Sector Note - Rude Health - Final Submission 14th Jan
The AIM Healthcare index rose by 13% in 2019, marginally outperforming the AIM All Share (+12%). AIM Healthcare was outperformed by the larger cap FT All Share Health and World Health indices (+25% and +17%, respectively), assisted by M&A activity, sustained rate of regulatory approvals and also the defensive nature of the large cap sector, set amidst Brexit uncertainty and earnings downgrades elsewhere in the market. However, there were 17 finnLife 50 stocks that exhibited double-digit percentage increases in the past 12 months, and a further four that exhibited triple-digit percentage increases; namely Silence Therapeutics (+503%), Shield Therapeutics* (+482%), ReNeuron (+184%) and Ergomed (+126%). We remain optimistic for the sector in 2020, given expected inflection points and superior growth.
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15 Jan 20
Morning Note – 17 December 2019
City of London Group (CIN): Corp Ready steady go | ClearStar (CLSU): Corp Trading update | Destiny Pharma (DEST): Corp Asian Pacific guidelines support XF-73 future use | Evgen Pharma (EVG): Corp Interims – cash to Q3 2021 | SDI Group (SDI): Corp Interims on track for strong FY 2020 | Tristel (TSTL): Corp AGM and trading update
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17 Dec 19
Small Cap Feast
The Pebble Group, a provider of products, services and technology to the global promotional products industry, announces its intention to seek admission of its shares to trading on the AIM market of the London Stock Exchange, which is expected to take place in early December 2019.The Group delivered revenue of £99.8 million in the year ended 31 December 2018.No mention of bottom line and a suggestion that funds raised would provide an exit to private equity shareholders and the repayment of debt. Offer TBA. Longboat Energy raising £10m. Expected admission November 2019. The company has been established by the former management team of Faroe Petroleum to create a new full-cycle North Sea oil and gas company .The strategy to achieve this will initially be through the acquisition of assets where the management team can add value through subsurface and operational improvements, follow-up deal opportunities and nearfield exploration; and by value creation through the drill bit.
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18 Nov 19
FY 2019 results: new three-year financial plan
Full-year results were in line with July’s trading update. Revenues grew by 18% CER, with a stronger-than-expected UK performance (+9% vs +2% in FY 2018), driven in part by the launch of new products, supporting the continued expansion in international markets (+26%) that now account for 55% of group revenues. The expected response to Tristel’s pre-submission request to the FDA, expected in December, should help determine the next steps for US registration. We maintain our FY 2020 adjusted pre-tax profit forecasts (+16%) with changes to reflect IFRS16 and introduce FY 2021 forecasts for 10% and 7% revenue and EPS growth. These are towards the bottom of Tristel’s newly set three-year financial plan, which bodes well for potential upside given the strong delivery over the past three years. Our unchanged 325p target price implies a 4% FY 2020 FCF yield.
16 Oct 19
FY trading update and Italian acquisition
Tristel provided a positive trading update for the year ending 30 June 2019, indicating revenues of £26m (+17%), some £0.3m above expectations, driven by a stronger UK performance, and adjusted pre-tax profit of at least £5.5m (+18%), in line with current forecasts. Tristel also announced the buy-out of its associate in Italy (80% of Tristel Italia) for c.£0.6m (3.3x EBITDA), for which it intends to invest in a sales force to drive future growth. This should be broadly neutral to FY 2020 earnings but accretive thereafter. This is a well-trodden path that Tristel has followed over the past two to three years, taking greater control of its overseas markets, and underpins the solid and sustained performance that we have seen over the past five years. We make minor changes to forecasts and increase our target price to 325p.
22 Jul 19
Sector Note -
AIM Healthcare Index is up 10% year to date, outperforming the AIM All Share (+6%) and FT All Share (+7%), having suffered with the broader market pull back in Q4 2018, in which AIM Healthcare fell 18%. This compared with a 22% decline in the AIM All Share and 11% decline in the FT All Share. In the past quarter, the AIM Health sector has fallen 1%, not helped by the FDA’s rejection of Motif Bio’s NDA for iclaprim. However, there were 14 finnLife 50 stocks that exhibited double-digit percentage increases, most notable of which are Futura Medica (+112%), Avacta* (+82%), OptiBiotix* (+35%), hVIVO (+34%), Instem (+34%) and ANGLE* (+29%) in the past three months
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05 Mar 19
Interims underpin full-year outlook
Interim results reflected the two sustained strategic themes for Tristel: (i) strong growth from its international markets (53% of revenues, growing at 23% CER or 16% ex-Ecomed acquisition); and (ii) growth in Human Healthcare (91% of revenues and rising 16% CER). The need to complete more extensive human usability studies to comply with the FDA de novo 510(k) filing process in the US has no real impact on our forecast horizon, with international markets more than offsetting the c.£50k built into our 2020 forecasts, which are removed. The US remains an attractive market but by no means the only opportunity for substantial growth. We reiterate our 300p price target, which is based on current unchanged forecasts, cognisant of the upside potential that international growth offers.
25 Feb 19
Morning Note – 25 February 2019
ANGLE (AGL): Corp New use of Parsortix | Independent Oil & Gas (IOG): Corp Core project funding update | President Energy (PPC): Corp Turbocharging growth | Synairgen (SNG): Corp Finals – Phase II patient selection as good as it gets | Tekcapital (TEK): Corp Significant fair value uplift | Tristel (TSTL): Corp Interims underpin full-year outlook
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25 Feb 19
Small Cap Feast
United Oil & Gas (UOG.L) an oil and gas exploration and development company brought to the Official List (Standard Segment) in July 2017 by way of a reverse takeover of Senterra Energy plc. No capital to be raised, expected market cap of £17m and expected 1 March Techniplas –global producer and support services company providing highly engineered and technically complex components, making the supply chain to original equipment manufacturers more efficient. FYDec17 rev $515m. Polemos, to be renamed Digitalbox plc, has agreed to acquire Digitalbox Publishing Holdings Limited for c.£10m through a share for share exchange. The acquisition constitutes a RTO. Polemos has also agreed to acquire the entire issued share capital of Mashed Productions Limited, a digital media business which owns the online satirical news website "The Daily Mash", for a maximum total consideration of up to £1.2m. Market cap on admission £12.4m, expected 28 February
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25 Feb 19
Small Cap Feast
United Oil & Gas (UOG.L) an oil and gas exploration and development company brought to the Official List (Standard Segment) in July 2017 by way of a reverse takeover of Senterra Energy plc. No capital to be raised, expected market cap of £17m and expected 28 Feb Techniplas –global producer and support services company providing highly engineered and technically complex components, making the supply chain to original equipment manufacturers more efficient. FYDec17 rev $515m.
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05 Feb 19
Sector Note -
It is always darkest just before dawn and we are starting to feel that – disaster aside (eg no deal Brexit followed by a Labour Government) – after a proper correction in Q4 2018, the market will soon start to find a level from which the best stocks will again emerge. We have no idea how the key geopolitical issues of 2019 will play out. What we do know is the following: the UK remains a treasure trove of good quality growth businesses, now at much cheaper valuations than 12 months ago. Despite some recent earnings downgrades, the small/mid-cap segment as a whole offers 6.0% sales growth, 13.4% EBIT growth and 5.4% dividend growth, consensus expectations that have remained remarkably robust over the past year. This is balanced by a market valuation of 11.8x EBIT and 13.5x earnings – substantially cheaper than the beginning of 2018. On this basis, we have chosen ten of our favourite ideas for 2019. As usual, there is no specific theme; we are simply trying to identify quality companies where there is overlooked value or self-help potential (for instance through M&A). Interestingly, four of our ideas have entirely US dollar earnings, thus insulated from the political issues in the UK. Happy New Year! Raymond Greaves – Head of Research – email@example.com – 020 7220 0533
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08 Jan 19
Small Cap Feast
PetroTal Corp is an oil and gas company whose shares are currently admitted to trading on the TSXV. The Company is focused on development of oil and gas assets in Peru and it currently has controlling interests in three onshore Peru license blocks. No new funds being raised. Due 21 Dec. Mkt cap c.£80m Litigation Capital Management—provider of litigation financing and ancillary services, moving from ASX (ASX:LCA) to AIM. Offer TBC. Due 18 Dec. Mkt Cap A$64m. Crossword Cybersecurity PLC* (NEX:CCS)—the technology commercialisation company focusing exclusively on the cyber security sector is due to start trading on AIM 14 December. Raising £2m at 290p. Mkt cap at issue price £13.6m. Manolete Partners—leading UK insolvency litigation financing business looking to join AIM raising £16.3m as a placing and £13.1 realised by the selling shareholder at 175p. Market cap £76.3m, expected 14 December Greenfields Petroleum (TSX-V:GNF) production focused company with operated assets in Azerbaijan seeking AIM dual listing including $60m private placement. Mkt cap $12.6m CAD. Expected mid December.
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11 Dec 18
Acquisition – material EPS accretion
Tristel has acquired Ecomed (distributor for Benelux and France) for a maximum consideration of €6.8m (£6.0m), of which €5m is paid up front with the balance contingent on achieving a minimum of €0.8m of EBITDA in calendar year 2018 and revenue growth in excess of 15%. This is in line with the company’s strategy to have a direct sales presence in markets where possible. The maximum consideration represents c.2.1x and 6.8x prospective EV/Sales and EV/EBITDA respectively, and is expected to be accretive to EPS by 5% in FY 2019 (includes the cost of acquisition and integration) and 10 in FY 2020. We increase our target price by 7% to 300p, implying FY 2020 P/E of 24.0x and supported by 2-year CAGR EPS growth of 17%.
19 Nov 18
AIM Healthcare Index fell 10% in the past three months, compared with an 8.5% decline in the FT AIM All Share. The performance stats in the past month were more balanced, with AIM Health down 1.5% compared with a 3% decline in the AIM All Share. Despite this, ten finnLife 50 stocks showed positive gains with four rising by 15%+: namely Tiziana Life Sciences (+89% – FDA clearance to start Phase I trial with foralumab, an orally delivered antibody, and the announced intention to IPO on NASDAQ); Sinclair Pharma (+46% – agreed takeover); Omega Diagnostics (+28% – strategic update); and Creo Medical (+28% – product launch). Conversely, Diurnal shares fell c.80% on the back of a failed Phase III trial for Chronocort in chronic adrenal hyperplasia
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14 Nov 18
FY 2018 results – US update
Full-year results were marginally ahead of the July trading update. Revenue growth (10%), albeit at the lower end of target range, was affected by lower UK growth (+1%) but international markets (+19%) now account for 51% of revenues and EBITDA rose 16%. Clarity from the US FDA with regards the regulatory process for a high-level disinfectant has been received, and the revised process will delay the filing by six months. We still expect royalty income from Parker Labs in the US for its EPA-registered product in FY 2019. We make minor upgrades to our FY 2019 forecasts (+4% to EPS) and introduce FY 2020 forecasts for 12% EPS growth. Our 280p target price implies a FCF yield of 3.2%, although scope for upgrades from better than expected launch of SHOT should not be discounted.
17 Oct 18
D4T4 Solutions (D4T4): Corp Strong H2 lifts EPS forecast and quality of earnings | Lok'nStore (LOK): Corp Pipeline of new stores in an undersupplied market | Paragon Entertainment (PEL): Corp Trading update | Savannah Resources (SAV): Corp Mutamba mineral sands project update | Tax Systems (TAX): Corp Prelims on track | Tristel (TSTL): Corp EPA approval – on track to launch in 2019 | Utilitywise (UTW): Corp Legacy issues being dealt with | ZOO Digital (ZOO): Corp Further positive trading update
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23 Apr 18
Akers Biosciences (AKR): Corp US distribution agreement | ANGLE (AGL): Corp Detailed results of US ovarian cancer study presented | Bioventix (BVXP): Corp What a nice surprise! | Cambridge Cognition (COG): Corp Contract win | Premaitha Health (NIPT): Corp “321” patent update | Taptica (TAP): Corp Taptica’s transformational time | Tristel (TSTL): Corp US partner secured for ultrasound
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26 Mar 18
Small Cap Breakfast
Hydrominer GmbH, An Austrian cryptocurrency miner, is considering an initial public offering (IPO) on the London Stock Exchange AIM during 2018 according to an article on Bloomberg | 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 | 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.
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24 Jan 18
Small Cap Breakfast
Erris Resources PLC—a mineral exploration and development company currently focused on two geographic areas. Offer TBC, expected 21 December 2017 CIP Merchant Capital—Closed ended investment Company. Sector focus oil & gas, healthcare, pharma, and real estate. Offer TBA. Due 21 Dec Panthera Resources— The Company was established to act as a holding company for Indo Gold Limited, an unlisted Australian registered company. The Company aims to explore and develop gold assets in India and West Africa. Offer TBC, expected 20 Dec Sumo Group—one of the UK's largest independent developers of AAA-rated video games providing both turnkey and codevelopment solutions, including initial concept and pre-production . Offer TBC. Due late Dec Pelatro—provider of proprietary software solutions to enterprise-level customers for various aspects of precision marketing for use in B2C applications. Offer TBC, expected 19 December 2017 Fusion Antibodies—contract research organisation providing services to biopharmaceutical and diagnostics companies that are involved in the development of antibodies for both therapeutic drug and diagnostic applications. Offer TBA. Due Mid Dec. Sirius Petroleum—RTO. Becoming an operating company in the Ororo Field in Nigeria. Raising £7.2m/ Mkt Cap £35.6m. Due 19 Dec. Bushveld Minerals—RTO of Bushveld Vametco and therefore 78.8% of Strategic Minerals Corporation, the intermediate holding company that owns a 75 per cent. interest in the Vametco Vanadium Mine. Range Resources— oil and gas company listed on the ASX plans to admit to AIM on 13 Dec with mkt cap of £17.4m. Acquiring Range Resources Drilling Services Limited, an oil services business based in Trinidad & Tobago with extensive drilling capabilities. Eqtec—Company with access to a proprietary advanced gasification technology used in industrial size power plants to convert waste into synthetic gas to generate electricity. Raising £1.6m. Mkt Cap £8.7m. Due 21 Dec. Volex VLX.L—The global provider of cable assemblies is proposing to move from the main market to AIM on 19 January. £71m market cap. FYMar18E rev £241.5m and £7.19m PBT Miriad Advertising—Global video advertising company incorporated in 2015 and is engaged in the development of native invideo advertising. 2016 rev £0.7m and £7.3m operating loss. Offer TBA. Expected 19 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.
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12 Dec 17
The AIM Healthcare index has shown positive returns in all but three out of the past 11 years (2007, 2008 and 2011), growing at a CAGR of 7.6% over the period. This compares with a CAGR of -0.3% for the broader FT AIM All Share, +0.6% for the AIM 100 and +3.5% for its more senior FT All Share Health index. Sector growth and relative performance to the AIM All Share index has accelerated over the past five years; the sector having risen 19.19% CAGR since 1 Jan 2012. This compares with 6.8% growth in the AIM All Share and 6.1% in the FT All Share. This outperformance can be attributed to the increasing success amongst the Healthcare constituents which have progressed their business plans to a point where substantial value has been/is being created and where many companies have successfully scaled their businesses to sustain future growth. We highlight four companies that have different business models but exemplify the opportunities that are increasingly becoming evident within the sector.
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21 Nov 17
FY 2017 results – RoW now dominates
FY results were marginally ahead of July’s trading update, boosted by FX tailwinds and stronger-than-expected gross margins. Revenue growth of 19% was driven by overseas markets (+42%), despite intentional declines in non-ClO2 chemistry-based products. We make only minor changes to our FY 2018 forecasts, with EPS 2% higher than previously forecast and representing c.2% growth (+10% if adjusted for 2017 lower tax charge) during a period of higher investment ahead of the US launch expected in FY 2019. We re-introduce a target price of 275p, underpinned by a DCF analysis, which depends on the timing and success of the company’s entry into the US market.
19 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 year ended 31 March 2017. Totally to address Care Quality Commission concerns. Due 24 Oct. | 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, epected late October | ContourGlobal LP— contracted wholesale power generation businesses, with 69 thermal and renewable power generation assets in Europe, Latin America and Africa. In the year ended 31 December 2016 it generated $905.2 million of combined revenue and $440.4 million of Adjusted EBITDA. Raising c.$400m. Expected November | TI Fluid Systems—Maybe second time lucky? Pulled last October. global manufacturer of automotive fluid storage, carrying and delivery systems seeking to raise €425m to reduce financial leverage (to approximately 2.0x net debt to Adjusted EBITDA by the end of FY 2017). Possible partial sale by Bain. Revenue for FY 2016 was €3.3 billion and Adjusted EBIT was €362.1 million | M7 Multi-Let REIT—Intends to raise up to £300m at 100p. Aims to acquire and hold a portfolio of UK regional light industrial and regional office assets diversified by geography, asset type and tenants that is expected to generate stable income returns and, where appropriate, offer the potential to leverage and enhance returns through active asset management initiatives. Due 13 Nov | Bakkavor Group - Provider of fresh prepared food intends to float in November. FY 16 Revenue: £1,763.6 million FY 16 Adjusted EBITDA: £146.4 million (13.7% CAGR FY 14-FY 16). Part vendor sale and primary raise of c. £100m. Price TBA | Russia’s En+, owned by Russian aluminium tycoon Oleg Deripaska, has assets in metals and energy, including hydropower. reported to be seeking dual London and Moscow listing raising $1.5bn | TMF Group , which provides tax, admin and legal support services, reported to be seeking London IPO to raise c. £200m. | People’s Investment Trust—Objective of sustainable wealth creation. Also to list on the Social Stock Exchange. Targeting £125m raise on 17 Oct. No performance fees or executive bonuses in order to focus on long term rather than short term performance
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19 Oct 17
Revolution Bars (RBG): FY 2017 results (HOLD) | ScS Group (SCS): FY 2017 results (BUY) | Tristel* (TSTL): EPA results (CORP) | Firestone Diamonds (FDI): Recovery of 134 carat gem-quality diamond (U/R) | Independent Oil & Gas* (IOG): Letter of Intent for SNS platforms (CORP)
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03 Oct 17
Small Cap Breakfast
Alpha Financial Markets Consulting— Global provider of specialist consultancy services to the asset and wealth management industry. Due Oct. Revenue of £6.7 million for the year ended 31 March 2011 to £43.6 million for the year ended 31 March 2017. Offer TBA. Due 11 Oct. Cora Gold— West African focused gold exploration business, significantly enlarged by the amalgamation of the gold exploration assets in Mali and Senegal of Hummingbird Resources and Cora Gold's former parent, Kola Gold. Due 9 Oct. Offer TBA City of London Group (COLG) - Sch 1—RTO of Milton Homes Limited, an equity release provider which has a UK residential property portfolio of 586 properties with a market value of approximately £77 million as at 30 June 2017. Offer TBA. Due 5 Oct Springfield Properties—Scottish housebuilder. Intention to float. Offer TBA “Our turnover exceeded £100 million for the first time this year and now we employ around 500 people. This IPO is the next step in our growth.” 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.
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03 Oct 17
Topic of the quarter: Many recent news articles have highlighted the growing opiate addiction rates across the world, particularly in the US where new president Donald Trump has declared a national emergency with regard to prescription drug abuse. We look at the underlying trends in this growing space and potential opportunities for investors in the coming years both here in the UK and in the US.
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24 Aug 17
US market squarely in the cross-hairs
One golden rule of investing is not to ‘count chickens’. A prudent view that we’ve adopted when modelling Tristel’s application to the EPA/FDA to launch chlorine dioxide (Clo2) based infection, hygiene and contamination control products in the US. Whilst our approach is admirable, there is nonetheless a danger of us being too conservative for too long. Especially when, in Tristel’s case, the opportunity of accessing the world’s biggest healthcare market is now almost within striking distance.
19 Jul 17
Quartix* (QTX): H1 in line and lifting TP on strong fleet growth (CORP) | Tristel* (TSTL): EPA submission & US launch progress (CORP) | Sound Energy (SOU): Badile well update (HOLD) | 7digital* (7DIG): Forecast updates (CORP) | Trakm8* (TRAK): All about Big Data for the transport industry (CORP)
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03 Jul 17
Significant uptick in R&D output. After a very disappointing 2016, as measured by the number of new drugs approved by the FDA (23), we have seen 22 new product approvals year-to-date. We now expect the 2017 output to be above the 16-year median of 22 NDAs (New Drug Application) and 5 BLAs (Biologic Licence Application). As previously commented on, BLAs are expected to represent an increasing proportion of overall approvals. The most notable approval in the past quarter was AstraZeneca’s Imfinzi (durvalumab), not because of its use in metastatic bladder cancer but for its potential use as a first-line therapy in surgically unresectable Non-Small Cell Lung Cancer (NSCLC) following an interim analysis of a Phase III trial (PACIFIC), which showed a statistically significant increase in progression-free survival.
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30 May 17
Consistently strong growth at a sensible price
In “Alice in Wonderland”, Lewis Carroll tells the story of a girl, who falls through a rabbit hole into a world populated by peculiar, anthropomorphic creatures. Here, Alice crosses swords with the Queen of Hearts, meets the Cheshire Cat and is invited to the "Mad Hatters” tea party, which she subsequently discovers is “stupid”.
24 Feb 17
Interim results – adhering to international growth strategy
Interim results showed a strong performance for Tristel, 6% ahead of its AGM statement on 12 December at which it indicated adjusted pre-tax profits to be no less than £1.6m. Revenues increased by 22% (16% at constant exchange rates – CER or 12% CER excluding the impact of the Australian acquisition) and adjusted pre-tax profits were up 15% to £1.71m. Despite the strong half, we leave our full-year forecasts unchanged, given FX uncertainty and a one-off stocking order in H1 from the NHS, although at current FX rates the risk to our forecasts is considered to be to the upside. However, we raise our target price by 10% to 165p to reflect the solid progress as well as rolling forward our multiples to calendar-adjusted 2017.
23 Feb 17
Small Cap Breakfast
Ferrum Crescent (FCR.L) |FitbugHoldings*(FITB.L) | Tristel (TSTL.L) | EmpyreanEnergy (EME.L) | StatPro Group (SOG.L) | Global Invacom Group (GINV.L) | Monitise (MONI.L) | Koovs (KOOV.L) | IronRidge Resources (IRR.L) | BOS Global (BOS.L)
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23 Feb 17
Tristel has announced in its AGM statement that it expects to report first half adjusted (share-based payments) pre-tax profits to be no less than £1.6m. This compares with £1.5m in the 6 months to December 2015 and is in line with management’s expectations and stated strategic financial goals: (i) revenue growth within a range of 10% to 15% as an annual average over the 2016-19 period, (ii) maintaining a minimum pre-tax profit margin of 17.5% and (iii) distributing cash that is not required for the operational and investment needs of the business to shareholders in the form of dividends. Our forecasts for the full year are for adjusted pre-tax profits of £3.6m, and include a contribution from the acquisition of its previous Australian distributor for its Wipes System from 21 July 2016 (ie 11 months contribution in the full year). Our forecasts also include £0.5m of US development expenses for the full year (incremental £370k), which impacts margins by c190bps. We make no changes to either our forecast or target price; however, note that risks to both of these are on the upside.
13 Dec 16
Trading in line with expectations
In medieval times moats were built around castles to protect their inhabitants. Today, they are used by companies to generate superior returns for their shareholders. However, rather than being constructed out of bricks and mortar, they are now based on intellectual property, brands, networking benefits and such like. The $64m question of course for investors is: “what price to pay” for these type of high quality business?
13 Dec 16
The prospect of Hilary Clinton creating an oversight panel with the power to impose a set of harsh enforcement rules to control aggressive pricing of pharmaceuticals in the US fell away with the election of Trump, leading to a 16% bounce in the NASDAQ Biotech index and an 8% increase in the US Pharma & Biotech index, some of which has already been given back.
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29 Nov 16
STM* (STM): Acquisition of London & Colonial (CORP) | Hurricane Energy (HUR): £70m placing and open offer (BUY) | Firestone Diamonds* (FDI): Liqhobong commissioning update (BUY) | Accsys (AXS): Acorn aiming to be a mighty oak – analyst interview (BUY) | Avacta* (AVCT): Act now… – analyst interview (CORP) | Tristel* (TSTL): Full year 2016 results – analyst interview (CORP)
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21 Oct 16
Walking the talk
Two traits that investors love about a company are predictability and execution. The former underpins confidence and lowers the risk premium, while the latter drives valuation. On both counts, we think Tristel scores favourably, with the stock rallying from 20p in April 2013 to 160p today – equivalent to a 700% capital gain, supplemented by 14p of dividend income.
17 Oct 16
A strong FY 2016
Full-year results were ahead of July’s trading update, boosted by a year-end Fx benefit and stronger than expected gross margins. Revenue growth of 12% was driven by overseas markets (+22%) and assisted by a stronger UK performance in the second half. A broader and deeper strategy for the US market, including the registration of surface and water disinfectants with the EPA, is now being pursued, with expected launches in FY 2019. We have increased our target price to 150p to reflect a 6% EPS upgrade to 2017 earnings and introduced a 2018 forecast, calling for EPS of 7.0p.
17 Oct 16
Avacta* (AVCT): Act now (CORP) | Tristel* (TSTL): A strong FY 2016 (CORP) | Bioventix* (BVXP): FY 2016 results (CORP) | Elecosoft* (ELCO): SaaS model strengthened through acquisition (CORP) | Lok’nStore* (LOK): NAV up 28% (CORP) | Omega Diagnostics* (ODX): Mid year trading update (CORP) | Mortice* (MORT): Positive trading update (CORP)
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17 Oct 16
Australian product approvals
The company announced that it has received regulatory approval for two surface cleaners from the Australian Therapeutics Goods Association. This follows the acquisition of its Australian distributor's business in July, thereby broadening its product offering to include Tristel Fuse and Tristel Jet. We have made minor changes to forecasts, raising EPS by 1.8% to 3.59p for FY 2017. We are raising our target price to 140p to reflect these changes and likely acceleration of growth in FY 2018. At this level, the stock would trade on FY 2017 EV/EBITDA and PE of 12.1x and 21x, respectively; justified in our opinion by the rising post-tax ROCE.
12 Sep 16
Rude Health - Life Sciences quarterly sector note
In light of the Brexit vote, we reflect upon the implications for the NHS and the wider healthcare industry. We take a pragmatic approach to how the referendum result will affect staffing, recruitment, clinical trials, drug pricing and small company grant funding in the coming months and years.
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30 Aug 16
Excellent H2 and ahead of forecasts
The cream ultimately rises to the top, or so that is the case with Tristel. You see, despite fears over the global economy, NHS budgetary constraints and BREXIT, the company this morning said that it had enjoyed a “very strong” 2 nd half – reporting H2 revenues of >£9m, up 13.5% YoY. Better still, FY16 adjusted PBTA (pre SBP and unrealised forex gains) and net cash came in above expectations too, at £3.1m (+20% vs £2.6m LY) and £5.7m (vs ED at £4.5m) respectively - driven by an outstanding performance from overseas (42% of H2 sales vs 36% in H1), augmented by an encouraging rebound in UK Healthcare following a slight decline in H1.
21 Jul 16
Berkeley Energia (BKY): Initiation of coverage: Clean fuel for Europe and beyond (BUY) | Constellation Healthcare* (CHT): Strong trading confirmed (CORP) | 7digital* (7DIG): H1 trading update highlights momentum (CORP) | Tristel* (TSTL): Trading update, acquisition and special dividend – new forecasts (CORP)
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21 Jul 16
Underlying H1 PBT jumps 35% to £1.5m
After January’s wild swings on the FTSE, RBS’ erudite analysts advised their clients to “sell everything except investment grade bonds”, warning that 2016 would be “cataclysmic”. Blind panic, though, is not the answer. Long term investing is all about building a diversified portfolio of quality names at attractive prices – each being able to deliver predictable earnings across the economic cycle.
24 Feb 16
Interim results – focus on high-margin revenues
Interim results were slightly ahead of January’s trading update/AGM statement. Revenue growth of 8% was driven by overseas growth of 21%, offsetting c1-2% growth in the UK. The balance sheet is healthy, with £4.3m net cash, despite the payment of a 3p special dividend (£1.2m) in the period. We are reducing 2016 and 2017 EPS by 3% and 21%, respectively, to reflect the increased R&D investment (£0.45m) expected to secure US approvals. Our 110p price target remains unchanged despite these changes.
24 Feb 16
Plenty more left in the tank
‘Running winners’ is a successful strategy for generating wealth. The difficult part of course is buying those high potential stocks at the right price, and then being prepared to stick with them over the long term. One good hunting ground is in Healthcare - especially for those companies that are globally scalable, deliver double digit top line growth and enjoy strong patent protection. Tristel possesses all three, along with high recurring revenues and predictable cashflows.
15 Dec 15
British innovator going global
Britain often gets unfairly knocked for all sorts of things – lack of manufacturing, uncouth behaviour, the weather and even the food. However, what cannot be denied is that we are a nation of great inventors – coming up with marvellous ideas such as the steam train, jet engine, internet, lightbulb, TV, telephone and many more.
12 Oct 15
Tristel comfortably beat our forecasts for the year ending June 2015, with sales, EBITDA (adj.) and PBT (adj.) ahead of expectations by 2.4%, 5.0% and 14.1%, respectively. Dividend per share for the full year increased to 5.7p (FY 2014A: 1.6p), including a special dividend of 3.0p per share. Net cash increased from £2.6m to £4.0m. We are upgrading our sales forecasts for FY 2016 by 6.1% and our PBT (adj.) forecast by 12.3%. We are also raising our target price to 110p from 90p. Based on our FY 2016 forecasts, this would place Tristel on an EV/Sales of 2.4x, an EV/EBITDA of 10.7x and P/E of 20.9x, whilst still yielding 2.5%.
12 Oct 15
Buoyant trading driving adj. PBTA up 39%
This morning, despite being impacted by geopolitics in Russia and forex headwinds (ie higher £ vs € and EM currencies), Tristel reminded investors once again the resilience, strength and underlying momentum behind its business. Saying that both revenues and profit were ahead of budget for the 10 months to 30 April 2015 – and raising adjusted FY15 PBTA expectations to at least £2.5m (£1.4m H2 vs £1.1m H1), or +39% up on last year’s £1.8m.
21 May 15