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
RBG Holdings had H1 revenues of £12.0m, up 17% against H1’19, of which £11.7m came from the Group’s law firm, RBL. On a LfL basis (excl. £2m of discretionary gains from litigation assets in H1’19), Group revenues were up c.46% YoY. EBITDA of £2.6m offers still-compelling margins of 22%. Transaction delays in Convex and a period of investment in LionFish held back ST performance for these higher margin divisions, yet pipelines remain healthy for Convex. Management is bullish on its ability in H2 to divest litigation assets in order to fund new investment, and in line with strategy. Continued uncertainty over timings around Convex transactions completing, and COVID headwinds, means we keep forecasts withdrawn, however suggest an intrinsic value of 90p is comfortably achievable for the shares.
RBG Holdings pre-close trading update to June 30th confirms a strong H1 performance for RBL, the Group’s law firm, with revenues up 36% like-for-like to c.£11.4m YoY. Convex, the CF boutique, understandably has faced COVID headwinds, with most of its H1 pipeline deferred indefinitely, whilst Litigation Finance continues to grow its pipeline and financing commitments on a longer term view. Due to continued uncertainty from COVID we withdraw our forecasts this morning, with a view to reinstating once more clarity on H1 outturn and momentum into H2 is available.
We initiate coverage on RBG Holdings (formerly 'Rosenblatt'). The Group floated in May 2018 and has since evolved into a consolidator of high margin professional services businesses. Amongst its peers, the Group is the only to operate a 'hybrid model; it owns Rosenblatt “RBL” – a litigation-focused law firm, Convex – a sell-side CF boutique acquired in September 2019, and a nascent litigation finance arm. Exposure to contingent fees and litigation assets offers upgrade potential beyond forecasts, whilst the contentious nature of the core services provided should support margins and growth. The shares currently trade on a 4.6x FY20E EV/EBITDA multiple (7.5x P/E), with a dividend yield of 8.0%.
FY19 results – well positioned
Caribbean Investment Holdings. Incorporated in Belize . CIHL primarily operates financial services businesses through its subsidiaries The Belize Bank Limited and Belize Bank International Limited, both located in Belize and international corporate services through Belize Corporate Services Limited. CIHL shares are also traded on the Bermuda Stock Exchange. Lord Ashcroft holds 75%. No capital raise. Due 28 April. £36m . 2019 net profit US$ 10.7m
Companies: PANR TON PRSM TAM KMK RBGP LID MERC BARK TM17
Solid Trading Update
Trading Update Inline – Signs of life in the market
We update our model and forecasts following RBG Holdings’ interim results and the acquisition of Convex. Discretionary sale of participation rights in DBAs introduces a hedge against downside risk on forecasts, whilst upside risk exists in the group’s litigation funding and exposure to potential DBA/CFA wins – something we attempt to quantify. On new forecasts we set a price target of 145p (from 120p), and retain our Buy recommendation.
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.
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RBG Holdings (formerly Rosenblatt Group plc) released their interims for the six months to June 19, showing revenues of £10.2m, Adj EBITDA of £3.8m, and Adj EPS of 3.2p. As expected, the Group’s Dispute Resolution and Employment divisions have performed well in the current market, whilst Corporate and Real Estate have seen a slowdown. We are encouraged by developments in the Group’s litigation funding arm and we maintain our 120p PT. The post-period opening of a White Collar Crime division and acquisition of Convex, an M&A boutique supports the investment case. Buy
Rosenblatt has announced the acquisition of Convex Capital Limited, a specialist corporate finance boutique, for total consideration of £22m. In line with the Group’s acquisition approach, most of the consideration (c.60%) is to be paid in shares, and we highlight these are to be issued at a premium to the current share price (first tranche at 120p). The high margin (>50% EBITDA) profile of Convex should prove immediately earnings enhancing, and the opportunity for cross-selling and diversified earnings supports the investment thesis on the shares. We make no changes to numbers this morning. Re-iterate Buy.
AMRYT PHARMA PLC— a biopharmaceutical company focused on developing and delivering innovative new treatments to help improve the lives of patients with rare or orphan diseases have raised $60m before expenses and will relist on the AIM Market on the 25/09/2019. VAALCO Energy, Inc. (NYSE: EGY), an independent energy com pany focused on developm ent and production assets in West Africa, today announces its formal intention to seek a Standard Listing on the Main Market of London Stock Exchange ("LSE"), to complement its existing Listing on the New York Stock Exchange. Kaspi.kz, the largest Paym ents, Marketplace and Fintech Ecosystem in Kazakhstan w ith a leading m arket share in each of its key products and services, announces today the expected publication of a registration document that has been submitted for approval to the FCA and its potential intention, subject to market conditions, to undertake an initial public offering. Registration document approved for Helios Towers. The Group provides essential network services, flexible infrastructure solutions and reliable power supply to mobile network operators in five African growth economies. Revenue increased 7 per cent. year-on-year to US$191m (H1 2018: US$178m), with Adjusted EBITDA up 15 per cent. year-on-year at US$99m (H1 2018: US$86m) for the six months ended 30 June 2019.
Companies: ANG LSAI OVB ADAM OEX ODX MPE MWE SAV RBGP
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Bioventix reported a strong set of full-year results, that were 8% above expectations, assisted in part by a c.£0.2m (+3%) FX benefit, which helped offset the obvious drag on performance in Q4 due to the impact of COVID-19 on routine testing in hospitals. A 53p special dividend was proposed, resulting in a full-year dividend of 141p, up 18%. Due to the COVID-19-related disruption to testing, which only exacerbates the poor visibility to customer royalty streams, we are withdrawing forecasts until normality returns. That said, the business remains in very good shape, with evidence that: (i) high sensitivity troponin is gaining momentum; (ii) physical antibody sales growth remains robust (+34%); and (iii) progress in its development pipeline (particularly pollution monitoring programme) is being made. The business is expected to remain cash generative, and with c.£8.1m of cash at 30 June, the company is a strong position to weather this period of disruption before returning to growth.
Companies: Bioventix Plc
Positive update today, reporting that trading in FYJun21 has begun well. As a result – and also thanks to DOTD’s strong revenue visibility – revenue guidance is already being upgraded. Consequently, we lift FY21E sales by 6% to £53.0m, so now expecting +12% y/y growth. To put this into context, growth fell to +9% in 2H20. We find this rapid recovery to more typical growth levels highly encouraging. Guidance for profit and cash is reiterated, meaning we leave both profit and cash forecasts unchanged. Somewhat obviously, this requires us increasing our cost assumptions….and if these don’t fully materialise, provides upside risk. Cash continues to build, now £27.7m as at Q1 – we might expect this to be strategically deployed, to enhance what is impressively consistent organic growth.
Companies: dotDigital Group plc
ORPH has signed a contract with the UK Government for the development of a COVID-19 human challenge model. This will involve manufacture of the challenge virus and a first-in-human characterisation study. The contract begins immediately and is likely to be worth c.£10m. The government has also reserved the first three slots to test vaccines using the challenge study at a total cost of £7.5m. We revise our forecasts and increase our SOTP target price to 28p (range 25-31p), reflecting ORPH’s world-leading position in traditional challenge models, and now COVID-19 challenge models, with additional upside from the potential development of new challenge models, the monetisation of valuable challenge model data and the potential sale of its non-core pharmaceutical assets.
Companies: Open Orphan Plc
Open Orphan has announced a contract with the UK Government to develop and perform the UK's first COVID-19 (COVID) human challenge studies. The multi-faceted agreement provides strong endorsement and validation of hVIVO's capabilities, with material revenues driving forecast upgrades and further upside risk to earnings as pipeline conversion continues and industry awareness and penetration of challenge studies accelerates.
Companies: OPORF ORPH CRO VENN
This morning's announcement of another insurance client win caps a week of excellent newsflow from WATR. Since the company entered this colossal ($US13bn-plus) sector, strong insurance-derived growth has been achieved in this area, helped by WATR's status as the only national player to provide pinpoint services identifying water leaks while minimizing damage claims. Beyond this morning's announcement, this has been a week to remember for WATR, with a strong Q3 update on Oct. 14th generating c.8% '20 /'21 profit upgrades followed by the news at the start of the week of a successful fundraise delivering just shy of $US5m which can be put to work generating growth for the company and its shareholders. As the fifth such win, this morning's announcement is a reminder of the very good traction the company has achieved with the US insurance majors. Our 550p fair value estimate includes the annuity-style earnings stream from the franchise businesses in a Sum of the Parts structure. We note the company's conclusion that demand is high for its solutions and also the fact that WATR is an “essential service provider” in the Covid context. Beyond this morning's encouraging news, we also note the recent award of the Green Economy Mark from LSE and the company's consistent track record of 30%+ CAGR in recent years.
Companies: Water Intelligence plc
Verditek’s core lightweight solar PV business is positioned in an attractive secular growth market with strong regulatory and technological drivers. Recent management changes have resulted in the company focusing on sales execution and moving the business into the initial phase of commercialisation. With first orders for its solar PV modules already in place, the company should report its first revenues later this year. Recent contract wins in the oil gas and mining sectors will act as reference contracts for future wins in the off grid solar market. In addition to energy and mining, significant opportunities exist for Verditek’s lightweight and durable solar PV product in the marine, telecoms, residential housing, commercial real estate and transport sectors. From its plant in Italy, the company has sufficient manufacturing capacity to produce up to 60 MW per year of solar modules (based on triple shift production). The Paragraf joint development program (to produce a graphene integrated solar PV cell provides a source of substantial optionality within the solar business.
Companies: Verditek Plc
ANGLE plc (AGL.L): Acceptance of FDA submission | Feedback plc (FDBK.L*): Partnership agreement | Open Orphan (ORPH.L): Human Challenge Study Model contract with UK Government
Companies: AGL FDBK ORPH
Interim results to 30 June reflected a step-up in research activity post-June fundraise as it seeks to take its first pre|CISION targeted chemotherapy into clinical trials in early 2021. With period-end cash of £54.5m, Avacta has a cash runway into 2023, providing the necessary working capital to deliver a rapid SARS-CoV2 antigen test, take AVA6000 into the clinic, as well as its first Affimer immunotherapy and the next pre|CISION pro-drug into the clinic. Avacta is aiming to have validated its rapid SARS-CoV-2 antigen test in Q4 2020, the exact timing of which is dependent on pilot batch product from BBI Solutions. However, it is increasingly clear that there is a need for mass screening tests to isolate and remove infectious people, with Avacta’s test at the forefront. We have made changes to FY 2020 forecasts, introduce FY 2021 forecasts and a target price of 310p with a range of 211-796p.
Companies: Avacta Group plc
In a positive trading update, Elixirr has announced that trading continues to be strong, with September 2020 being another record revenue month, following previous records achieved in both June and July 2020. This outperformance has dropped through to profits with EBITDA (on an IAS 17 basis) now expected to be in excess of £8.75m. This is ahead of our previous forecast of £7.8m and we have upgraded by 12% to this level. As at September 2020 Elixirr had net cash of £16.8m (ahead of our previous December 2020 forecast of £16.0m). Cash conversion has clearly remained strong. We reiterate our view that the entrepreneurial culture and focus on helping clients build businesses, new products and client experiences are key differentiators, and very much in tune with client needs. We have raised our target price from 312p to 336p.
Companies: Elixirr International Plc
RELX issued a fairly sound 9 month trading statement despite the Exhibitions division remaining highly impacted by the current pandemic. More than 4/5 of the business are continuing to hold up well, which we consider a positive.
The FY20e outlook is unchanged for the three largest divisions while Exhibitions continue to suffer.
Some downgrade adjustments are expected to our forecasts, mostly due to Exhibitions, but we intend to reiterate a positive recommendation on the stock.
Companies: RELX PLC
Rentokil bounced back strongly in Q3 FY20, supported by a strong recovery in demand for its core pest control and hygiene services, and the ongoing need for disinfection solutions amidst the COVID-19 pandemic. Moreover, management sounded confident about the positive momentum to be sustained in Q4 FY20 and, hence, expects to meet full-year expectations and to announce a dividend during the preliminary results.
Companies: Rentokil Initial plc
The H1 results were well flagged in the 15th April update. H1 PBT is significantly ahead of last year at £1.3m (H1’19: £0.8m). Driver traded profitably through April to June. Whilst guidance is suspended, with the pipeline maintained, we believe the Group will continue to trade profitably through H2. As flagged in the H1 update, there is no interim dividend, with management seeking to preserve cash. The balance sheet is strong, with net cash of £3.3m at 31st March (improved to c.£5.5m post period end). We believe the medium term outlook is positive, with new CEO Mark Wheeler focused on improving profitability and growing the business. Delays in construction projects as a result of COVID-19 should support near term levels of dispute work, whilst an expected increase in infrastructure spending supports the medium term outlook.
Companies: Driver Group Plc
FY20 results reflect a year of trading in-line with earlier expectations, until being significantly interrupted in Q4/20 by the impact of Covid-19. Despite this, 1pm remained profitable throughout, despite accepting forbearance requests and prudently lifting bad debt provisions for the future. Post-period, there has been a noticeable pick-up in trading as the UK economy recovers, which 1pm is currently positioning itself for. A P/TNAV of 0.55x materially undervalues 1pm, hence we remain at “Buy”.
Companies: 1 PM 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
Bioventix delivered a strong set of interims, with revenues up 21%. Given the 9% decline in operating expenses, this resulted in a 31% increase in adjusted EBITDA, with adjusted pre-tax profit also rising 31% to £4.4m (52% of full-year forecasts) and adjusted EPS up 29% to 69.4p. An interim dividend of 36p was declared (+20%) with net cash at period end of £5.5m. Growth was driven by both Vitamin D antibody sales/royalties (+c.25%), its portfolio of other antibodies (+c.12%) and a more meaningful contribution from troponin. Given the inevitable disruption that COVID-19 will have to some testing volumes (although tests such as NTproBNP are likely to benefit from high risk COVID patients), we leave forecasts unchanged, confident that the strong H1 and weaker sterling in H2 should offset any potential H2 trading shortfall. We leave our forecasts unchanged and reiterate our 3750p target price. At this level, the stock would trade on a 30x FY 2020 P/E with a free cashflow yield of 3.1x