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Today's news & views, plus announcements from TSCO, AVON, BGO, MERC, BOXE
Companies: Bango plc
Pressure Technologies has announced that it has raised £7.5m through a Placing, via an accelerated bookbuild, and PrimaryBid offer at 60p/share, a 4% discount to the closing midmarket price on 27th November 2020. The net proceeds of the fundraise will be used to accelerate growth in the fast developing hydrogen market, build the group’s capability in Integrity Management and to strengthen the balance sheet. As Nomad and Broker to the fundraise we are restricted and can therefore provide factual comment only. The Placing and PrimaryBid offer are subject to shareholder approval at a General Meeting to be held on 17th December 2020.
Companies: Pressure Technologies plc
Boku has released a trading update confirming that EBITDA is likely to be ahead of consensus expectations for FY20. As most of the upside is due to COVID-19-related cost savings, we have upgraded our FY20 EBITDA and EPS forecasts by 10% and 15%, respectively. We leave our FY21/22 forecasts unchanged, pending a more detailed trading update in January that will cover the busy December holiday season.
Companies: BOKU, Inc.
Westminster Group has raised £5m of new equity to pay down debt and support organic growth from conversion of the current substantial pipeline of new potential Managed Services contracts. The Group's industry reputation and global profile provides it with significant high-value security project opportunities with visible recurring revenue, driving substantial multi-year earnings growth. We initiate with a buy rating.
Companies: Westminster Group plc
FY2020E has been a challenging year on a number of fronts and a significant loss is expected on revenues down 12% at c.£25m and also impairment charges of c.£14m. Nevertheless, the Group enters FY2021E in better underlying shape, with benefits to follow from reorganisation and restructuring, and investment in sales, engineering capability and systems. This provides a platform to capture growth, albeit that no recovery is expected in the next 12 months in the oil & gas market, now c.35% of FY2021E revenue. Efforts to diversify both its customer base and end markets have been successful, with growing opportunity in the defence, industrial and hydrogen sectors in particular. Our forecasts anticipate profitable growth in both FY2021E and FY2022E, leaving the shares on forward PERs of 21.8x and 12.1x for FY2021E and FY2022E respectively.
Gateley’s H1 update is highly impressive, confirming a year on year improvement in activity levels in September and October and a strong sense of optimism at the beginning of H2. The Platforms continue to drive new business, whilst operating margins have benefited from cost actions taken in response to the pandemic (H1 PBT will show growth year on year). In light of the confident tenor of the statement, we reintroduce headline forecasts this morning, assuming stable revenue this year - which would be a considerable achievement - with profits returning to pre-pandemic levels by FY23.
Companies: Gateley (Holdings) Plc
Keystone Law has announced a trading update indicating that the Group has performed well through the second half of the year and that like-for-like performance has returned to near pre-COVID levels. This results in the Group expecting to see results “comfortably ahead of current market expectations” for FY21 which we see as a strong message and reiterate our buy rating.
Companies: Keystone Law Group Plc
RBG Holdings has updated on significant transactions completed in the Group’s Convex and LionFish divisions since its last market update in mid-September. With the Group’s legal division – RBL – continuing to trade well, management now have considerably improved visibility on financial performance, and so reinstate guidance with an expected FY20E revenue range of £24m-£26m (FY19A: £23.7m). For FY21E we anticipate revenue in the range of £26m-£29m We take this opportunity to reinstate our forecasts for both FY20E and FY21E; revenues of £24.6m / £26.9m, adj EBITDA £6.8m / £8.9m, adj EPS 5.0p / 6.8p respectively. Our forecasts are cautiously positioned towards the bottom end of guidance, with scope for upgrades when discretionary litigation asset sales or Convex transactions complete. On our FY21E forecast of 6.8p adj EPS, a mid-teens multiple of 15x PER implies the shares could be worth 100p.
Companies: RBG Holdings Plc
WEY has delivered an impressive set of results this morning, significantly ahead YoY, meaningfully outpacing our expectations on the revenue, profit and EPS lines. With strong revenue growth of 38% feeding through to 103% EBITDA growth and adj. EPS up 100%, the inherent efficiency of the model, supported by rising student numbers, is manifest. Educating ‘3,000' students, WEY is larger than any UK secondary school. Moreover, while providing a collegiate, online education, WEY is a clear beneficiary both of long-running and fundamental drivers, and of the current Covid-focused environment. With the benefits of past investment effectively displayed in today's results, the company continues to do more to grow its platform, present and future, and has highlighted an ongoing commitment to investing in the business to provide further support for future profit acceleration. Our Fair Value assessment is 34p per share.
Companies: Wey Education PLC
Oxford University and AstraZeneca announced the first interim analysis from the Phase III study of its COVID-19 vaccine candidate, which was found to be 70% effective in preventing COVID-19. This follows similar announcements from Moderna, and Pfizer/BioNTech in the previous two weeks, and the caveats we mentioned at the time remain the same. While all of these results have been highly encouraging, we reiterate that they do not diminish the urgent need for COVID-19 treatments and testing, which will be required for years to come. We consider Synairgen, Avacta, genedrive, Omega Diagnostics and Open Orphan to offer good buying opportunities.
Companies: AVCT ODX SNG GDR ORPH
Rhino’s second series of 5-year bonds offers exposure to a private company with an enticing set of characteristics, combining significant growth potential with proven ability to deliver over a 40-year history. Having spent several years shifting its business model away from capital-intensive production towards closely controlled licensing, and then investing heavily in increasing exposure at the top level of international rugby, Rhino is in a position to generate significant free cashflow to service this 5.5% coupon and offer attractive growth potential, further strengthening debt serviceability ratios.
Companies: Rhino Rugby Bonds Plc
Yesterday’s trading update confirmed the work management has undertaken to transform Sureserve into a smaller, more predictable business has paid off. The performance through the challenges of COVID-19 has demonstrated the resilience of the business. We had trimmed our 2020 revenue estimate from £210m to £201m, but the improving margins result in PBT being nudged up from £9.1m to £9.3m. The gradual re-rating of the shares this year suggests investors are starting to buy in to the turnaround and the improving market position.
Companies: Sureserve Group Plc
FRP has delivered strong YoY growth in its first full interim period post-IPO. Despite subdued UK appointments this year, we see this as clear evidence FRP is taking market share. With little trading seasonality, FY21E forecasts look achievable. FRP is well positioned to service an expected increase in demand in 2021, as Government support winds down. We see upside to FY22E forecasts; a P/E of 15.5x that year fails to recognise this.
Companies: FRP Advisory Group Plc
Microsoft is using the Bango Platform to bundle Xbox cloud gaming subscriptions for telco partners to include in their subscription packages. The latest announcement contains no financial details and consequently we make no changes to forecasts at this time. Nevertheless, we believe gaming represents a potentially significant opportunity for the group. In our view, the release signals the deepening of the existing strategic relationship with a tech industry titan (Microsoft) beyond payments, and also demonstrates further commercial expansion of Bango’s bundling and resale offering into the leading cloud gaming service, including physical goods such as consoles.
Braemar’s associate AqualisBraemar (AQUA-OSL) announced an acquisition and equity raise yesterday that was very well received by investors. The AQUA share price finished the day up +25%, meaning Braemar’s stake (which is on the balance sheet at £7m) is now worth £13.4m. This provides increased support to Braemar’s valuation and a significant potential source of funds if the stake were to be realised in the future. In the meantime, it provides a useful and increasing source of dividend income (prior to yesterday’s deal, we had forecast £0.6m dividend income p.a.) and we continue to highlight the strategic progress the new management team at Braemar is making and the very significant valuation gap to closest peer Clarkson (December 2021 P/E 22x).
Companies: Braemar Shipping Services plc