Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on Datatec. We currently have 13 research reports from 2 professional analysts.
Bioventix* (BVXP): Strong trading update (CORP) | Central Asia Metals (CAML): Intended transaction and suspension of trading (U/R) | InnovaDerma* (IDP): Solid operational update (CORP) | Tax Systems* (TAX): Evolution continues (CORP) | Datatec* (DTC): Completion of Westcon-Comstor disposal (CORP) | SimiGon* (SIM): Encouraging contract from The FAA (CORP)
Companies: BVXP CAML IDP TAX DTC SIM
Gem Diamonds (GEMD): Large diamond recovered at Letšeng mine (BUY) | Datatec* (DTC): Year-end trading update and possible sale of Westcon-Comstor (CORP)
Companies: Gem Diamonds Datatec
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.
Companies: 7DIG AMO ARTA BVC BOTB CTP CFHL ISL DTC DOTD ELCO ESV FDSA FDEV GBG IDEA IDOX IMTK IGP IOM KBT KCOM KWS LRM MAI MMX NASA NET ONEV PHD QTX QXT RCN 932 SSY SEE SIM SPE TAX TEP TPOP TRAK UNG VIP ZOO
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*.
Companies: 7DIG AMO ARTA BVC BOTB CTP CFHL ISL DTC DOTD EGS ELCO ESV FDSA FDEV GBG IDEA IDOX IMTK IMG IGP IOM KBT KCOM KWS LRM MAI MMX NASA NET ONEV PHD QTX QXT RCN 932 SSY SEE SIM SPE TAX TEP TPOP TRAK UNG VIP WAND ZOO ARC
Datatec’s interims to August repeated the underlying detail revealed at the September trading update: the board looks to a sequentially and comparably stronger 2H17 and FY17, with revenue of $3.04bn showing a 7.6% decline vs 1H16 but at a gross margin of 13.8% (1H16: 13.1%), highlighting the challenges faced in a macro environment dominated by the effects of the strong dollar. The 1H dividend has reverted to match the unchanged existing dividend policy (exceeded since 2012) from 8 USc to 4.2 USc, to maintain a fixed three-times cover relative to underlying earnings. While FX has challenged the business momentum, it has benefited the sterling translation effect and therefore we retain our 400p target. Evidence of gentle LatAm recovery to the benefit of revenue, an improving product mix to the benefit of gross margin, and efficiency gains in opex due to the ERP, BPO and other initiatives, all lead to optimism for recovery for Datatec into 2H17 and FY18.
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.
Companies: 7DIG AN/ AMO ARTA BVC BOTB CTP CFHL ISL DTC DOTD EGS ELCO ESV FDSA FDEV GBG IDEA IDOX IMTK IMG IGP IOM KBT KCOM KWS LRM MAI NASA NET ONEV PHD QTX QXT RCN 932 SSY SEE SIM SPE TAX TEP TPOP TRAK UNG VIP WAND ZOO ARC
After a challenging year driven negatively by macro-economic circumstances beyond company control, the Datatec board has reiterated confidence with a maintained dividend. The one-off FX cost in Angola will not recur and we can see no further similar situations; the Westcon restructuring and BPO transformations are mostly complete, which will enhance margins and efficiencies; and challenged emerging markets businesses have been right-sized accordingly. Logicalis enjoyed strong second-half margins and strength in the US and Europe. With growth initiatives and margin focus, it is now a question of proving the execution and restoring confidence. Target 400p reiterated.
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.
Companies: 7DIG AN/ AMO ARTA BVC CTP CFHL DTC DOTD EGS ELCO FDSA FDEV GBG IDEA IDOX IGP IOM ISL KBT KCOM KWS MAI NASA NET ONEV PHD QTX QXT RCN 932 SSY SEE SIM SPE TEP TPOP TRAK UNG WAND ZOO ARC
In January we screened for companies with estimates that had been declining consistently since a year previously, but which had risen in the immediately preceding three months (see our note dated 22 January 2016). We have reviewed the performance of those companies and, given the overall strength of this selection, we have re-run the screen. In the c.3 months since selection, the unweighted average rise was c.34% against a c.11% rise in the main All-Share index. From the same universe as before (some 900 companies) we find 38 companies selected by the screen. We note a number of stocks in the list where we have a supportive stance including: Devro (DVO LN, Buy), James Fisher (FSJ LN, Corporate), Mattioli Woods (MTW LN, Buy) and Spirent Communications (SPT LN, Buy).
Companies: CAML PAF STCM TCM TTG ULE BNK IAE SEPL SEPL SOU LWB MPE PURE VLS AGY CIR SUMM BEG TAP ACSO FDSA JPR LAD QRT FLYB GOG BGEO BRK FBD HLCL ACA APF CEY FDI GEMD HOC KAZ KMR PDL SHI TYMN ACL SPT ELA AGL VER GCC DVO CHOO CMS MTW UTW ECM DTC FXI NETD SOG SPI AO/ FSJ CLIG HSD HSS IPX IPF AVN LMI GKP
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.
Companies: 7DIG AN/ AMO ARTA BVC CFHL CNS DTC DOTD EGS ELCO FDSA FDEV GBG IDEA IDOX IGP IOM ISL KBT KCOM KWS MAI NASA NET PHD QTX QXT RCN 932 SSY SEE SIM SPE TEP TPOP TRAK UNG WAND ZOO ARC CTP
SCISYS*: H2 confirms recovery (CORP) | Aukett Swanke*: Choosing the moment (CORP) | Independent Oil & Gas*: Skipper licence extension and share issue (CORP) | Datatec*: Ten-month update (CORP) | Penna Consulting: Analyst interview (BUY)
Companies: SSY AUK IOG DTC PNA
Datatec interims to August were well flagged by trading updates in July and September, having indicated FX and margin pressure. Group revenue growth of 10.1% included organic revenue growth of 8.5%, however EBITDA (Datatec measure, post SBP) declined 11% due to the fall-out from US dollar currency exposure, weakness in the high-margin Latin American region, and growth in lower-margin US product sales. Remedies are in hand to correct or minimise further impact and lift the trajectory back up going into FY17, however there are inevitable downgrades (-15%) to FY16 (February year-end) EBITDA. Target 400p (450p).
Datatec’s prelims to February 2015 prove both the recovery evident at interims within Westcon, the technology distribution business, and 2H growth at Logicalis after a slower 1H. Group revenue grew 14% year-onyear, including 16% growth 2H vs 1H. The group stands to benefit from the continued strength at Westcon, and an ongoing focus on margins where a small percentage points improvement can deliver a material improvement, given revenue is approaching $7bn. With the planets aligning once again in Datatec’s favour and a meek 5.0x Feb 2016 EV/EBITDA (4.5x Feb 17), we lift our target price to 450p (400p) based on a 6.6x FY16 EV/EBITDA target.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Datatec. We currently have 13 research reports from 2 professional analysts.
|14Sep17 15:00||RNS||Report on proceedings at AGM|
|05Sep17 16:00||RNS||Holding(s) in Company|
|04Sep17 16:00||RNS||Notification of major interest in shares|
|01Sep17 18:00||RNS||Completion of Westcon-Comstor SYNNEX transaction|
|30Aug17 15:00||RNS||Report on proceedings at General Meeting|
|01Aug17 16:30||RNS||Share incentive schemes and dealing in securities|
|31Jul17 10:00||RNS||Posting of circular, notice of general meeting|
Keywords Studios (KWS): Ticking every box (except valuation) (HOLD) | OptiBiotix* (OPTI): SlimBiome commercial update (CORP) | Surface Transforms* (SCE): Steady progress (CORP) | Gem Diamonds (GEMD): Recovery of high quality 115 carat diamond (BUY) | ClearStar* (CLSU): Record H1 driven by direct sales and medical business (CORP)
Companies: KWS OPTI SCE GEMD CLST
Advanced Medical Solutions (AMS LN) Interims in line, valuation out of kilter? | Alliance Pharma (APH LN) Interim results in line with expectations | Bagir Group (BAGR LN) Strategy on track, no further production line delays | Dunelm (DNLM LN) Confidence in expansion + ambition to double profit medium term | SQS Software Quality Systems (SQS LN) Currency headwinds on revenue but profit gains being made | StatPro Group (SOG LN) Contract extension for Delta service | Surgical Innovations Group (SUN LN) Interims in line, integration of Elemental on track | Touchstone Innovations (IVO LN) Solid FY results
Companies: AMS WIL SUN BAGR IVO SOG SQS DNLM APH
Towards the end of H117 one of the numerous development programmes for photonics applications that IQE has been working on moved to volume production. The programme, which we infer relates to 3D sensing in the iPhone X, potentially has a transformational impact on IQE’s performance. Until there is clarity on the rate of roll-out of the new phone however, our estimates, which are unchanged from the trading update in July, model a cautious ramp-up in IQE’s epitaxy sales. The share price is looking for performance substantially ahead of this, which our scenario analysis suggests is achievable. Importantly, even if demand for the iPhone X is muted, IQE is engaged in multiple photonics development programmes with the potential to generate transformational levels of growth.
Blancco Technology (BLTG): Cash or growth – choose one (SELL) | Abzena (ABZA): Trading update (U/R) | Nautilus Marine Services* (NAUT): 2017 interim results (CORP) | Shield Therapeutics (STX): Interim CFO appointed (BUY) | Hurricane Energy (HUR): Operational update (BUY) | Amino Technologies* (AMO): New contract win – Finland (CORP) | Alliance Pharma (APH): Interims highlight strong free cashflow (BUY)
Companies: BLTG ABZA NAUT STX HUR AMO APH
Anpario (ANP LN) Impressive growth highlights strategic initiatives bearing fruit | Augean (AUG LN) H1 results in line with expectations | Brady (BRY LN) Contract win | First Derivatives (FDP LN) Investment in Machine Learning | Northgate (NTG LN) In line AGM statement, but higher H2 weighting now expected | Sinclair Pharma (SPH LN) H1’s in line; growth expected to accelerate in H2 | Speedy Hire (SDY LN) H1 update slightly ahead of expectations driven by further cost savings | Swallowfield (SWL LN) Strong progress in FY17 and positive outlook | Yu Group (YU LN) Strong interim results – expectations increased
Companies: AUG NTG SPH SDY SWL FDP BRY ANP YU/
Proactis Holdings Plc (LON:PHD) is a provider of software for Spend Control and eProcurement, systems which are used by most large organisations to manage the way they transact with their supplier base. In recent years Proactis Holdings Plc (LON:PHD) has been gaining market share, within a growing market, delivering a 35% CAGR in revenues, and 62% in EPS. The trading update (Aug 22nd) confirms that progress remains positive. Meanwhile the shareprice has gained 10.4% in the last 6 months, and 664% over the last 4 years. So, is there further headroom for growth from here? In this report we argue that the acquisition of Perfect Commerce (announced July 7th) is a transformative move which takes Proactis Holdings Plc (LON:PHD) to a new level – comprehensive solution set, truly global footprint, and sufficient scale to make Proactis relevant for the ‘Tier 1’ client base. In the coming years we believe the company can sustain or even exceed its previous level of progress.
StatPro has secured a £1.5m two-year contract extension with a large European asset manager for its Delta service. This deal alleviates any concern over potential client churn post StatPro’s acquisition of Delta, highlights the value of the Delta service to its users, and confirms StatPro’s ability to strengthen relationships with existing clients. We make no changes to our forecasts, recommendation or target price.
Companies: Statpro Group
The launch of the Location Sciences division marks Proxama’s strategic shift from proximity marketing to the more scalable location data products. This first-party data is very high quality and can be used for customer targeting and advertising attribution. Management is focused on rapidly growing audience reach and data revenues to bring the group to break-even. While early in its transition, progress is encouraging; the National Rail partnership announced in July increases its audience to over c 4m.
IQE’s interim results confirm a strong start to the year, as indicated at the trading update in July. Group revenue grew 12% to £70.4m, driven by a 17% increase in wafer sales. Photonics delivered strong growth (+48%), helped by the early phase of a significant ramp in VCSEL wafers, which we believe is related to the iPhone 8. Adj. EBIT fell 2% to £10.6m reflecting the expected reduction in licence revenue. We welcome the positive newsflow on VCSEL technology but are equally interested in the encouraging comments around GaN-on-Silicon for base stations and full service DFB lasers. Investor focus is on the large 3D Sensing opportunity, which we expect to drive significant near term upgrades, but we continue to believe that IQE’s technology will be adopted in a wide range of high volume use cases, providing continued strong newsflow throughout our forecast period. Our published bull case scenario includes only potential VCSEL related upgrades. As such we believe the shares remain attractive and retain our Key Buy recommendation.
Bango has reported strong interim results, with impressive growth in End User Spend (EUS) and revenue, alongside reduced losses and cash outflow. Operational momentum remains strong, with new billing routes activated across the world. The first half also saw the launch of Direct Carrier Billing (DCB) for physical goods with Amazon Japan. We make minor increases to forecasts following the announcement, and believe the H1 2017A outcome is encouraging for the second half performance.
The transformative deal to acquire Perfect Commerce has now completed and PROACTIS has updated the market on trading for the year end. Financial metrics and deal volumes are in line with expectations following a year of good new business wins and strong organic growth. While bringing our FY2017E estimates in line with the trading update, we make no changes to underlying forecasts for FY2018E, but we do update them to reflect the earnings-enhancing Perfect deal.
Stride Gaming (STR): Changing pace (BUY) | Lombard Risk Management* (LRM): Strategic alliance with Euroclear (CORP) | Wentworth Resources (WRL): Payments received (BUY) | Petra Diamonds (PDL): Annual results (BUY) | Amino Technologies* (AMO): German contract win (CORP) | MP Evans (MPE): Excellent interim results (BUY)
Companies: STR LRM WRL PDL AMO MPE
In the September edition of the Hardman Monthly Newsletter, Dr Martin Hall - based partly on his personal experiences as a long-standing investment analyst - addresses various accounting issues that are highly relevant to today's investors. In particular, he concludes that measuring company cash flow - and especially projecting future cash flows - is pivotal to undertaking rigorous financial analysis, irrespective of how individual companies may present it.
Companies: ABZA AVO AGY APH ARBB AVCT BUR CMH COS DNL EVG MCL MUR NSF OBT ODX OXB PPH NIPT PHP PURP RE/ RGD SCLP SCE TRX VAL
Intercede has signalled that the second half of 2016/17 is likely to be materially stronger than the first. There is clearly a return in momentum within its core “occupational” market (MyID) which bodes well for the current year (2017/18). We remain convinced that the move to mobile usage in this market and the roll-out of the RapID product in mobile transactions will drive substantial improvements such that the Group returns to profit by 2018/19. We upgrade forecasts and our estimate of NPV.
Companies: Intercede Group
Corero Network Security Plc (LON:CNS) H1 results release (14/092017) showed strong progress, with revenue up 51% for the flagship SmartWall product. Perhaps even more importantly the recurring revenue element for SmartWall was up 177%. This reinforces the growth profile going forward because licence fee income grows cumulatively as new customers are added. We believe these results demonstrate that the company has essentially completed its transition from a software generalist to a DDoS protection specialist, and that the SmartWall DDoS protection product continues rapidly gaining traction in the market. In this report we review the progress of the group. We also revisit some of the fundamental drivers, and how the DDoS protection market functions. We argue that SmartWall’s real-time threat mitigation represents a disruptive new presence in the space.
Companies: Corero Network Security