R4E has released a Trading Update which states that it has made good progress in the year to December 2019 and revenues and EBITDA will be 'significantly ahead' of market expectations. This has been driven both by the continued positive performance of the group's existing operations and the successful integration of Sold Out and Buzz 16. We raise our PBT/EPS forecasts by +27% to £1.9m/0.10p (was £1.5m/0.08p) for FY19 and +5% to £2.3m/0.11p (was £2.2m/0.11p) for 2020. We view our 2020E estimates as highly conservative given the strong momentum across R4E, with a greater level of collaboration across the group. R4E finished the period with net cash of £2.75m. We note that the strong FY19 update follows on from a very robust set of interims that were also well ahead of our forecasts. We believe R4E has very strong momentum as it continues to expand into the broader area of live entertainment and in our view the shares offer compelling value. We retain our Buy rating and target price of 2.40p.
Companies: Reach4Entertainment Enterprises
R4E delivered very robust interim results that were well ahead of our forecasts. Gross Profit leapt +40% to £12.0m while Pre IFRS16 EBITDA nearly tripled to £1.2m vs DCe £1.0m. The turnaround of the existing R4E businesses has been successfully executed by the new management team, led by Marc Boyan, that joined the group late in 2017. Encouragingly, all areas of R4E have contributed to the turnaround and the pipeline is strong across the group for H2 and into 2020. The group had an active H1 corporately, with the acquisitions of Sold Out (arts & entertainment full service agency) and 50% of Buzz 16 (sports media production) that have broadened the group's marketing and media offering. We are maintaining our forecasts on an underlying basis and believe the group has very strong momentum as it continues to expand into the broader area of live entertainment. We believe the shares offer compelling value and we retain our Buy recommendation and target price of 2.40p.
Reach4entertainment has reported strong finals with adjusted EBITDA of £1.4m ahead of DCe £1.3m and 0.061p adj EPS vs 0.025p DCe. The Group has an impressive pipeline for 2019 alongside realising the highly complementary client bases of R4E and recently acquired Sold Out. We believe there is considerable scope for the enlarged group to cross-sell services and pool resources around each other's key competencies.
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
Companies: AAU IHC MDZ GMR R4E APC WEB HAYD 88E BPC
R4E has announced the acquisition of Sold Out, a leading full-service advertising agency that specialises in the arts and entertainment sector. Initial consideration of £4.19m will be part-funded by a £3.0m placing of 250m shares at 1.20p, with deferred consideration for the next three years to a total cap of £10m. We view the strategic rationale of the deal as compelling, with significant scope to cross sell services across the enlarged client base of R4E, which focuses on theatrical releases, and Sold Out, that serves live music festivals, comedy and sport. Further, there is significant potential to offer a broader range of services across the enlarged group, with R4E providing a fully integrated marketing and communications offering while Sold Out has particular strength in media planning and buying. In addition, we believe Sold Out's media buying will be significantly enhanced by tapping into R4E management's expertise. The transaction is materially enhancing and our PBT/EPS forecasts more than double to £2.0m/0.109p (was £0.9m/0.054p) for 2019E and £2.7m/0.138p (£1.0m/0.064p) for 2020E, the first full year of the transaction. This puts the shares on just 9x 2020E earnings, which we view as stand out value.
reach4entertainment has today provided an encouraging trading update for the year ended 31 December 2018. The Group expects to report 'full year adjusted EBITDA significantly ahead of expectations'. We have upgraded our FY18 and FY19 adj PBT forecasts by 50% and 12.5% respectively, and remain extremely confident in management's ability to achieve further operational improvements
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.
Circassia Pharma (CIR.L) - specialty pharmaceutical company focused on respiratory disease transferring from the Main Market. No funds being raised. Due 4 Feb. Mkt Cap c.£185m.
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 late January 2019.
Chaarat Gold Holdings—RTO, the Company intends to acquire Kapan Mining and Processing CJSC, which owns the Shahumyan medium-sized polymetallic mine in Kapan in the Republic of Armenia. No raise, market cap of £110.1m, due early Feb
Companies: JHD RNWH MPAY ERIS STM R4E ING TRMR RWI KDNC
reach4entertainment has today announced it is acquiring a 50% stake in Buzz 16 Productions Group ("Buzz 16"). R4e will work in partnership with Buzz 16's cofounder and sports broadcaster Gary Neville. We view this as an attractive acquisition enabling the Group to expand into sport and live entertainment. The acquisition will be satisfied through the Group's existing cash resources and management expects the acquisition 'to be earnings accretive in 2019'.
Reach4entertainment (R4E.L) today announced H1 2018 results outlining a strong win rate for 2019 and 2020 Broadway shows. As a result of the growing pipeline and greater future visibility, we upgrade our FY19E forecasts leading to 20% earnings growth on current DCSe. R4E is a cash generative business undergoing a management-led transition to improve margins and explore new growth opportunities. We remain confident in the Group’s long-term potential and reiterate our 2.0p target price and ‘Buy’ recommendation.
In a year of major transition, results for FY2017 came in ahead of our revised forecasts yet were significantly below the prior year outturn, primarily due to much weaker trading at the Group's largest business, SpotCo, against a particularly strong comparative in FY2016. SpotCo still has operational challenges ahead and this, together with expected initial losses from the start-up in Amsterdam, will negatively impact our forecasts for FY2018 which are now expected to be in line with FY2017 trading. With the attainment of a year-end net cash position for the first time in many years, the legacy of a highly leveraged balance sheet is now confined to history. This coupled with a new, ambitious and highly experienced management team suggests to us that there are significant opportunities for growth from FY2019 onwards.
reach4entertainment (r4e.L) offers investors a cash generative business undergoing a significant management-led transformation to improve margins in its existing businesses and explore new growth opportunities in similar verticals and new geographic markets. We initiate with a “BUY” recommendation and 2.0p target price.
reach4entertainment (r4e) has confirmed that the Group traded broadly in line with market expectations for the year to December 2017 and better business prospects, together with actions taken since the new management team was appointed in October 2017 all point to an improvement in Group profitability during 2018. It is clear that the Board envisions much broader horizons for r4e than its traditional theatre markets in London, Germany and New York as it seeks to exploit and expand the Group’s expertise in media and entertainment marketing. With a balance sheet strengthened by the recent £5.5m fund raise we believe that on a medium term view the current share price offers an attractive buying opportunity.
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
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. Offer raising £30m at 165p with mkt cap of £100m . Due 9 Feb.
Companies: NFC FEN OSI PMG R4E SNG GROW FLX BLV MLVN
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. | Springfield Properties—Scottish housebuilder. “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.” Expected 16 October. Offer raising £25m at 106p with marketcap of £87m. | 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 . | SolGold—Publication of prospectus regarding transfer from AIM. Due 6 Oct | 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.
Companies: GDP YGEN NAH REDX ANGS PTD JAY R4E
A quieter 2017, but growth to resume in 2018
Interim results for FY 2017 were lower than the comparative period. In mixed trading for the first six months, the Group reported stronger EBITDA at Dewynters and a very positive breakeven position for Dewynters Germany in its first year of trading. However, SpotCo, the Group’s US subsidiary, had a quieter half year compared to the exceptionally strong results achieved in 2016 while Newmans suffered from tougher market conditions in the UK. As a consequence, and in line with the trading update issued in August, our original expectations for 2017 are unlikely to be met and we are therefore downgrading adjusted EBITDA and EPS by 33% and 63% respectively. Pleasingly, the trading outlook for 2018 is more positive, particularly for SpotCo which has won the engagement for several new shows opening in 2018, and together with the expected benefits to be derived from strategic initiatives put in place over the past twelve months, should see a return to strong growth. We remain comfortable with our fair value of 2.5p.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Reach4Entertainment Enterprises.
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Kape’s recent Capital Markets Day (CMD) was an extremely useful update on the many benefits of integrating complementary acquired businesses (including the collaboration between engineering teams) and the opportunities for upselling that new product development brings. Over the last six months, Kape has proceeded with the integration of PIA, expanding the growth of new users through the application of the Group’s user acquisition knowhow and technology. It has also made further enhancements to its product offering which, inter alia, will improve user engagement and retention. This note looks to bring out the main points from the CMD and highlights the significant progress that has been made this year.
Companies: Kape Technologies
U.S. futures and European stocks dropped on Friday as investors mulled a reported conflict among policy makers over a stimulus package for the single-currency region, as well as political upheaval in France.
The Stoxx 600 Index fell after Bloomberg News reported the European Central Bank is facing a potential rift over how much their emergency bond-purchase program should stay weighted toward weaker countries such as Italy. The euro fluctuated following French President Emmanuel Macron's decision to name a new prime minister after asking his government to resign. Rolls-Royce Holdings Plc slumped after the British jet-engine maker said its exploring options to raise funds to strengthen its balance sheet.
The dollar was slightly down, posting its first weekly drop in a month, while American cash equity and bond markets were shut for Independence Day. President Donald Trump will attend an early July 4 celebration at Mount Rushmore with thousands of guests who won't be required to wear masks, while his U.K. counterpart Boris Johnson urged Britons to act responsibly as pubs prepare to re-open and the government lifts quarantine rules on travel for 60 countries.
The friction at the ECB highlights the risk to markets should promised stimulus measures fall short. Investors continue to weigh policy support and upbeat economic data against relentless new outbreaks of the virus. U.S payrolls figures Thursday fuelled optimism of a V-shaped recovery in the world's biggest economy, even as Florida reported that infections and hospitalizations jumped the most yet, and Houston had a surge in intensive-care patients. Emerging-market stocks posted the biggest weekly gain in a month.
Elsewhere, crude oil dipped but remained on track for a weekly gain.
Companies: TGL JSE IAE ADME BP/ DGOC ENOG NTQ NTOG PMO RBD ROSE RDSA UKOG TRIN
What’s new: Since 27 April 2020, when OnTheMarket started offering new “welcome contracts” almost 500 estate agent branches have signed up, with each business owner receiving welcome shares and over 60% either listing exclusively with OnTheMarket or on a “one other portal basis“.
We are introducing our Best Ideas for 2019 and also review the performance of last year’s picks. We suggest ten solidly financed stocks with good business dynamics that ought to be considered for core portfolio holdings and six UK domestically focused stocks that our analysts believe should perform strongly in the event that uncertainties unwind. We also introduce a new style of research from N+1 Singer which presents a Company’s dynamics and metrics in a clear and concise manner and concentrates on the pivotal issues affecting that Company and an investment decision.
Companies: BCA CLIN CLG CBP DNLM EAH STU FCRM FUTR GTLY INS GLE NICL SDL SPR TRI
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
A well-attended virtual CMD highlighted the continuation of attractive market dynamics within the Group’s core Data Privacy segment, as well as offering insight into PIA integration progression and the Group’s product roadmap. The launch of the Kape’s customer dashboard further improves customer experience (‘CX’), providing an easy-to-use interface and attractive upsell/ cross-sell optionality. We have taken the opportunity to introduce FY’22E forecasts on the back of the CMD, with strong customer retention and in-market consolidation improving the competitive landscape. FY’22E sales of $150m (FY’20E: $123m) are forecast to deliver adj FCF of $39m (FY’20E: $19m), generating a FCF yield of 8.4% in FY’22E. The Group has a number of levers for outperformance against conservative forecast KPIs.
Cello Health (CLL.L): Recommended Cash offer
Companies: Cello Health
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: OPM 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
Gfinity (LON:GFIN) is a world leader in the fast-growing market for esports. The company designs, develops and delivers full end-to-end esports solutions. This includes bespoke content, tournament and event solutions for commercial partners via the company’s proprietary online platform, live broadc
YouGov has updated on good H120 figures, with underlying revenue up 15% and adjusted operating margins increasing from 13% to 15% as the mix shifts further to the higher-margin Data Products segment. The group had cash of £27.2m at end January (lease liabilities only). With an online culture since the group’s inception 20 years ago, it is better placed than many to satisfy the increased desire to understand what is happening in populations by corporate and state at this time of uncertainty. We have reflected a more cautious outlook for the remainder of the year and will revert with FY21 estimates when the outlook is clearer.
Gfinity plc* (GFIN.L, 1.625p/£14.0m) | Blackbird plc* (BIRD.L, 16.5p/£55.4m) | Tern plc* (TERN.L, 11.5p/£31.1m) | The Panoply Holdings (TPX.L, 72.5p/£39.9m)
Companies: GFIN BIRD TERN TPX
What’s new: OnTheMarket plc (65% agent-owned and has almost 40% of independent UK estate and letting agents as shareholders) has released its January 2020 results revealing:
+ 32% rise in average branches listed to 12,497 (over 8,000 paying at year end; over 9,000 paying on 31 May 2020);
+ 12% rise in advertisers during FY20 to 13,364 (31 May 2020: 13,605);
+ 49% rise in mobile site traffic or portal visits to 237m;
+ 75% rise in average monthly leads per advertiser to 96.
We have refreshed our momentum style screen for the first time since inception on 26 July 2016. As before, the screen selects the 25 stocks exhibiting the most extreme momentum characteristics, according to our measurement method. From these we have selected 10 to focus on. Since inception the screen has underperformed both the main small-cap and micro-cap indices against a background of generally rising momentum. We have noted a subset of the basket, where decelerating momentum at the time of measurement appears correlated with significant share price falls since selection. We shall monitor this factor with the new screen, albeit there are only two such stocks showing this pattern, namely Lamprell (not rated) and Gear4music (not rated).
Companies: IQE SDY SUN ERGO NETD G4M GFIN ULS FUTR
OnTheMarket (“OTM”) is the largest majority-agent owned UK Property Portal. In its previous form Agents' Mutual, its agents with Board membership included SpicerHaart, Savills, Knight Frank, KFH, Strutt & Parker and Chestertons. OTM recognises that Agents’ listings provide the content for Portals to monetise, and Agents are the main source of Portal income. In recent years Agents’ shareholdings in the two large Portals, Rightmove and Zoopla, have fallen, while their prices have risen sharply. Duopolistic* pricing and reduced agent ownership within the two leading portals create the conditions for the next stage of OTM’s growth. OTM offers agents competitive prices with benefits of “mutual” ownership supported by external capital to fund marketing and growth plans. This includes use of 36.4m shares to attract agents with over 5,000 offices.
The Court of Appeal yesterday issued judgment “comprehensively” in favour of property portal owner OnTheMarket’ssubsidiary, Agents' Mutual, regarding all the competition issues in its legal proceedings against Gascoigne Halman, part of the Connells estate agent chain. While the non-competition issues relating to OTM’s claim remain to be resolved, we see this as a positive in terms of investor sentiment and allows senior management to focus more on the delivery of its growth strategy.