Quarterly Research Outlook Autumn 2019
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.
INDI ABBY AMS ANX ARS ATYM AVON BLVN PIER BUR CGS CAML CDM CSRT TIDE CYAN DTG DEMG ELM EMR FPO FDEV GTLY GENL GHH GRI GEEC GKP HMI HAYD HEAD HILS HTG HUR IBPO IOG JHD JOG KAPE KEYS KWS KCT KGH LAM LIT LOK MACF MANO MOD OXIG PCA PANR APP ESRE PHC PMO RBW RMM RBGP REDD RSW RNO ROR SUS SCPA SEN SHG SOLG SOM SUMO TM17 INCE TWD TRAK TRI VNET VTC ZOO ZTF
21 Oct 19
FY 2019 results
Indus has released its FY19 results, which are mildly ahead (~4%) of our forecasts at the EBITDA level, showing strong operational cash flows and good progress on the key pipeline. We make a number of changes to our forecasts (outlined on pg. 2) and reiterate our Buy recommendation.
27 Sep 19
Quarterly Research Outlook - Summer 2019
In January, we provided a list of 11 stocks for 2019 that we believed would perform strongly with attractive catalysts that could lead to material outperformance. In this Quarterly Research Outlook, we revisit these views, analysing what has happened and how the remaining six months of the year could play out.
INDI AMS ANX ARS ATYM AVON BLVN PIER BUR CGS CAML CALL CSRT TIDE CYAN DTG DEMG ELM EMR FPO FST GTLY GENL GRI GEEC GKP HMI HAYD HEAD HILS HTG HUR HYR IBPO IOG JHD JOG KAPE KEYS KCT KGH LAM LIT LOK MACF MANO PCA PANR PXC PHC PMO RBW RMM REDD RSW RNO RKH RBGP ROR SUS SCPA SHG SOLG SOM TWD TRAK TSG TRI VNET VTC ZOO ZTF
23 Jul 19
Quarterly Research Outlook
We’re just over three months in to 2019 and we’ve seen a 10% UK market rally, retracing much of the Q4 decline, such is the nature of fickle market sentiment. That said, many of the issues we wrote about three months ago that were impacting markets remain: notably Brexit, trade wars, geopolitics and global monetary policy. The 2019 rally thus far feels somewhat fragile, with competing forces of optimism on a potential trade deal which could underpin the rally, against the deterioration in underlying economic data that could ultimately undermine the recent market gains. In this context, we look at what the lead indicators and the market are telling us about the industrial cycle and the stocks most exposed to various industrial trends. The Q4 derating in short cycle industrials and autos had been vicious and while these sectors have seen a more solid footing in 2019, with earnings downgrades being priced in, it will likely take a trough in lead indicators before short cycle stocks can start to perform again and re-rate relative to the market.
INDI ARS CYAN HYR LIT SOM ABBY AMS AMER ANX ATYM AVON BLVN PIER BUR CGS CAML CALL CSRT TIDE DTG DEMG EMR FPO FST GTLY GENL INCE GRI GEEC HDY HMI HAYD HEAD HILS HTG HUR IBPO JHD JOG KEYS KCT KGH LAM LOK MACF MNO MANO MOD MKLW OXIG PCA PANR APP PXC PHC PMO RBW RMM REDD RSW RNO RKH RBGP ROR SUS SCPA SHG SOLG TRAK TRI VNET VTC ZOO ZTF
11 Apr 19
Quarterly Research Outlook
The market has not faced quite so many conflicting challenges for a number of years, whether related to global geopolitics, trade wars, ongoing Eurozone issues or the “will they, won’t they” saga of Brexit. In our Best Ideas, we sought to highlight stocks that present investors with interesting opportunities following recent market moves. Those stocks, we believe, warrant investor attention, in many cases for uncorrelated or stockspecific reasons, regardless of the near-to-medium term market direction. These stocks, in general, represent attractive and well-managed businesses or assets, with share price catalysts and where valuations or recent stock performance provide investors with a good entry point.
INDI 7DIG ABBY AMS ANX ARS ATYM AVON BLVN PIER CGS CAML CALL CSRT TIDE DTG DEMG ELM EMR FPO FST GTLY GENL GRI GEEC HDY HMI HAYD HEAD HILS HTG HUR IBPO IOG JHD JOG KEYS KCT KGH LAM MACF MOD MKLW OXIG PCA APP PMO RBW RMM REDD RSW RNO RKH RBGP ROR SUS SCPA SHG SOLG TWD TRAK TRI VNET VTC ZTF
31 Jan 19
Quarterly Research Outlook
The June IPO of Knights Group Holdings, a Top-100 regional law firm, marked the fifth entrant to the burgeoning UK-listed legal sector. Following recent expansion of our coverage across all five listed legal firms, complemented by coverage of three broader support services peers with exposure to the sector, we revisit and build upon our views on this rapidly evolving sector.
INDI ARS GTLY GENL KEYS KGH MNO RBGP TWD 7DIG ABBY AMS AMER ANX ARS ATYM AVON BLVN PIER CGS CAML CALL CSRT TIDE DTG DEMG ELM EMR FPM FPO FST GTLY GENL GRI GEEC HDY HMI HAYD HEAD HILS HTG HUR IBPO IOG JHD JOG KEYS KGH LAM MACF MNO MKLW NAH OXIG PCA APP CAKE PDG RBW RMM REDD RSW RNO RKH RBGP ROR SUS SCPA SHG SOLG TWD TRAK TRI VNET VTC ZTF
23 Oct 18
FY 2018 Results
Indus has released its FY18 results, which are in line with our forecasts on a total revenue basis and continue to show good operational cash flows. Of significance, the company has confirmed that the Petroleum & Natural Gas Regulatory Board (PNGRB) have invited bids for laying the planned Langtala-Bhilwara pipeline, which once connected, will facilitate increased capacity for gas production, and give Indus access to India’s national gas pipeline network. We see this as being very good news for the company, representing an extra step towards progression of its wider development plans, and ultimately realising value from the 6.1tcf of raw gas resources within its RJ-ON/6 block. We await further news on this, as well as future updates on the development of the c.2000sq km area of SSG & SSF (to provide an additional 200mmcf/d of processed gas), which we consider to be key drivers for the stock.
01 Oct 18
GMP FirstEnergy ― UK Energy morning research package
Licences award the Santos basin in Brazil | Range Resources (RRL LN/RRS AU): Results for the year ending 30/06/2018 | Indus Gas (INDI LN) (not covered): 1H18 results | Ascent Resources (AST LN): Operational update in Slovenia | Serica Energy (SQZ LN) (not covered): Update on Rhum field in the UK | San Leo Energy (SLE LN) (not covered): Large shareholder transaction | Victoria Oil & Gas (VOG LN) 1,6; SPEC. BUY, £0.85: 1H18 results in line - Gross production had already been reported |
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01 Oct 18
Quarterly Research Outlook
In Q2, UK equities regained some of their poise after the draw down in Q1, although uncertainty around Brexit continued to grab the headlines. On the back of this, investor concern about the UK economy has been understandable in recent months given a number of negative data points. However, we see reasons for optimism for UK Plc with wage growth supporting an improving outlook for the consumer and business investment holding up. That said, continuing UK political disruption clearly remains a risk going forward.
INDI AMER EMR HMI JOG PDG ABBY AMS AVON BLVN PIER CGS CALL CSRT TIDE DTG DEMG ELM EMR FPM FPO GTLY GENL INCE GEEC HDY HMI HAYD HEAD HILS HTG HUR IBPO IOG JHD JOG LAM MACF MKLW NAH OXIG PCA APP CAKE PDG RBW REDD RSW RNO RKH ROR SUS SCPA SHG KCT TRAK TRI VTC ZTF
18 Jul 18
Further US$150m Singapore bond issue
Indus has announced that it has issued a further US$150m of bonds under its Singapore bond listing. The bonds pay interest at a fixed 8.0%, and are due in 2022. This follows the issue of US$74m of bonds under the same programme in April 2015, which themselves are due for repayment in April 2019. The total amount cleared for issue by the Singapore regulator is US$300m, meaning Indus may issue further tranches going forward.
14 Dec 17
FY 2017 results
Indus has released its FY 2017 results, which are in-line with our forecasts when all revenues are included, and show continued cash flow generation. Importantly, the results also report government approval of the development plan for the 2,000sq km area of the RJ-ON/6 block outside the additional producing SGL area, progression of discussions for a pipeline connection to the Indian pipeline network, and approval of the plan to take existing SGL production up to 90mmcf/d. Existing production from SGL provides helpful cash flow, but the key to realising the value of the 6.1tcf of raw gas resources on the block is further development phases and access to offtake markets. The wider development plan and pipeline connection could provide this (initially targeting an additional 200mmcf/d), and though exact timing remains to be defined, we await further news on this going forward as the key driver for the stock.
29 Sep 17
GMP FirstEnergy ― UK Energy morning research package
Phoenix Global Resources (PGR LN) (not covered): 1H17 results | President Energy (PPC LN) (not covered): 1H17 results | Indus Gas (INDI LN) (not covered): FY results for the year ending 31/03/17 | Lundin Petroleum (LUPE SS) (not covered): Dry hole in Norway | Petroneft (PTR LN) (not covered): 2017 results in Russia
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29 Sep 17
FY 2016 Results
Indus has released its FY 2016 results, disclosing that the long awaited development plan for the entire block (outside the already producing SGL area) was submitted in February. Government approval is pending, but once this is received Indus can proceed with the first phase of development outside the SGL area, targeting an additional 200mmcf/d during 2019. Offtake is to be via a pipeline planned to connect up to the national gas pipeline network, and discussions for this are progressing with third parties. Further development on SGL is also planned, with supply of a further 27mmcf/d to GAIL now expected in January 2018. This progression of development across the block is all encouraging. The FY 2016 results themselves show strong OCF of US$57.2m, though fall short of our revenue and profit estimates on lower gas sales and pricing than we had forecast. We have adjusted our forecasts for lower revenues but also lower depreciation and interest, driving increased P&L profits overall. Going forward we look for further updates on progression of development on both the SGL area, and also the wider block development and pipeline project, to continue supporting the strong share price performance seen already this year.
27 Sep 16
H1 FY 2016 Results
Indus has released its H1 results showing operating cash generation of US$27.2m in the half from SGL revenues and positive working capital, helping fund CAPEX on the rest of the company’s RJ-ON/6 block. Reported revenues leave ground to make up in the second half due to maintenance shut-downs at the offtaker power plant and an agreement on higher gas pricing yet to be reached. We have left our full year revenue forecast unchanged optimistic that this will be made up. Our earnings forecasts reduce for greater administrative costs and lower capitalised interest than we had expected. Indus continues with its development work drilling six appraisal wells and continuing long-distance pipeline negotiations. This is all aimed at submission of a full field development plan in Q1 2016 at which time we hope for greater clarity around Indus’s long-term plans for the 6.1tcf of gross raw gas resources its RJ-ON/6 licence is estimated to hold. We would expect this to be a key event for the stock.
21 Dec 15
Full Yr To 31 Mar Results
Indus has released its FY 2015 results showing growth in revenue and profits versus the previous year. Revenues were behind our forecasts due to the level of power plant usage from customer GAIL though PAT is in line on lower-than-expected interest. Based on this we have trimmed FY 2016 revenues though PAT remains largely unchanged. Indus has drilled 15 development and appraisal wells since April 2014 supporting the potential for increased gas sales and long term development plans for the block. A full field development plan is expected to be submitted by February 2016 and plans to connect to India’s emerging national gas grid via long-distance pipeline have also progressed. SGL already provides cash flows to support further development and the main route to value for the company is progression of development of the rest of the block. We expect another update at the H1 results before the end of the year and subsequently the development plan submission – both of which could provide catalysts for the stock.
22 Sep 15
US$74m Bond Issue in Singapore
Indus has announced that it has issued SG$100m (US$74m) worth of three year notes in Singapore. These will pay a fixed semi annual coupon of 8% and settlement is expected around 23 April. As part of the process Indus has registered with the Singapore stock exchange to issue up to US$300m of bonds in total in multiple tranches allowing the company to return to the market relatively quickly to carry out further issues if desired. The statement discloses that Indus may utilise this in the coming years (subject to availability and terms) during which time we expect it to be continuing with development of its RJ-ON/6 block in Rajasthan.
21 Apr 15
Indus has released a new CPR update from Senergy on its RJ-ON/6 block in Rajasthan. Key here is the increase in gross 2P reserves from 573bcf to 872bcf of raw gas based on further work at the producing SGL field and addition of reserves elsewhere including the new SSM discovery. 2C resources are up from gross 2.7tcf to 3.3tcf based on drilling of further wells since the last report. There is also some welcome detail on further development phases focusing both on increased local sales but also, crucially, plans for subsequent development to include a long distance pipeline connection to India’s emerging national gas grid. This would help secure not only gas sales for current reserves but potentially open up a line that could hasten far more widespread commercialisation of contingent and prospective resources on Indus’s block by allowing the company to access a deep pool of gas demand in a country where supplies are very limited. Further detail around longer-term development should be available in due course but a long distance pipeline grid connection is a very important building block for this helping underpin the long-term value of the asset and the resources that it contains.
08 Dec 14
H1 Results and Declaration of Commerciality Approval
Indus has released its H1 FY 2015 results and also announced formal approval of its declaration of commerciality for an additional 2,000 sq. km development area on its RJ-ON/6 block. The H1 results show sales behind our expectations due to some intermittent outages at the power plant Indus supplies to. These have caused a reduction in our FY 2015 forecasts though FY 2016 remains constant. This should not detract from the declaration of commerciality approval which is an important step in hugely increasing the area of the block that Indus will be able to secure for the long-term. We look for this to be followed by a full development plan next year and subsequently a formal development licence. We also expect upcoming news from a new CPR. The declaration of commerciality approval helps underpin our valuation which is 1,504p risked going to 2,384p unrisked.
25 Nov 14
New US$180m Debt Facility In Place
Indus has announced completion of its new US$180m debt facility and drawing is in progress. This is to be a nine year facility with repayments beginning in July 2017. Interest is at a rate of 410bps over three month LIBOR marginally reducing the blended rate for Indus’s debt when its existing facilities are included. The new facility will be in addition to the company’s existing US$150m of facilities (which were fully drawn with outstanding repayments due of US$94.0m as at the end of September 2014) and is with a consortium of seven banks/institutions –four of which participated in Indus’s previous two debt raisings.
17 Nov 14