IQE’s revenues grew by 35% year-on-year during H120 to a record £89.9m, taking the group from a £1.9m adjusted operating loss in H119 to a £4.3m adjusted operating profit. We upgrade our FY20 estimates in line with management’s guidance. The resultant 15% revenue upgrade changes the outcome from a loss to £3.1m adjusted PBT.
Companies: IQE plc
IQE has announced that it expects H120 revenues to be at least £85m. This is 27% higher than H119 and a record first half performance. Despite this encouraging start to the year, we leave our estimates unchanged given the prevailing uncertainty regarding the impact of the coronavirus pandemic on global handset demand.
IQE has released its audited FY19 results following the comprehensive trading update in March. We leave our estimates unchanged after the 6% revenue downgrade in March since in IQE’s case the impact of COVID-19 on global handset demand is likely to be softened by gaining share in both the wireless and photonics markets. While the full effect of the coronavirus on the global economy and thus on demand for IQE’s epitaxy remains to be seen, management notes that Q120 was slightly ahead of internal expectations and the outlook for Q220 remains positive.
Yesterday’s trading update confirms that IQE’s FY19 results will be in line with the revised guidance it provided in November when the full extent of the impact of the US-China trade war became visible. We have cut our FY20 revenue estimate by 6%. In IQE’s case the impact of COVID-19 on global handset demand is likely to be softened by gaining share in both the wireless and photonics markets. However, the full effect of the pandemic on the global economy and IQE’s business remains to be seen.
The breadth of IQE’s technology portfolio and ability to serve compound semiconductor chip customers in the US and Asia puts it in a good position to benefit from rising demand for compound semiconductor applications for 5G and connected devices. The share price has been hit by the shift to Asian-centric supply chains caused by US-Chinese trade tensions, and resultant reductions to management guidance. Although the timing of a recovery is difficult to gauge, we see scope for earnings recovery as IQE secures additional contracts in Asia and leverages its IP portfolio into sustainable profit growth and cash generation.
IQE’s reduced guidance for FY19 revenues of £136–142m (vs £140–160m previously) reflects primarily the greater than anticipated disruption to its major US wireless customers as a result of the US/China trade war. There is good evidence to support a recovery in the medium term: the qualification of products and tools in the Asian supply chain for both 3D sensing and wireless RF is encouraging, while exposure to 5G remains attractive. However, the timing of a recovery is difficult to gauge and with Q120 expected to be seasonally quiet we downgrade our FY19 and FY20 revenue estimates by 5.3% and 15% respectively, with FY19 EPS reduced from a 0.5p profit to a 0.8p loss and FY20 EPS reduced from 2.3p to 0.3p.
Diploma (DPLM LN, £1.9bn) FY19 results (30/09) – u/l rev growth 5% y/y vs. +7% y/y in FY18; adj. operating margin +30bps y/y from stronger GM and cost controls; adj. PBT +14% y/y; DPS +14% y/y; outlook expects “moderately lower underlying growth” from political & economic uncertainty to be offset by strong acquisition contributions | IQE (IQE LN, £609m) FY19 trading update revises down rev guidance by ~7% (mid-point), expecting “mid-single digit adj. operating loss”; expects seasonally weak Q1 2020 but “cautiously optimistic about a return to growth” | Eddie Stobart (ESL LN, £269m) may receive £75m rescue package from former boss Andrew Tinkler, adding an alternative to last week’s Dbay offer (source: FT.com) | Pressure Technologies (PRES LN, £19m) confirms commencement of trial relating to prosecution by HSE following fatal accident in June 2015 | Chamberlin (CMH LN, £2m) H1 20 interims (30/09) reports 26% y/y fall in revenues; op. loss pre-restructuring increased from £0.4m to £1.0m; expect better H2 due to higher volumes from existing automotive customers; new contracts and higher selling prices but anticipate small loss for FY20
Companies: DPLM IQE ESL PRES CMH
Uber announced earnings Monday that beat analyst estimates on the top and bottom lines for its third quarter of 2019. But the stock fell as much about 5% after the company reported over $1 billion in net losses, topping its $986 million loss during the same quarter last year. The loss includes $401 million in stock-based compensation. Following the results, in an interview with CNBC’s Deirdre Bosa on Monday, Khosrowshahi (CEO) said the company is targeting adjusted EBITDA profitability in 2021. We believe Mobility companies will continue to struggle to convince the capital markets until investors see the model proven.
Companies: TRAK AMO CPX IQE MIRI QTX SEE TCM TRCS TRMR
Intel’s share price rose 7% on Friday, driving the Philadelphia Semiconductor Index to all-time highs. Intel’ stellar quarter was supplemented by improved guidance and bullish commentary from the management on the strength of demand from cloud service providers, underscoring the theme of an ‘insatiable demand for data’. The semiconductor cycle appears to be back, in spite of recent warnings from TI.
Companies: ENET CML IQE TCM
The recent run-up in semiconductor stocks hit a speed bump Tuesday afternoon that could turn into much more. Texas Instruments gave a forecast that was much worse than expected in a Tuesday earnings report, raising questions over whether the cycle is anywhere near the trough as was widely expected.
Companies: ENET TRAK BGO BOKU CAPX CML EQLS IQE SEE TCM TRCS QTX XPP FIN NETW
IQE has acquired the third-party shareholdings in its CSDC joint venture in Singapore for a nominal fee. This gives it control of the operation, which is currently loss making, enabling it to restructure the business and focus it on emerging sales opportunities in Asia for molecular beam epitaxy (MBE)-based products. Short term, the deal has a negative impact on earnings. We reduce our FY19 and FY20 EPS estimates by 8% and 5%, respectively.
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. Pricing rumoured at 115p to 145p implying valuation of up to $1.8bn. Expected Oct 2019.
Companies: OSI CTP IQE MTFB SENS AVCT TGP PMI CMCL JLH
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FY’20 results are slightly ahead of our expectations, and cap an excellent period with strong news flow. KidneyIntelX has now launched at Mount Sinai and is cleared to report results in all 50 US states. We continue to believe KidneyIntelX could represent the future standard-ofcare for early detection of chronic kidney disease progression and kidney failure in patients with Type II Diabetes, affecting an estimated 11m. Focus is now on building out the platform with expanded indicated uses, win national reimbursement and drive testing adoption. One significant catalyst ahead is Medicare coverage, which come as early as H1 2021 under new proposed rules. Whether or not this rule is finalised, the company is moving forward towards broader insurance payor coverage. In this note, we have refreshed our forecasts and valuation reflecting the deployment of IPO proceeds.
Companies: Renalytix AI Plc
An H1 update to September reveals a robust performance notwithstanding a challenging macro backdrop - sales (ex. Coral) are just “slightly lower” y/y, indeed if also excluding an intentional move away from hardware-based Support, we estimate core revenue grew c.+7%. This was underpinned by continued strong growth in US SecPay: +80% y/y, now ~32%/group sales, while in the UK, we estimate sales fell by c.-11%. Here, Covid impacted transactional sales (rather than any permanent loss of business) such that a future recovery is likely in our view. Despite the lower sales and GP, it‘s impressive to note profitability is expected to be in line with 1H20 (AOP: £3.4m) following tight cost management. Looking ahead, there’s reason to be optimistic, as in US SecPay, large enterprise tenders that were paused in H1, may resume in H2. Meanwhile in the UK – and despite the headline sales figure – business activity is already reassuringly strong: total new business won grew 8% y/y in H1, this includes the major £4m/6yr contract with Capita and TfL announced in August. In addition, closing net cash of £12.9m (£2m FCF) continues to offer strategic options. We reiterate that this a high quality company, with a robust and cash generative UK business, while leadership position in a nascent and fast growing US market.
Companies: Eckoh plc
Proactis has delivered finals to July in line with the August trading update, revealing EBITDA of £11.8m from revenue of £49.6m and pre-IFRS16 net debt of £45.1m (net bank debt of £37.1m). The focus remains on annual recurring revenue (ARR), total contract value (TCV), and bePayd, with positive news on all three: core ARR increased by 1.3%, TCV won in the period surpassed all previous highs despite COVID, and bePayd engaged with early adopters. While COVID has had an effect on sales cycles, the application of the UK and NL mid-market sales methodology across a consistent target market in France, Germany and the US has already demonstrated results with contract wins and the establishment of a record pipeline. The group has reshaped in favour of efficiency and visibility, delivering credibility with proof of execution and offering substantial upside. Target 80p reiterated, with a long run target of 180p applying reasonable peer group multiples to maiden FY22 forecasts.
Companies: PROACTIS Holdings PLC
Positive update today – reporting that as a consequence of recent SITS contract wins, careful cost management and the efficiency of remote delivery, TRB is tracking “comfortably ahead” of current profit estimates. As a consequence, we upgrade EBITDA and AOP to £14.8m and £11.5m, equivalent to 8% and 10% upgrades respectively. FCF is tracking better also, as implied by current net cash: £11.2m – already exceeding our FY20 estimate. Accordingly, we upgrade u/l FCF (i.e. ex the royalty dispute) to £5.7m. Also announced today - Q3 ARR now stands at £44.5m, up £1.3m on 2H20. While only using 3 months of data, we highlight that this run-rate equates to +12% annualised growth i.e. a significant step-up vs. the +3% y/y achieved to 2H20. To us, this is a clear reflection of how TRB’s on-prem SITS product continues to sell, TRB’s significant cloud hosting opportunity with existing customers and lastly, we’re also starting to see the financial benefits from Tribal Edge, as the first module went live earlier this year. In view of progress, we also make modest upgrades to FY21 estimates, whilst leaving scope for outperformance, should current momentum be maintained. On valuation, whilst the share price has recovered somewhat, TRB still trades on a 7% earnings yield or alternatively, just 2.7x ARR. On either metric, this looks attractive vs. peers…so would suggest TRB’s very real growth opportunities are still not priced in.
Companies: Tribal Group plc
Allergy Therapeutics (AGY.L): Initiation of field trial | Sensyne Health (SENS.L): Research agreement with Milton Keynes University Hospital
Companies: Allergy Therapeutics plc (AGY:LON)Sensyne Health Plc (SENS:LON)
GB Group (GBG) expects to report underlying revenue growth of 10% y-o-y for H121, with a one-off contract in the US making a material contribution to revenues. Combined with strict cost control this resulted in adjusted operating profit growth of 26% y-o-y and a £32m h-o-h reduction in net debt. With management guidance for revenue well ahead of our and consensus forecasts for FY21, we have upgraded our revenue and EPS forecasts for FY21–23. Despite COVID-19 related pressure on new business in the short-term, we view GBG as well placed to benefit from the accelerated shift in the digitalisation of business processes.
Companies: GB Group PLC
Microsoft has begun marketing LiveData as its ‘preferred solution’ to migrate Hadoop data into the cloud. The announcement represents a culmination of years of development work from WANdisco and finally proves beyond doubt the capabilities of its technology. As highlighted previously, we expect this launch to drive a significant uptick in financial performance. The exact timing and pace of this uplift is uncertain, but the company has reaffirmed the guidance given to the market at its interims.
Companies: WANdisco Plc
Gaming Realms is a creator and licensor of innovative games for mobile, with operations in the UK, U.S. and Canada. Flagship brand Slingo® is a highly popular and unique game genre which combines elements of slot, bingo and table gameplay. These games are licensed by some of the biggest online gaming operators in the world, including DraftKings, Sky Betting & Gaming and GVC, and distributed directly to operators or via global partners such as Scientific Games & Relax Gaming using the company's proprietary Remote Game Server platform.
Companies: Gaming Realms PLC
Mirriad Advertising’s H120 numbers show strong top-line progress, up 109% on H119 and 26% ahead of H219. H120 revenues were up over 185% year-on-year in China and Singapore, with market confidence rebuilding. There are very promising new agreements in place with US media owners, with early moves in large adjacent markets, such as music video. There are advanced negotiations ongoing with Tier 1 entertainment platforms. These prospects significantly increase the attraction of Mirriad’s proposition to advertisers. Cash burn is now under £1m per month, with end-August cash of £13.3m (no debt). Market forecasts for FY20–22 are unchanged.
Companies: Mirriad Advertising plc
Crimson Tide has reported a strong set of H1 results evidencing very strong sales momentum backed by long-term contracts and cash flow. H1 sales grew by 40% and EPS by 154%. Net cash has improved to £0.8m at June 2020 from nil at December 2019. The strategic focus on transportation and supermarkets is working well, partnerships are improving routes to market, and there is growing traction from investments in innovation. We have left our forecasts unchanged for now, but recognise positive pressure and have upgraded our target price from 3.1p to 4.3p. We reiterate our view that Crimson Tide’s valuation will be dictated by its ability to convert the significant opportunity rather than short-term metrics. H1 results show the group is nicely on track to do exactly that.
Companies: Crimson Tide Plc
LoopUp has announced a very strong H1 period, in line with the previous trading update and reflecting a number of months of exceptional performance. This is allowing the business to invest in the major identified new opportunity, to provide telephony within Microsoft Teams, where the early signs are extremely positive. We look forward to further detail on the Teams pipeline and sales levels over time.
Companies: LoopUp Group PLC
Gamesys Group’s Q320 trading update is ahead of expectations with pro forma revenue growth of 31% and an improved financial position. As in previous quarters, the company increased the active player base responsibly and benefitted from new game launches. We increase our revenue forecasts for FY20–22 by 5.7–7.0%, and EBITDA forecasts by a slightly lower 2–3% as management further invests in growing a sustainable and repeatable business, while ensuring revenue growth is done responsibly. This follows an EBITDA upgrade of 7.8% for FY20 at the time of the interim results. For FY21e, the free cash flow yield is 9.2% and the dividend yield is 2.9%.
Companies: JP7 GYS JKPTF
Q3 figures were broadly in-line with our estimates
Q4 guiding implies marginal changes to our estimates
Focus in the coming months should be a potential IPO of Bemobi in Brazil
Continue to view Otello as a break-up-case, could give additional upside
Companies: OS3 OPESF OTELLO 0FI5 OPERA
Otello’s Q3 figures were slightly below our estimates. AdColony was in-line with our estimates, while Bemobi came in slightly below. We continue to view Otello as a break-up-case, as its segments share no synergies, which could give potential upside to our target price. The focus in the coming months should be on the preliminary filing for an IPO of Bemobi in Brazil. We maintain our Hold rating but increase our target price due to AdColony.
AGM statement as expected; Resume with a Buy
Companies: CloudCall Group PLC