Due to a change in sector focus Cenkos Securities plc has suspended coverage of the following stocks (see table 1). Our previous recommendation and forecasts can no longer be relied upon.
Please contact Cenkos for further information.
Companies: TUI CCL CPG DOM GNK JDW JE/ MARS MERL MAB FLTR PTEC RTN TCG WTB WMH IHG SSPG
UK equities can maintain current valuations, says Panmure Gordon
We are downgrading the stock from Buy to Hold, setting 800p as our new 12m TP and lowering our FY17/FY18 EPS expectations by 7%/10%. This takes us 3%/8% below consensus. Trading has been mixed for c.3 years and the anaemic 3 year EPS CAGR of 3% is uninspiring. Until management can evidence a higher growth rate we feel the group should be viewed as a utility type stock with yield being the main attraction. We prefer Marston’s in the sector and are buyers of it ahead of next weeks YE update.
Companies: Greene King
Greene King (GNK LN) Stronger than anticipated finals | Harwood Wealth (HW LN) Interims in-line, healthy acquisition pipeline | Infrastructure India (IIP LN) Sale of interest in WMP toll road completes | OMG (OMG LN) Appointment of Non-Executive Chairman
Companies: OMG GNK IIP HW/
We are lifting our 12m TP by 14% to 1030p to reflect upgrades post recent interims and stay at Buy. Our positive stance is purely a valuation call as the FY17 spot multiples are attractive given a 3 year EPS CAGR of 10% and a c.4% yield. Our concerns about the Spirit deal furthering GNK’s exposure to wet sales and earnings growth largely being synergy driven have not eased. But we acknowledge the Group’s strong track record, enhanced FCF and an attractive pub estate.
A satisfactory Q3 trading update from Greene King this morning which shows it had a strong Christmas and that the LFL trend has improved in Q3 vs H1. No consensus upgrades envisaged this morning, but in the context of mixed peer updates recently, today’s news should be viewed favourably. We stay at Buy with a 900p Tp.
Greene King has developed a reputation as a leading pub company combining a consistent record of successful earnings growth and a
meaningful dividend yield. Now 80% larger by market cap than its nearest peer, it continues to lead the consolidation of the sector. Its latest
acquisition, of Spirit Group, is integrating well, which significantly underpins earnings and dividend growth over the next two years.
A stronger then anticipated set of interims from Greene King this morning which should be well received by investors. Current trading appears to be good albeit no LFLs are given. There is good news on Spirit synergies and we envisage three year consensus forecast moving up by 3-5% post the results. The shares should react positively today and we move from Hold to a Buy with a 900p TP.
BREWIN DOLPHIN HLDGS (BRW LN) Finals in line, positive margin progress | FINDEL (FDL LN) Is this why Sports Direct bought at 200p? | GREENE KING (GNK LN) Strong interims, we upgrade to Buy | IOMART GROUP (IOM LN) In-line interims; small adjustments to forecasts
Companies: BRW STU GNK IOM
An in line Q1 trading update from Greene King this morning. LFL sales growth of 1.3% at the Greene King Managed estate is an improvement on the 0.6% reported after 8 weeks, but it's the least we expected given a soft Q1 comp of 0.4%. Trading across the rest of the business is mixed in our view and there's nothing tangibly new around Spirit. Overall, the update reinforces our view that despite a macro tailwind, intense competition is proving a hinderance to strong pub-restaurant sector top and bottom line growth. We make no forecast changes and stay at Hold with a 830p TP based on a 15% P/E and EV/EBITDA sector discount.
We use this note to preview the forthcoming Q1 update and formally publish our new forecasts and target price post the Spirit merger. We anticipate another sluggish trading update next week despite soft comps. If proved correct, this will act as a further ST sentiment drag for both GNK and the sector in general. We have mixed views about the Spirit deal and reinforce the pros and cons in this note. The main positive is that the deal has helped lift the 3 year EPS CAGR from 5% to 8%, but we question whether the quality of earnings has improved. For now we value the group on a 15% YR1 P/E and EV/EBITDA discount to the pubs/restaurant sub-sector to derive a revised TP of 830p (from 797p) and stay at Hold. The main attraction we see in the near-term is the 4% dividend yield.
Carclo (CAR LN) Trading in line | Greene King (GNK LN) Upcoming Q1 update unlikely to be a positive ST catalyst | Horizon Discovery Group (HZD LN) Collaboration with Redx Pharma | Lookers (LOOK LN) Benfield acquisition for £87.5m – 12.5% upgrades in 1st full year (FY’16) | Redde (REDD LN) Upgrading PBT, strong growth drives dividend | Summit Therapeutics (SUMM LN) Dr Ralf Rosskamp appointed Chief Medical Officer
Companies: CAR GNK LOOK SUMM
An inline set of finals this morning from sector stalwart Greene King. The numbers graphically show that the previous year was a difficult one, with PBT -3% and EPS effectively flat. The current year has not got off to a much better start with weak LFL’s reported after 8 weeks despite softer comps. This further brings into sharp focus the lack of momentum in the Greene King managed estate and the impact an increasingly competitive market at the value-end is having. There is no fundamental new news / insight regarding Spirit. Overall, there is nothing in today’s results to influence us adopt a more bullish stance on the stock and thus stay at Hold.
The big event in the Leisure sector next week will be Greene Kings finals on 1st July. These will highlight a difficult 12 months with PBT projected to go backwards (we estimate -3%). The industrial and financial logic of the Spirit deal are well understood and the market will be looking for more colour on synergies, brand rationalisation and organic expansion next week. All this could be overshadowed if current trading remains challenging, despite soft comps. We have no huge axe to grid against Greene King other than having a question mark over the quality of earnings post Spirit. In this regard a pro-forma P/E of 13x and EV/EBITDA of 9.4x look about right vs. peers MARS and MAB. The shares have had a good run in recent days on news of the Spirit deal being consummated and are trading above our TP of 798p. We stay at Hold and will review our TP post the results.
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The group has announced the Board’s decision to terminate the Strategic Options Review announced in June 2020 and to continue to focus on its existing online strategy, which continues to generate exceptional growth and strong cash flow. The statement also provides a trading update that confirms continuing strong trading through Q3. Our current year forecast PBT is upgraded by 79% from £7.8m to £14.0m.
Companies: Best of the Best plc
Sales growth of 27% in FY’21 was slightly better than expected after a successful Q4 despite lock-down restrictions. This reflects its growing omni-channel status in fragmented markets. Previously upgraded EBITDA guidance of not less than £3.8m is well underpinned by this and progress on key strategic priorities, including gross margin expansion. While FY22 forecasts (set in early Dec) don’t factor in an extended lock-down until 12 Apr, these margin/efficiency gains also have positive implications for future profitable growth once restrictions end.
Companies: Angling Direct Plc
Cornish Metals (TSX-V: CUSN) intends to list on AIM. The Company is proposing to raise £5 million by way of private placement of new Common Shares (the "Fundraising") to advance the United Downs copper-tin project. The Company expects that Admission will become effective in February 2021. The Company's Common Shares will continue to be listed and trade on the TSX-V in Canada. Further media reports that Dr Martens, the British Boot brand is planning an IPO on the LSE. It is currently owned by PE group, Permira who is expected to sell down its stake at the IPO. March 2020 YE the group had revenues of £672m and EBITDA of £184m. Deal size TBC. VH Global Sustainable Energy Opportunities plc, a closed-ended investment Company focused on making sustainable energy infrastructure investments, today announces intends to launch an initial public offering of shares on the Official List (Premium) of the Main Market of the London Stock Exchange. Due by Early Feb. Moonpig, the digital greeting card company, is planning an IPO with a potential valuation of £1bln, according to multiple media reports. Further details expected to be announced over the next two weeks.
Companies: ZPHR PANR PRSM SENS CYAN G4M ITX CRCL FEN ZIN
AF-KLM’s FY20 results were slightly stronger than the market’s expectations. The group foresees a sombre Q1 and has delayed its mid-term financial objectives as expected. The quasi-equity and equity injection proposal is expected to be settled within the next few weeks.
Companies: Air France-KLM SA
Nightcap is building a portfolio of high-quality brands in the Premium Bars sector targeting millennials in the 25-40 age bracket. Nightcap’s first acquisition was the London Cocktail Club. Founded in 2010 The London Cocktail Club operates nine bars across London and one in Bristol. The New York style cocktail bars have their own individual themes ranging from ‘Downtown LA’ to ‘Saville Row’ making each unique. Customers are served sophisticated drinks, by world class bartenders in an unpretentious “party style” environment. The bars are typically basement located and so competition for sites is reduced and rents lower. Serving predominantly spirits based cocktails without a wide range of wines or beers creates a concentrated drinks list allowing greater purchasing synergies and high margins.
Companies: Nightcap PLC
The final results reflect the impact of the UK Government’s enforced closure of bars and restaurants due to COVID-19 in March 2020, which resulted in the group being unable to trade for the final 14 weeks of the financial year. This offset the good progress made in the first half of the year and the first ten weeks of the second-half following the introduction of a number of management initiatives.
Companies: Revolution Bars Group Plc
In conjunction with the government’s new tier 4 restrictions, ANG has closed 12 stores. These stores remain operational for ‘call & collect’ though. The remaining estate, websites and DC continue to trade normally, and are geared up to fulfil demand. Positive sales momentum has continued since the update at the start of December, and angling continues to be permitted. The Board therefore reiterates full year guidance of no less than £3.8m EBITDA.
We were bullish about the ongoing effects of strategic/operational initiatives at G4M, seeing forecast upside risk. It has not disappointed. Q3 sales and margin outperformance drive a 30% upgrade, and a shift into net cash. Extensive planning and systems/delivery changes have helped it after Brexit too, with trading stronger than expected so far in Jan. Valuation looks undemanding given upgrade momentum and the discount to lower margin peers.
Companies: Gear4music (Holdings) PLC
Reverse Takeover by London Stock Exchange Group (LSEG.L) following the acquisition of Refinitiv in an all share transaction for a total enterprise value of approximately US$27 billion.
Companies: ADME ROCK ZPHR DKL VARE SMRT PTRO MHC BOO
AMTE Power, a developer and manufacturer of lithium-ion battery cells for specialist markets, announced its intention to seek admission to trading on AIM. Admission is expected to take place during March 2021. The Company intends to raise approximately £7 million by way of a placing of new ordinary shares in the capital of the Company. Timing TBC. Samarkand Group Limited, the cross-border eCommerce technology and retail group opening up the world's largest market for brands and retailers, intends to IPO on the Apex Segment Aquis Stock Exchange Growth Market. Admission is targeted for March 2021. Cellular Goods a UK-based provider of premium consumer products based on biosynthetic cannabinoids announced its intention to join the main market (standard) this Spring. Target valuation £20m raising c. £8m “to finalise the development and launch of a range of the Company's premium-quality consumer products based on biosynthetic cannabinoids, which is fully compliant under UK law.” Kanabo Group (RTO by Spinnaker Opportunities SOP.L) on the main market (standard). Raising £6m, enlarged mkt cap £23.4m. Kanabo focuses on the distribution of Cannabis-derived products for medical patients, and non-THC products for CBD consumers . Due 16 Feb. NextEnergy Renewables to launch an IPO on the Main Market. NREN is a differentiated renewables investment company that aims to capture the most attractive private renewables and energy transition infrastructure investment opportunities globally. Targeting a £300m raise. NREN is targeting total returns of 9-11 per cent. per annum (net of all fees and expenses but including the Target Dividend and capital appreciation) . The Company's target dividend yield for the first full financial year to 31 December 2022 is 5.5 pence. Due Early March 2021. Auction Technology Group is considering an IPO on the Main Market. The Group operates six world-leading online Marketplaces and proprietary global auction platform technology for curated online auctions . In FY20 the Group delivered pro forma revenue of £52.3 million, supported by notable underlying year-on-year growth from both Standalone ATG Group and Standalone Proxibid Group (12.4 per cent. and 40.4 per cent., respectively). For the same period, the Group delivered a strong profitability performance of £22.3 million pro forma Adjusted EBITDA representing a pro forma Adjusted EBITDA margin of 42.6 per cent. Expected March 2021. Digital 9 Infrastructure launch an initial public offering on the Specialist Fund Segment of the Main Market of the London Stock Exchange, by way of an initial placing and offer for subscription for a target issue £400m. Digital 9 Infrastructure plc is a newly established, externally managed investment trust. The Company will invest in a range of digital infrastructure assets which deliver a reliable, functioning internet. The IPO Prospectus is expected to be published in March 2021. Cordiant Digital Infrastructure to admit its shares on the Specialist Fund Segment of the Main Market of the London Stock Exchange . Targeting a £300m raise. Cordiant invests in global infrastructure and real assets, running infrastructure private equity and infrastructure private credit strategies through limited partnership funds and managed accounts. Due 16 Feb. 4basebio UK Societas is a specialist life sciences group focused on therapeutic DNA for gene therapies and DNA vaccines and providing solutions for effective and safe delivery of these DNA based products to patients. The Company has been divested from 4basebio AG , a German company listed on the Prime Standard segment of the Frankfurt Stock Exchange . No capital to be raised on Admission. Anticipated market capitalisation on AIM Admission: £14.53m. Due 17 Feb Cornish Metals (TSX-V: CUSN) intends to list on AIM. The Company is proposing to raise £5m by way of private placement of new Common Shares to advance the United Downs copper-tin project. The Company expects that Admission will become effective 16 February 2021. The Company's Common Shares will continue to be listed and trade on the TSX-V in Canada. Raising £8.2m. £18.7m mkt cap.
Companies: FRP BZT NAR FFWD SRB GRL RRR JET2 FARN INFA
Warren Buffett once said that as an investor, it is wise to be ‘fearful when others are greedy and greedy when others are fearful’. Fear is not in short supply right now.
Companies: TIME ALU ANCR BLV CONN CRC STU GATC HAT LEK MMH MCB MWE NXR NTBR NOG PAF PEG RFX SRC TEF TEG TPT VTU WYN XLM
Following continued delays of a Brexit agreement, few sectors within the UK market have remained attractive to investors despite low valuations. One sector which has continued to outperform despite the political drama has been the UK video gaming sector (henceforth UK gaming), which we are fans of. We believe a combination of sector-leading growth, strong cash conversion and timely cyclical positioning support our positive view on the UK video gaming sector.
Companies: ABBY AMS ANX ARS ATYM AVON BLVN PIER BUR CGS CAML CDM CSRT TIDE CYAN JET2 DEMG ELM EMR FPO FDEV GTLY GENL GHH GRI GEEC GKP HMI HAYD HEAD HILS HTG HUR IBPO IOG INDI JHD JOG KAPE KEYS KWS KCT KGH LAM LIT LOK MACF MANO MOD OXIG PCA PANR APP SRE PHC PMO RBW RMM RBGP RSW RNO ROR SUS SCPA SEN SHG SOLG SOM SUMO TM17 INCE TWD TRAK TRI VNET VTC ZOO ZTF
Gear4music is the leading UK online retailer of musical instruments and music equipment and has established operating bases in Sweden and Germany to spearhead its expansion into mainland Europe. It operates a low-cost model, with further efficiency gains targeted, and is profitable from the first customer transaction, achieving a 250% gross margin return on its marketing investment in new customer acquisition.
The final results revealed adjusted PBT up 99% year-on-year, which was 10% better than forecast despite four upgrades during the financial year. This strong performance reflects the financial benefits that have accrued following the shift in the business model to online only, as well as management’s strategic decision to significantly increase marketing spend. A second special dividend for the 2020 financial year has also been announced, reflecting the strong cash flow characteristics of the business model. Our 2021 profit forecast implies continuing momentum and a year-on-year increase in PBT of 86%. We raise our target price to 1050p.
FDJ reported flat Q3 20 revenue even though stakes grew 6%. Importantly, stake growth suggests activity above the pre-pandemic levels, which, along with the incremental momentum in online, were key takeaways. Management also re-instated guidance, and now expects FY20 stake/revenue to decline by 6%/7%, respectively, and an EBITDA margin of 21%. We do not expect any significant change to our estimates, as the more than expected decline in the top line will be offset by a better than expected EBITDA margin.
Companies: La Francaise des Jeux SA