT): Gaming gains (CORP) | SCISYS* (SSY): Bringing good news from Germany (CORP) | Hayward Tyler Group*: Contract wins (CORP) | Sound Energy (SOU): TE-7 flow rate and fund raise (BUY) | Water Intelligence* (WATR): Growth and improving returns in a defensive market (CORP) | Imaginatik* (IMTK): Interim trading update (CORP)
SSY QXT HAYT SOU WATR SEE KBT NET SYME
24 Nov 16
Joy of Techs
ICT evolution is driven by technological development as advances are made which both meet and shape customer requirements. Our 2011 note No such thing as a telco described the modern reality in that former ‘telcos’ now deliver varying elements of a range of managed services. We built on this theme last year, exploring in further detail their evolutionary paths, operating fundamentals, and cashflow yield similarities. In the consumer environment, demand for bundles of technology is complemented by demand for content. Across the pond, the mooted combination of AT&T and Time Warner typifies the bundled need of ‘pipe’ and content, since unbundled alternatives such as FaceTime and WhatsApp can be easier and clearer to chat over, and Amazon and Netflix are easier to watch anywhere. In the UK, BT’s defensive actions cover delivery, content and capabilities, acquiring EE yet also buying football rights. While TV was long ago added to triple play to become quad play, voice is now merely an app, and fixed and mobile seen as just dumb pipes: it's the content that will influence consumer choices. Growth of TV and film as well as music and gaming over IP leads to UK small cap opportunities. In context of the drive to maximise value from pipes and access by offering content and data, we look at some amongst the potential tech small cap beneficiaries: Amino*, Keyword Studios, ZOO Digital*, 7digital*, KCOM* and CityFibre*.
SSY 7DIG AMO ARTA BVC BOTB CTP CITY D4T4 DTC DOTD EGS ELCO FDSA FDEV GBG IDEA IDOX IMG IGP IOM KBT KCOM KWS LRM MAI MMX NASA NET PHD QTX QXT RCN 932 SEE SIM SPE TAX TEP TPOP TRAK UNG VIP WAND ZOO ARC ONEV SYME WJA
21 Nov 16
Management says that due to continued strong trading in H2, FY16 revenues and adjusted operating profits are anticipated to be ahead of current market guidance. The group has been benefiting from contract wins while a weakening sterling against the euro has additionally benefited its Space and Media & Broadcast units. Consequently, we have upgraded our forecasts, which comes on top of the significant upgrades we made after the interims in September. Given the potential for margin recovery and the improving growth profile, in combination with a strong balance sheet, we believe the stock looks attractive on c 11x our FY17e earnings.
17 Nov 16
Karelian Diamond Resources (KDR.L) | DODS Group (DODS.L) | Stellar Diamonds (STEL.L) | SCISYS (SSY.L) | Prime People (PRP.L) | Taptica International (TAP.L) | Oxford Pharmasciences (OXP.L) | Providence Resources (PVR.L)| ECR Minerals (ECR.L) | Pacific Industrial & Logistics REIT (PILR.L)
SSY DODS STEL PRP TRMR ABA PRP SHED
09 Nov 16
Outlook underpinned by strong order book
SCISYS reported a strong H1, with revenues up 35% to a record £22.2m and the group returned comfortably to profit, despite being held back by currency hedging due to the slide in the pound against the euro. The performance partly reflects the impact of a problem project in H115, which led to deferrals. The group has also been winning new business and had a strong closing order book at £35m. Cash flow was very strong, with the group returning to a net cash position of £1.4m from £1.0m net debt at end-December. We have upgraded our adjusted operating profit forecasts by 12% in FY16 and 8% in FY17. Given the potential for margin recovery and the improving growth profile, in combination with a strong balance sheet, we believe the stock looks attractive on c 12x our FY17e earnings.
03 Oct 16
SCISYS* (SSY): Strong H1 enjoys growth from all divisions (CORP) | eServGlobal* (ESG): Corridors of opportunity (CORP) | Hurricane Energy (HUR): 2016 interim results (BUY) | The Mission Marketing Group* (TMMG): Good interim results (CORP) | Cambridge Cognition* (COG): Interims show a company being noticed (CORP) | Synairgen* (SNG): Interims in line with expectations (CORP)
SSY HUR TMG COG SNG WJA
22 Sep 16
Encouraging start to FY16 is extended
SCISYS says it has maintained the encouraging start to the year, as reported at the AGM in June. Strong cash generation has continued, with net cash rising from £0.3m at end-April to £1.4m at end-June. Around half of group revenues are in euros, and if the euro-sterling exchange rate remains around current levels throughout FY16, SCISYS has indicated that current FY16 consensus forecasts will be significantly exceeded even after allowing for hedging impacts. We will review our forecasts following the interims in September, when we will have more information. Given the scope for upgrades, in combination with a strong balance sheet, we believe the stock looks attractive on c 12x our FY17e earnings.
16 Aug 16
Castleton Technology* (CTP): Final results to March (CORP) | SCISYS* (SSY): Strong H1 cashflow and Brexit benefits (CORP) | Cambridge Cognition* (COG): Positive Cognition Kit feasability study (CORP) | Wentworth Resources (WRL): Q2 results (BUY) | Joules Group (JOUL): Initiation of coverage – analyst interview (BUY) | Gresham House Strategic* (GHS): Responsible asset management (CORP)
SSY CTP COG WRL JOUL GHS
16 Aug 16
The Joy of Techs
Mobile money has been slow to deliver but investors need to stay engaged as there are plenty of reasons as there are plenty of reasons for success. Mobile penetration and network coverage are growing inexorably and where communication leads, transactions follow, as e-commerce has proven. Banking and payments lead the way but it will embrace other financial services too, from insurance to cross-border remittance. Slowly but surely, mobile money is coming of age.
SSY 7DIG AN AMO ARTA BVC BOTB CTP CITY D4T4 DTC DOTD EGS ELCO FDSA FDEV GBG IDEA IDOX IMG IGP IOM KBT KCOM KWS LRM MAI NASA NET PHD QTX QXT RCN 932 SEE SIM SPE TAX TEP TPOP TRAK UNG VIP WAND ZOO ARC ONEV SYME WJA
15 Aug 16
Indicators are pointing in the right direction
SCISYS’s trading update indicates that last year’s problems continue to drift into the distance, as the group returns to its strong project disciplines of the past and indicators continue to point in the right direction. Q1 trading was in line and, supported by a healthy order book, management anticipates a similar good performance in the traditionally stronger H2. Cash flow was particularly robust in Q1, with the group swinging around from a £1m net debt position at end-FY15 to £0.3m net cash at the end of April. Given the confident outlook, in combination with a strong balance sheet, we believe the stock looks attractive on c 10x our FY17e earnings.
09 Jun 16
eg solutions*: Guidance reiterated but with H2 weighting (CORP) | SacOil*: Malawi licence extension (CORP) | SCISYS*: Recovery continues with return to net cash (CORP) | Best of the Best*: Initiation of coverage – analyst interview (CORP) | Revolution Bars: Initiation of coverage – analyst interview (BUY)
SSY EGS BOTB RBG SAC
09 Jun 16
The Joy of Techs
This quarter's topic: Feasting on Red Tape. 2016 harbours every chance of being a stultifying year, given the imminent local and London mayoral elections, the looming hurdle of Brexit, the summer doldrums, the bizarre potential outcome of the US presidential election and then the home strait to Christmas. Excuses for inactivity abound with regard to spending IT capex budgets.
SSY 7DIG AN AMO ARTA BVC CTP CITY DTC DOTD EGS ELCO FDSA FDEV GBG IDEA IDOX IGP IOM D4T4 KBT KCOM KWS MAI NASA NET PHD QTX QXT RCN 932 SEE SIM SPE TEP TPOP TRAK UNG WAND ZOO ARC ONEV
04 May 16
A tale of two halves
Following a very positive post year-end trading update in January, SCISYS prelims confirmed a strong recovery in H2 after H1 was impacted by a problem contract, which was rapidly and fully resolved. The net debt is steadily being reduced and the company has reinstated the dividend in full, making up for the missed interim payment. It was a better-than-expected set of results thanks to a strong H2 performance, backed by some significant contract wins. FY 2015 revenue fell 11% in absolute terms (but only 4% at constant currency) to £36.1m, beating our forecast by £0.2m. This was assisted by £0.9m from a full year of Xibis, acquired in December 2014. In H2, sales rose 2% YoY and SCISYS swung back to adj. PBT of £1.8m from a £1.2m loss in H1. Adj. PBT for the FY of £0.6m was double our £0.3m forecast. An expected heavy effective tax burden was lower and adj. EPS was 1.2p – positive against an expected loss. SCISYS’ usual strong cash conversion delivered £1.6m of cash from operations, reduced to £0.2m FCF by tax, interest and £0.6m (tangible) capex. There was also a £0.8m deferred cash payment for Xibis and £0.3m of dividends, reducing LY’s £0.3m net cash position to net debt of £1.0m; however, this is a considerable improvement on the £1.9m net debt reported at interims. The final dividend of 1.78p is up 11% YoY, offering a yield of 2.8%. 2016 has started well, with an opening order book up 23% to £37.2m; our forecasts for FY 2016 are unchanged and we issue FY 2017 forecasts. We lift our target price from 76p to 81p
22 Apr 16
FY15 results reveal that the difficult H1 is firmly behind it, as SCISYS bounced back with a strong H2. In H1, SCISYS was hit by difficulties in a major fixed-price development project, but this was fully resolved in October. The group has a healthy order book of £37.2m, c 23% ahead of a year earlier, of which £25.8m is scheduled for delivery in FY16. Hence 69% of FY16 revenues are already in the bag and the group has a healthy pipeline of new business. SCISYS has a medium-term goal to return the business to 8%+ operating margins, which leaves the shares looking attractive trading on c 9x our FY17e earnings (based on a 6.6% margin).
14 Apr 16
The Joy of Techs
This quarter’s topic: Automotive Technology. With the Mobile World Congress approaching at the end of this month and likely to feature so many automotive applications to the extent it should perhaps be renamed the Mobile World of Cars, we examine the growing impact of technology in the automotive industry, from telematics to connected cars and autonomous vehicles.
SSY 7DIG AN AMO ARTA BVC CITY CNS DTC DOTD EGS ELCO FDSA FDEV GBG IDEA IDOX IGP IOM D4T4 KBT KCOM KWS MAI NASA NET PHD QTX QXT RCN 932 SEE SIM SPE TEP TPOP TRAK UNG WAND ZOO ARC CTP
03 Feb 16
Back on track with a solid H2
SCISYS has released an underlying positive trading update, which shows the difficult H1 is now firmly behind it. H2 trading was encouraging and FY16 guidance has been maintained, supported by a strong order book and healthy pipeline. Cash generation was stronger than we expected with the group ending the year with £1.0m net debt (we forecasted £1.4m). SCISYS has a long-term goal to generate revenues of £60m+ and doubledigit margins, although we noted in September that the target for this has slipped back from FY18. Nevertheless, this objective keeps the shares looking attractive trading on c 10x our FY17e earnings.
28 Jan 16
Contract underpins FY16 earnings
SCISYS has been awarded a significant £4m four-year contract to develop, support and host a business/regulatory application for the UK Ministry of Defence (MoD). The new contract indicates that momentum is returning to the business in the wake of the contract hiccup earlier this year, which has since been rectified. The contract will boost the year-end order book and underpins our forecasts for FY16 and beyond. SCISYS has a long-term goal to generate revenues of £60m+ and double-digit margins, although we noted in September that the target for this has slipped back from FY18. Nevertheless, this objective keeps the shares looking attractive trading on c 10x our FY17e earnings.
17 Dec 15
Looking to a brighter FY16
While the H115 numbers are marked by an untypical problem project, the underlying picture is looking brighter at SCISYS. The group has been winning some good business, such as a renewed framework contract with the BBC, and it has a healthy pipeline of opportunities, while some modest strengthening of the euro also helps. The long-term goal to generate revenues of £60m+ and double-digit margins remains in place, though the target has clearly slipped back from FY18. Nevertheless, this objective keeps the shares looking attractive trading on c 10x our FY17e earnings.
06 Oct 15
A stormy H1 but sunnier horizons ahead
SCISYS rode out a ‘perfect storm’ in H1 and foresees calmer waters and a sunnier outlook for H2, confident in making our FY earnings forecasts. H1 suffered from a combination of a problematic fixed-price contract in the ESD division; the on-going relative strength of Sterling against the Euro; and deferrals of expected projects in all divisions. Even the newly acquired Xibis mobile business experienced challenges, delivering a fractional loss from revenue below plan, with the Xibis founders leaving and foregoing their earn-out rights. Against that backdrop, the Interim results are a testament to the underlying strength and durability of the high-quality IT projects business with a number of significant wins from the blue-chip client base offering a bright outlook for H2. H1 saw net debt rise to £1.9m, but when banking covenants were tested in August, SCISYS relied on the strength of its contracted revenue base, good banking relationships and its asset-rich balance sheet. Relaxed covenant limits now provide sufficient headroom to deliver the expected trading performance. Prudently, the dividend has been suspended, pending greater visibility on the full-year cash flow. On the back of the Interims we eased back our FY sales forecast to £35.9m (from £38.0m) but maintained EBITDA expectations of £1.3m and we reiterate our 76p target price based on 12x FY 2016 earnings expectations, as we look to the calmer waters ahead in H2.
06 Oct 15
SCISYS*: A stormy H1 but sunnier horizons ahead (CORP) | The Mission Marketing Group*: Strong interim results (CORP) | Sound Energy: Interim results (BUY) | Europa Oil & Gas*: Holmwood – positive drilling decision (CORP) | Seeing Machines*: Analyst Interview (CORP)
SSY SOU EOG SEE TMG
24 Sep 15
Banking covenants position is resolved
In June, SCISYS revealed that it had been hit by cost overruns at a fixedprice development project. Also, as a result of the weak euro and the subsequent consensus forecast cuts, SCISYS said it might be in breach of its UK banking covenants. Following negotiations with the group’s UK banks, the covenant issue has now been favourably resolved. This is partly due to the group’s strong balance sheet, which includes the freehold property on its Chippenham HQ. Consequently, this leaves the shares looking attractive to investors, with the stock trading below book value.
07 Sep 15
SCISYS has revealed that it has been hit by cost overruns at a fixed-price development project. We note this is the group’s first significant problem project since FY07, as it has been managing its projects more effectively since then, having put more rigorous procedures in place. Trading across the rest of group has been broadly in line with expectations. However, SCISYS has also been affected by the recent strength in sterling against the euro. We have cut our forecasts, and SCISYS says it might be in breach of its UK banking covenants. Nevertheless, the business remains profitable at the pre-tax level, has banking facilities in place and a balance sheet supported by sizeable property assets.
15 Jun 15
FY 2015 profits hit by contract issue
Following a detailed and aggressive review, the senior management team has decided to take a major provision against a fixed-price contract in the ESD division that appears to have been substantially underestimated. This provision, together with the forex impact of continuing sterling strength, is likely to virtually eliminate the expected profit this year. We therefore reduce our FY 2015 forecast adj. PBT from £3.3m to £0.3m. There is likely to be a spill over into FY 2016 as staff are reallocated to complete the contract – set for delivery in February – and we reduce next year’s PBT forecast from £3.8m to £2.4m. Cash balances will be low and the company risks breaching banking covenants; however, the banks remain supportive and SCISYS is underpinned by a strong balance sheet with £7m NBV of property, including a £5m Chippenham HQ. We anticipate the dividend will be unchanged. Overall, this is disappointing but it is a ring-fenced, one-off issue, and procedures have been amended to ensure no recurrence.
05 Jun 15