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Election implications for the Industrial sector: The Conservative Party’s now stable working majority provides clarity, with the withdrawal agreement expected to be rapidly enacted. Status quo in most policy areas, except a stark change from a promised fiscal stimulus through higher spending on public services and investment programmes, which could kick-start activity. We see a recovery in consumer confidence boosting activity in the DIY and housing sectors, and greater infrastructure expenditure will also boost a number of construction-related industrials. While the sector participates in a Boris Bounce, we regard the recent strength of sterling cautiously, affecting international competitiveness and reducing the translation of overseas earnings, although it helps to reduce the price of imported raw materials. The renewed threat of a no deal Brexit has resulted in sterling giving up much of its gains.
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Aggregated Micro Power (AMPH): Corp Full-year results | iomart (IOM): Corp Interim trading update | Kingswood Holdings (KWG): Corp £80m capital injection suggests bright future | Maintel (MAI): Corp Appointment of CEO | Revolution Bars Group (RBG): Corp Significant progress. So far so good; much more to do
AMPH IOM MAI RBG
Full-year results show a significant trading increase on the prior year as the company continues to reap the benefits of the acquisition and restructuring of the Wood Fuels business as well as strong growth in Grid Balancing and Urban Reserve project developments, which are seeing favourable market trends and good traction in their project pipeline. The recent prior year non-cash balance sheet restatement was disappointing, though previously flagged. On maintained revenue forecasts but with higher costs, we reduce our FY20 EPS from 3.0p to 1.4p, with FY21 also cut from 3.6p to 2.7p.
Aggregated Micro Power
Post the group’s March period end, the company has made a further trading update ahead of its results, due before 30 September. It affirms previous expectations on revenues of £50m and a reported EBITDA loss of c£1.3m. Following the integration of the Wood Fuels business and an accounting review, it has announced that prior year stocks and receivables have been overstated by around £4.7m, resulting in Net Assets of c£13.3m in March 2018 and c£23.8m in March 2019. We have adjusted our net asset forecasts accordingly. Corrective action has taken place on systems and there is no effect on the 2019 P&L forecasts.
Aggregated Micro Power (AMPH): Corp Trading update, prior year accounting adjustments | Wameja (WJA): Corp Mastercard will explore multiple solutions
Aggregated Micro Power Wameja Limited
No-deal Brexit now the default: The change in the UK political leadership clearly signals that the likelihood of a no-deal Brexit has moved from 100-1 and now appear to be odds-on. Michael Gove recently confirmed that this should be regarded as the default position that we should all prepare for. Already, the new Prime Minister Boris Johnson has highlighted a number of new policies and spending projects, with a focus on high-profile infrastructure projects. The chequebook is open, with an additional £2.1bn of funding just announced. Deficit control and reduction is no longer the prime objective and Treasury funding will be used to ease the process of Brexit. We hope this may be a good news for those at the sharp end of international trade.
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Where are we in the cycle? There has been plenty of debate about what stage of the cycle we are in at present, and indeed the shape and duration of the current prolonged upcycle. We are, clearly in the more mature stages of the cycle and it is true to say that certain economic indicators have weakened. It currently appears that we are not heading into a downturn, or a recession, but rather a flattening-off in the global long up-cycle. The good news is that Chinese stimulus measures appear to be having some positive effects (recent Q1 data show GDP growth of 6.4% while industrial production rebounded 8.5% in March); equally, Sino/US trade disputes appear to be progressing towards being resolved, or at least ameliorated, which holds open the possibility of a relaxation of tariffs (or at least no additional ones). UK data continues to point to meagre growth, but this is being affected by Brexit. Growth remains lacklustre and the recent slight increase in PMI is related to additional Brexit buffer stock-building in March. The risk now is that the EU ‘flextension’ until the Autumn means that there is scope for some short-term destocking – which will cause a gap in some manufacturers’ orders. This lack of clarity and demand volatility causes production inefficiencies and makes business planning and forecasting more difficult, causing some to postpone investment decisions. The decline in business investment remains a serious issue for heavier, late-stage industrial equipment manufacturers and for longer-term UK competitiveness. This is especially the case given the revolution in manufacturing coming from IoT automation, robotics and other innovations such as electric vehicles/battery technology, 3D printing etc. If we fall behind in these areas, it will seriously damage longer-term productivity and international competitiveness
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Aggregated Micro Power (AMPH): Corp Warm winter hits Wood Fuels, Urban Reserve set to double | Avesoro Resources (ASO): Corp Q1 2019 operating results | IQGeo Group (IQG): Corp FY 2018 results and capital return
AMPH IQG ASO
The company affirms revenue and income (from project development) at £50m, with a statutory EBITDA loss of about £1.3m. A strong performance has been achieved in Urban Reserve and IncubEx, while Wood Fuels had a difficult year. For 2019, we therefore reduce our forecasts to an EPS loss of 3.9p. It reaffirms existing revenue and EBITDA expectations for 2020. Following recent restructuring, Wood Fuels is in a much stronger position, while Urban Reserve expectations have doubled in scale to a run rate of 100MWs pa. The positive effect of Urban Reserve outweighs Wood Fuels, increasing our sum-of-the-parts valuation from 135p to 156p, although in the short term the shares will reflect on today’s news and need to see some profit delivery coming through.
The attractiveness of Aggregated Micro Power Holdings (AMPH) to investors is the valuation as it continues to create value in the form of off-balance sheet ‘deferred carry’ interest in the distributed energy sector. This value is not captured in our earnings forecast but is included in our target price of 145p which we have upgraded from 136p. We maintain our BUY recommendation with AMPH trading at a substantial discount to the price target.
finnCap’s Industrials Brexit Survey. As Brexit is now only around 100 days away, we decided that – despite continuing uncertainties – it would be interesting to conduct a 10-question survey to investigate how management expects the small and mid cap Industrial sector to be affected by Brexit. We focused on what sensitivities they have to potential supply chain delays, raw material import prices, reductions in regulatory red tape and whether they expected changes to their ability to export to the EU, and if there are opportunities to boost trade with the rest of the world. Overall, 82% of companies responded that Brexit would be negative for their company with only 18% expecting no effect. Not a single company thought it would be positive. We hope that the survey responses will not only be of valuable insight to investors but also give company directors a broader consensus of how their competitors, customers and suppliers are all likely to react.
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Interim results confirm a step up in activity, with losses reflecting the usual summer seasonality in Wood Fuels as well as a lower level of completions in the company’s Project Development business. Winter trading combined with a streamlined operating brand will see a stronger H2 in Wood Fuels, and a stronger pipeline of completions in H2 is also expected in Developments. As such, trading is on track to exceed £50m of revenue. Following the £8.5m placing and conversion of CLNs, the balance sheet has been simplified and strengthened, with a year-end net cash forecast of £4.7m.
Aggregated Micro Power (AMPH): Corp Interims: on track for expected seasonally stronger H2 | Savannah Resources (SAV): Corp Project update – Portugal
Aggregated Micro Power Savannah Resources Plc
The group has announced two transactions that will improve the group’s liquidity and simplify the group’s financial structure. It has raised £8.5m via an equity placing and the conversion of its outstanding loan notes. The result is moderate EPS accretion in its first full year with the group moving from net debt of £12.0m to FY19 net cash of £5.6m. We believe investors should take these actions positively, being financially prudent but also enabling the group to pursue and accelerate additional investment opportunities over the medium term in the renewable energy sector.
AMP is rapidly developing a unique portfolio of diverse operations across the distributed power market where market forces and regulation are positive drivers for growth. We resume coverage of AMP on the publication of its FY results, confirming a significant year of change for the group with trading seeing a strong step forward. Strategically, it has cemented its market position in the supply of wood fuels. In biomass project developments, the link with AMPIL provides annual development fees and a progressively rising carried interest. The recent investment in IncubEx is also exciting with other new opportunities being evaluated in a rapidly changing market sector. We introduce a price target of 135p with 28% upside providing a strong potential investment return.
Aggregated Micro Power Holdings (AMPH) is emerging as a challenger utility presenting a unique investment opportunity. It is essentially an asset play offering exposure to a diverse stream of energy related revenues taking advantage of the fundamental changes in the UK energy sector as it strives to meet its legally binding CO2 emission targets. Revenues are forecast to grow from £19.7m in FY17 to £70m by FY21 and for EBITDA to reach £4m by FY21. In addition to earnings growth it is also creating value in the form of off-balance sheet ‘deferred carry’ interest. Combined, the earnings profile and deferred carry interest support our price target of 136p. We initiate with a BUY.
Avast, global cybersecurity provider with 435m users worldwide. In 2017, the Group's Adjusted Billings was $811 million, Adjusted Revenue was $780 million, Adjusted Cash EBITDA was $451 million. Seeking to raise $200m. Due in May | Fundamentum Supported Housing REIT. Raising £150m. Focussed on UK Social Housing assets. Due 2 May | Vivo Energy—retailer and marketer of Shell-branded fuels and lubricants in Africa, Due in May. 100% secondary sell-down of existing Shares by Selling Shareholders, No new Money. Pricing TBA | Gore Street Energy Storage Fund—Seeking to raise £100m for the purposes of investment in a diversified portfolio of utility scale energy storage projects. Due 03 May | Odyssean Investment Trust—Raising £100m at £1. Due 1 May. The Company will primarily invest in smaller company equities quoted on markets operated by the London Stock Exchange | Finablr - press reports in ‘Arabian Business’ that Money transfer firms UAE Exchange, Travelex and others under UAE billionaire Bavaguthu Raghuram Shetty’s newly formed holding company Finablr are preparing for a London IPO
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Aggregated Micro Power* (AMPH): Funding for first peaking power plant project (CORP) | The Mission Marketing Group* (TMMG): Positive trading update (CORP) | Cello (CLL): Increasingly backed by, and leveraging, technology (BUY) | 4imprint (FOUR): Growth backed by strong cash flow continues (BUY) | Allergy Therapeutics (AGY): Positive trading update and market share gains drive upgrades (BUY) | Shanta Gold (SHG): Q4 operating results (BUY) | Sound Energy (SOU): Tendrara extended well test result (BUY) | Revolution Bars (RBG): Price target increase (BUY)
AMPH TMG CLL FOUR AGY SHG SOU RBG
FY results show strong progress in the group’s boiler business and good sales growth in its recently acquired Forest Fuels pelleting and chip business. While results show an exceptional loss, this marks the group’s exit from gasification in its entirety. The group is now de-risked and simplified into a customer focused, profitable wood fuels business and into a projects business, which has already funded over £12m of biomass boilers and has a growing additional pipeline as well as exclusivity on a number of new grid balancing projects.
Aggregated Micro Power*: Full-year results (CORP) | Independent Oil & Gas*: Skipper drill confirmation (CORP) | BATM*: Adaltis given $58m valuation by partner (CORP) | Lombard Risk Management*: COLLINE gains traction in N America (CORP) | Keywords Studios: Balanced and poised to strike again (BUY)
AMPH BVC LRM KWS IO7
AMP has announced the conditional acquisition of Forest Fuels, a leading profitable biomass chip and pellet distributor. This appears to be a sensible acquisition as the company has strong synergies with AMP’s boiler and biomass strategy and provides profit and positive cash flow. The group has raised £5.8m via a combination of an equity placing and an 8% convertible loan note in order to fund the acquisition and working capital.
Aggregated Micro Power*: Acquisition and placing (CORP) | 4imprint: Substantial market share gain opportunity continues (BUY) | Penna: Recommended cash bid at 365p (HOLD)
AMPH FOUR PNA
The group’s interims results show trading still representing a low level of activity post start-up of operations at its Low Plains facility. Commercially, the group continues to advance its plans to develop both larger-scale projects, with Hill Barton and Kingsnorth being the front runners, as well as smaller-scale biomass boilers, thus generating development fees.
The group has announced its full-year results and an intended strategic partnership with Forest Fuels. We see this partnership as offering significant opportunities to accelerate the group’s growth. Progress continues on its CHP and boiler development pipeline that should result in a step-up in operations. Our forecasts and price target are therefore placed under review awaiting further newsflow in relation to development pipeline funding and the proposed strategic partnership with Forest Fuels.
Aggregated Micro Power*: FY results and strategic partnership (CORP) | Renold: FY results (BUY) | Scientific Digital Imaging*: Guidelines for protein contamination (CORP)
AMPH SDI RNO
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