Today's Q3 trading update said Revenue for the first nine months of FY17 is up 23%.
Firm posted positive Q1 trading update following weak FY results & raise to shore up balance sheet
Firm announced that it would have to raise £185m to shore up balance sheet
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Q2 EBITDA was slightly better than expected, down by only 3% yoy despite an expected 7% revenue decline. As a result the EBITDA outlook for 2020/21 has been slightly raised.
We have a Buy on the stock which offers significant upside potential to our target price as it has not recovered since mid-March and is still down by 50% ytd. Now that the dividend has been cut, we continue to believe that BT merits a much higher share price.
Companies: BTQ BTAN BTGOF BT/A BTQ
CAP-XX Ltd* (CPX.L, 4.5p/£19.9m) | Gfinity plc* (GFIN.L, 3.8p/£28.9m) | MTI Wireless Edge Ltd* (MWE.L, 44p/£38.7m) | Newmark Security plc* (NWT.L, 1.175p/£5.5m)
Companies: CPX GFIN MWE NWT
Companies: Trakm8 Holdings PLC
MTI Wireless Edge Ltd* (MWE.L, 37p/£32.5m) | Blackbird plc* (BIRD.L, 17.2p/£58.0m) | Gfinity plc* (GFIN.L, 3.8p/£29.0m) | Starcom plc* (STAR.L, 1.0p/£3.5m)
Companies: MWE BIRD GFIN STAR
Gamma has delivered this morning another strong set of results for H1 to June. Despite the COVID-19 challenges, the business has grown organically, and the acquisition programme is delivering well on its promise of European expansion. The group is positioned well to build revenues on and around Microsoft Teams, which is clearly benefiting from the work-from-home trend. We raise our profit estimates for all three forecast years as a sign of confidence in ongoing growth and look forward to further strong performance (and potentially even further M&A) into H2 and beyond.
Companies: Gamma Communications PLC
Telefónica remains on track to deliver its 2020 outlook of flat EBITDA-capex yoy in organic terms but… at constant currency. The Forex headwind is however a storm in Brazil (-30% yoy).
The stock is trading at a 55% discount to its February level. The dividend yield is nearly 15% reflecting the market’s major concern about its sustainability.
Even if the group ends up lowering its dividend due to this Forex storm… we maintain our Buy opinion.
Companies: Telefonica SA
For the six months to 30 September 2019 (H1 FY20) AdEPT Technology Group reported Revenue +26.4%YoY to £30.8m inclusive of acquisitions, with organic growth of +2.5%YoY. Fixed Line Communications comprised 18.5% (£5.7m), -10.7%YoY, whilst Managed Services grew 39.5%YoY to £25.1m inclusive of the acquisition of Advanced Computer Systems UK Ltd. (ACS) to reach 81.5% of revenue; underlying organic growth was 7.9%YoY. EBITDA (adj.) of £6.1m grew 18.3%YoY; a 19.8% margin. The interim dividend was 5.1p/share (H119: 4.9p) +4%YoY. Period-end senior net debt was £31.5m (FY19: £27.1m) 2.6x EBITDA (FY19: 2.5x), with cash at £4.6m.
Companies: AdEPT Technology Group Plc
Possible sentiment boost on election result
The Coronavirus pandemic is a human tragedy of vast proportions – as well as the terrible human toll, COVID-19 has led to economies across the globe going into physical lockdown and financial freefall. Entire populations are adapting to the “stay at home” edict, to safeguard the vulnerable – and some of these changes will lead to long-lasting or perhaps permanent changes in the way we live or work. This note describes some of our client companies whose business models are well adapted to these changes, or who might see a change in long-term structural demand.
Companies: AMO BGO FDM GAMA KAPE LOOP TERN ZOO
Gamma’s AGM statement contains a sensible degree of caution around the impact of COVID-19 on the economic backdrop, mixed with its continuing growth story. The group is seeing strong demand for Cloud PBX and UCaaS (Unified Communications as a Service) products in the UK but notes some slowdown in new orders and a lengthening of sales cycles. The business model has successfully moved to home working and, with a high (93%) proportion of recurring revenue, the outlook remains bright. We take a prudent view in reducing our revenue estimates although the impact on EBITDA is more muted. The Group has a strong balance sheet, is cash generative and retains its previously announced dividend payment.
FY20 results: inline with guidance
Blackbird plc* (BIRD.L, 17.5p/£58.8m) | MTI Wireless Edge Ltd* (MWE.L, 31.5p/£27.7m) | Mirada plc* (MIRA.L, 90.0p/£8.0m) | Brave Bison plc* (BBSN.L, 1.375p/£8.4m)
Companies: BIRD MWE MIRA BBSN
Bigblu Broadband has today announced the sale of its UK and European satellite broadband operations to Eutelsat for a maximum consideration of £39.3m, with £37.8m payable in cash upon completion. This represents 7.0x FY19 EBITDA of £5.6m for the sale assets, and values the assets ahead of other UK telecom and satellite peers on c6x EV/EBITDA. BBB intends to use the proceeds to reduce its net debt, and evaluate opportunities to enhance shareholder value that could include shareholder returns. In this report we lay out the investment case for BBB’s continuing operations (UK fixed wireless/Quickline, Australia, and Nordics), and introduce conservative forecasts for the continuing group that do not include tender wins for BBB’s Quickline division. This still leads us to expect FY21 organic revenue growth of +3% and EBITDA growth of +9% that compares to 12-month forward EBITDA growth for peers in Managed Services & Telecoms, and the finnCap Next 50, of +3% and +7% respectively. Combined with a net cash position and 2% EFCF yield in FY21, BBB looks undervalued on 7x 12-month forward EV/EBITDA (Managed Services & Telecoms peers 11x, fc Next 50 16x), and we reiterate our target price of 155p based on 12x FY21 EV/EBITDA.
Companies: Bigblu Broadband plc
The actual Interims are slightly improved on July’s update with $166.9m revenue and $56.2m net cash ($166.5m and $55.7m previously indicated) demonstrating a robust trading period despite the impact of pandemic restrictions and uncertainty. The COVID-19 global slowdown caused a 7.4% YoY revenue decline, but an improving gross margin and management’s temporary cost controls have seen adj. EBITDA rise 12% to $18.0m. The company’s ‘Profit in Cash’ metric (adj. EBITDA less capitalised R&D and lease payments) jumped 126% to $5.9m. In fact, cashflow has been very healthy with net cash rising from $48.2m in December to $56.2m, notably boosted by collections from the divested automotive business. One pleasing aspect of the first half was continued growth in higher-margin IoT Services, up 12% YoY despite COVID-19. Easing of restrictions in H2 should see a return to more usual revenue and profit levels, so FY 2020 sales and adj. EBITDA expectations remain unchanged. Looking ahead, a return to revenue growth and continued improvement in profit is anticipated for FY 2021, due to pent-up demand and greater IoT adoption on concerns over potential physical restrictions during future pandemics. Telit remains well positioned to continue to deliver its impressive track record for earnings growth (we expect 9% adj. EBITDA growth this year and then 20% next). Currently on an EV/EBITDA multiple of c.5x, the shares remain deeply undervalued for a stock delivering consistent profits progress with a very solid balance sheet in these very uncertain times.
Companies: Telit Communications S.p.A.
Bigblu Broadband’s H1 results highlight the strong potential for its continuing operations, with H1 organic customer net adds of +5k to 64k, organic revenue growth of +7% to £12.1m, and underlying EBITDA growth of +49% to £2.4m. This establishes a solid foundation for our unchanged FY20 EBITDA forecast of £6.2m, and highlights that our FY21 forecasts for organic revenue growth of +3% and EBITDA growth of +9% are conservative, as further potential tender wins for Quickline, or a continuation of the strong growth in Australia, could each provide substantial upside to our current forecasts. Our FY21 EBITDA growth of +9% also compares to 12-month forward EBITDA growth for Managed Services & Telecoms peers, and the finnCap Next 50, of +9% and +7% respectively, and this makes BBB look undervalued on 8x 12-month forward EV/EBITDA (Managed Services & Telecoms peers 10x, fC Next 50 16x), especially when combined with BBB’s net cash position and 2% EFCF yield in FY21. The general meeting required for BBB’s disposal of its UK and European satellite operations takes place at 10am this morning, and we include a recap of the transaction on p4. Completion of the disposal is then expected in Q3 20, and the next catalysts for BBB are likely to be tender wins for Quickline, new homes being released by NBN for satellite broadband in Australia, and BBB’s FY trading update in December.