Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on Brady. We currently have 28 research reports from 4 professional analysts.
Clean Invest Africa—Introduction due around 14 Nov. Vehicle established to identify investment opportunities and acquisitions in renewable and clean energy projects/companies or alternative technologies that are used in a socially and environmentally responsible way that will aid the development of the African continent. City Pub Group - owner and operator of an estate of 34 premium pubs across Southern England. £30m raise. Consistent track record of strong revenue and EBITDA growth, with a three year CAGR from FY14 to FY16 of 34.9% and 44.8% respectively, and an EBITDA margin of 14.7% in FY16. Due late Nov. Offer TBA. Boku - Independent direct carrier billing company. Revenues were up 21% to US$10.2 in HYJun17. Q32017, revenues grew to $6.5m, up by 44%. The Company also saw continued growth across all of its key metrics: user numbers, total payment and a positive adjusted EBITDA for the month of September 2017. Due 20 Nov. Offer TBA. Ten Lifestyle Hldgs. Technology-enabled lifestyle and travel platform providing trusted concierge services to the world's wealthy. Net revenue increased from £20m in the year ended 31 August 2015 to £33m in the year ended 31 August 2017, a compound annual growth rate of 29%. Offer and date TBA. OnTheMarket—Intention to float on AIM to raise c.£50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m. OG Graphite, brownfield development-stage graphite company focused on the reactivation of its wholly-owned Kearney natural flake graphite mine and mill located 280 km north of Toronto, Canada. Offer TBA, expected mid November. Shefa Yamin minerals company focused on the exploration for precious stones in Northern Israel. Net Proceeds will be used to advance the Company's mining project. Offer TBA. Bakkavor—After being postponed on 3 November the provider of fresh prepared food has today set its offer price at 180p. Primary raise of £100m plus vendor sale in combination totalling 25% of enlarged capital. Mkt Cap c.£1bn. FY 16 Revenue: £1,763.6 million. FY 16 Adjusted EBITDA2: £146.4 million . Aviva Investors Secure Income REIT - Targeting £200m raise. Will invest in a diversified portfolio of high quality, long-lease commercial real estate assets located within the UK and leased to predominantly investment grade tenants. Due Dec. Cabot Credit Management -one of the largest credit management services providers in Europe and the market leader in the UK and Ireland with total 120-Month ERC of £2.2bn. Raising c.£195m. Offer TBA. Due November. M7 Multi-Let REIT—Intends to raise up to £300m at 100p. Aims to acquire and hold a portfolio of UK regional light industrial and regional office assets diversified by geography, asset type and tenants that is expected to generate stable income returns and, where appropriate, offer the potential to leverage and enhance returns through active asset management initiatives. Due 30 Nov. En+, international vertically integrated aluminium and power producer with core assets located in Russia. Priced at $14 per GDR. $1.5bn offer of which $0.5bn primary to pay down debt. Dual listing in Moscow. Unconditional dealings 8 Nov.
Companies: REAT GPX MMO APPS BOIL CGH MBO IOG IQE BRY
Brady’s H1 results reveal the initial impact of the group’s transformation. While revenues slipped, reflecting the planned shift to software rental, recurring revenue rose to 68% of total revenues, up from 60% a year earlier. The move into microservices is gaining traction, with three proof of concept trials taking place in H2. Four new licences were sold in H1, all on a rental format, of which three are hosted. With nearly four months remaining in FY17, the group has 93% of revenue in the bag, including several software renewals and services business. Given the attractive long-term growth opportunities in the E/CTRM space, we believe the shares look attractive on 14x our maintained cash-adjusted FY19 EPS.
While the H1 revenue decline (-11% to £13.2m) and EBITDA loss (-£0.9m) reflects the impact of organisational restructuring and the transition to a recurring revenue model, there are many positives to take from this set of results. Four new deals totalling £3.2m were signed on a recurring revenue basis, recurring revenue has grown to 68% of the sales mix (vs 60% in H1 2016) and proof of concept trials for microservices have been secured for H2. Management expects full year results to be in line with market expectations, hence we make no changes to our forecasts, recommendation and target price. We continue to view the current valuation (FY 2018 EV/EBITDA of 8.6x, falling to 5.3x for FY 2019) as highly attractive given the potential for accelerating revenue growth, significant margin enhancement and improvement in quality of earnings.
We have revised our forecasts following the newsflow over the last few months. While management has completed its strategic review, the transitioning process is continuing. The group has switched from operating on a divisional basis to global functions. The development team has been unified, and development work has shifted from platforms to ‘microservices’, so that new products can be leveraged across the group. Further, Brady is evolving to a recurring revenue model. We have cut our FY17 forecasts to reflect the current transitioning but forecast revenue and margins to improve significantly thereafter. Given the long-term growth opportunities, notably in agriculture, natural gas and power, we believe the shares look attractive on 14x our cash-adjusted FY19 EPS.
Brady (BRY LN) Building a platform for superior growth and margin | Devro (DVO LN) We see 3 key sentiment drivers for FY17 | EMIS Group (EMIS LN) In line prelims, investment in patient a short term drag | M&C Saatchi (SAA LN) 9.3% LFL revenue growth, 3% profit beat, dividend +15% | Northgate (NTG LN) Strategy refresh expected in June | Oxford BioMedica (OXB LN) Full year results; anticipate CTL019 launch later this year
Companies: SAA NTG OXB EMIS DVO BRY
Global Energy Development (GED.L) — To be renamed Nautilus Marine Services. Schedule 1 from developer and seller of hydrocarbons and related products. Reverse takeover. Raising $10.5m via a convertible. Expected 9 Feb. Eco (Atlantic) Oil & Gas—TSX-V listed oil and gas exploration has announced its intention to float on AIM. Assets in Guyana and Namibia. Proposed £2m-£3m fundraise. Diversified Gas & Oil—According to LSE website first day of trading on AIM now expected for 30 January.
Companies: 7DIG EHG FFX BRY EVG LTG DOTD MGR VLS NGR
In a brief trading update, Brady says that trading is in line with market expectations. FY16 saw of a lot of internal change, with a new chairman and COO while the CEO left the group. While commodity markets have seen some improvements, the backdrop remains challenging. The main focus over the last few months has been on improving efficiencies, including a shift away from the old divisions to global functions. We make no major changes to our forecasts and, given the strong balance sheet and scope for recovery, continue to believe the shares look attractive, trading on c 18x our cash-adjusted FY17e earnings.
Boohoo.com (BOO LN) Stronger growth outlook means further upside | Brady (BRY LN) Steady first half, but new management has plenty to fix | City of London Investment Group (CLIG LN) FY16 performance confirmed, benefiting from positive EM performance | EKF Diagnostics (EKF LN) Recovery taking shape | IPPlus (IPP LN) Disposal of call centre businesses to focus on secure payments | Murgitroyd Group (MUR LN) FY16 outturn in line; strong cash generation | Restore (RST LN) Strong period of growth and delivery
Companies: CLIG MUR EKF RST BOO BRY
BILLING SERVICES GROUP (BILL LN) | BRADY (BRY LN) | EKF DIAGNOSTICS HOLDINGS PLC (EKF LN) | GABLE HOLDINGS INC (GAH LN) | GATTACA PLC (MTEC LN) | REAL GOOD FOOD PLC (RGD LN) | RESTORE PLC (RST LN) | AFESTAY PLC (SSTY LN) | XCITE ENERGY LTD (XEL LN)
Companies: XEL BRY BILL MTEC GAH EKF RST RGD SSTY GAME
In another in-line trading update, Brady has reported that H1 revenues grew by 4%, which includes the impact from acquisitions (energycredit and ScrapRunner) and currency movements. New business was spread across the three divisions, with nine new contracts signed. The trading update reveals that the group is continuing to stabilise in spite of a tough commodities-related backdrop. The outcome for the year will depend on the busy Q4. We are maintaining our forecasts and continue to believe the shares look attractive, trading on c 15x our cash-adjusted FY17e earnings.
Brady (BRY LN) Q1 in line but traditionally busy Q2 will determine progress | Carclo (CAR LN) Exit from CDS; Focus on core divisions | Speedy Hire (SDY LN) Anticipating reassuring numbers tomorrow | Victrex (VCT LN) Highly reassuring interims
Companies: BRY CAR SDY VCT
A brief trading update issued alongside the AGM on Friday indicated that Q1 was in line with management’s expectations and highlighted further wins across the three divisions. While this is encouraging, the traditionally busy Q2 period will be key to determining a) the impact of recent fluctuations in underlying commodities markets on demand and b) the company’s subsequent ability to deliver on full year expectations. We make no changes to our forecasts or Target Price pending a further update on deal flow.
In an in-line trading update, Brady says each of the group’s three divisions have signed deals in the year to date. This includes the first new business from energycredit, which the group acquired in January. The brief trading update indicates that the group is stabilising after the difficult FY15, which saw business being deferred in the wake of the turmoil in the commodities space. Nevertheless, the outcome for the year will depend on the busier Q2 and Q4. We are maintaining our forecasts and continue to believe the shares look attractive, trading on c 14x our cash-adjusted FY17e earnings.
Brady had a difficult FY15, as turmoil in the commodities space resulted in business being deferred. Nevertheless, the commodities markets are showing signs of recovery and the commodities software sector benefits from broader business drivers such as regulatory changes while the sector remains underinvested in IT. Further, the group continues to use its position as a quoted company to consolidate the sector and in our view the acquisition of energycredit is a bold one, as it creates significant cross-selling opportunities and provides an opportunity to leverage energycredit’s offshore development facility. Hence, we believe the shares look attractive, tracing on c 12x our cash-adjusted FY17e earnings.
While the shares have sold off on headline earnings contraction and the removal of a yield attraction, investors should take reassurance from the fact that underlying forecasts remain intact. The key messages to take away from these results are that, while market conditions remain challenging, 1) earnings risk is mitigated by conservative forecasts, 2) there is upside revenue potential from the energycredit acquisition, 3) action has been taken to reduce costs, and 4) the new offshore development capability can be leveraged to reduce costs further. Diversification (across asset classes, into more robust markets like the US, and within the customer base) and increased scale are tools that management can use to move away from historic reliance on large licence wins. While the dividend attraction has been removed, a SOTP valuation (76p) underpins our Target Price of 71p (up from 68p).
Research Tree provides access to ongoing research coverage, media content and regulatory news on Brady. We currently have 28 research reports from 4 professional analysts.
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Apple announced yesterday that US optical components manufacturer Finisar (NASDAQ: FNSR) will receive $390m from its Advanced Manufacturing Fund. The award will be used to increase Finisar’s R&D spending and high-volume production of VCSELs. We had always expected Apple to dual source VCSEL components when possible, so we see the fundamental IQE investment case as unchanged on the back of the investment, however we are highly encouraged by the accompanying commentary on Apple’s Q4’17 VCSEL volumes. We believe that IQE is the only volume source of VCSEL wafers currently available. IQE was one of our key picks for 2017 and has served us well (+325%). With a recently strengthened balance sheet and further positive newsflow expected, we remain highly positive on the stock and retain our Buy recommendation.
On the back of the recent extremely positive newsflow, the group has raised an additional A$61m from equity to accelerate the development of the technology product and platform, expand global infrastructure and provide working capital headroom. Crucially, the contract award from a second OEM demonstrated that Seeing Machines (SM) has a credible DMS solution for the global automotive industry and is likely to win a significant share of a huge global market. Equity investors are now beginning to appreciate the scale of the opportunity and the true value of this business. To date, enthusiasm and valuation have been tempered by a relatively heavy investment programme for AIM and an obvious funding gap with likely dilution. We adjust our forecasts to reflect the post-placing investment; however, it clears that final hurdle and opens a path for SM to achieve its remarkable potential. We also highlight upside from a potential re-rating.
Companies: Seeing Machines
Since April, our growth style screen has performed very strongly, outperforming the main small-cap index by 20pp and 24pp on an unweighted and weighted basis respectively, also comfortably outpacing microcap. In this note we provide more detail on the constituent and basket performance in the period and present the new screen constituents. As usual we focus on 10 of the current constituents, providing brief summaries and financials for clients to consider. We will refresh again in 5-6 months time and report back on performance.
Companies: SUN DOTD ERGO TEF AVG SOG COR FEN LOOP YU/
SDL’s trading update confirmed that whilst its sales pipeline is in line with expectations, it remains reliant on the closure of certain software deals by year end without which 2017 adjusted EBITA will be below expectations. In addition, the greater automation in the business is allowing the group to reduce the cost base in 2017 (£3.5m exceptional costs) but the group will reinvest the savings in 2018 in premium solutions in fast growing verticals in order to maximise its opportunity. The net result is an underlying downgrade of 18%/23%/20% in 2017/18/19 in adjusted EBITA on a like for like basis. The group is now required to capitalise a small proportion of its R&D spend so the adjustments to forecasts are 7%/10%/13% if we include the benefit of capitalisation. Whilst these downgrades are disappointing, we believe the technology investments the group is making will lead to a highly optimised platform that will be industry- leading in what is a multi-billion dollar market. The group reiterated its commitment to deliver double digit revenue growth and mid to high teens margins over the medium to long term.
Idox has identified a small number of revenue items which it does not consider should be recognised in 2017 and now expect 2017 EBITDA to be c. £20m vs. the c. £23m it indicated at the time of its trading update in mid-November. These issues were identified internally and brought to the attention of its auditors by the company. This is clearly disappointing and we put our forecasts under review awaiting further details. The Board also announces that Andrew Riley is on sick leave due to illness and former CEO Richard Kellett-Clarke, has agreed to stand in as Interim CEO pending Andrew’s return. The group will need to rebuild investor confidence but we believe Idox has a valuable portfolio of products and services and a broad customer base generating good levels of recurring/repeating revenues. FY results are now expected to be announced in February 2018.
In the October edition of the Hardman Monthly newsletter, Chief Executive, Keith Hiscock analyses the much misunderstood – but highly important – issue of stock liquidity. In particular, he focuses on the lower echelons of the Main Market and of AIM.
Companies: OPM ABZA AVO AGY APH ARBB AVCT BUR CMH CLIG COS DNL EVG GTLY MCL MUR NSF OBT ODX OXB NIPT PHP PURP RE/ RGD SCLP SPH SCE TRX VAL
PRSM has released a trading update this morning and the strong momentum of H1 has actually increased. We are upgrading our revenue forecasts substantially and we are increasing our PT to 1750p from 1250p.
Companies: Blue Prism Group
RhythmOne has delivered a better result at the revenue, EBITDA and cash levels than indicated at the last trading update. This is encouraging given trading appeared slightly below our expectations. The core business is trading well with RhythmMax growing very fast (+25%). Perk also traded well (ahead) and the first two months of Q3 have been good and now there is just the largest month of the year to go. The only fly in the ointment is RadiumOne where the costs program is slightly behind. This means a c$2m hit to FY18 EBITDA estimates, reducing it to c$14m. However from a big picture perspective the step change in profitability this year is still on track and the Company is happy that RadiumOne will be on plan in FY19 meaning that our FY19 EBITDA expectation should hold up. With the drift on the share price this makes the valuation look obscenely low. The Company indicates that the YUME acquisition remains on track to close in Q1 2018, although we note this is not key to getting an attractive return on the stock. We maintain our Buy rating.
First Derivatives has announced that it has acquired Telconomics, a Madrid-based provider of telco analytics software, for a total consideration of up to €2.5m. This looks a sensible bolt-on acquisition that brings valuable domain expertise and complementary product in a target vertical. We have made no changes to our current year expectations, but increase FY 2019E revenue/EBITDA by £0.9m/£0.25m and FY 2020E revenue/EBITDA by £1.0m/£0.3m. This delivers EPS enhancement of c1% in both years and increases our target price from 4190p to 4222p.
Companies: First Derivatives
SQS has reached agreement on a recommended cash offer at 825 per share, which values the company at c£281m (c1.0x FY2017E sales and c10x FY2017E EBITDA). Indications of acceptance have been provided by 66% of the shareholder base. The acquirer is a bidco set up by Assystem Technologies, a European leader in outsourced research and development. The combined group will provide its customers with more automated processes to boost operational efficiency, meet evolving regulatory standards and remain competitive. We believe this is a sensible combination that leverages the two companies’ respective development strengths.
Companies: SQS Software Quality Systems
accesso unveiled a solid H1 last week, with 40 new customer wins across the group delivering 17% (10% organic est.) growth in revenue. Challenging weather conditions did limit accesso LoQueue revenue growth to an estimated 5%, but this was in line with our relatively cautious expectations ahead of the key (weather-influenced) summer trading period. Now that this period has been successfully exited, we have revisited forecasts and valuation. While we make no changes to our headline revenue and profit estimates, we do increase current year EPS to reflect a lower effective tax rate (20% vs 23%). The major driver to our target price increasing from 1747p to 2151p is the roll-forward of our base valuation year to reflect a full year contribution from the Ingresso and TE2 acquisitions. This increase, together with the expectation of improving earnings momentum, drives our upgrade from Hold to Buy.
Companies: Accesso Technology Group
We have refreshed our quality style screen for the first time since its inception in February this year. As before, the screen selects the 25 stocks exhibiting the highest quality characteristics according to our criteria from our universe of approx. 500 stocks and we have chosen 10 stocks to focus on. Since inception the screen has significantly outperformed the main small-cap index and marginally outperformed the microcap index. There was notable volatility around the UK general election, which is interesting as quality would usually be seen as a defensive style in large-caps. As expected, turnover of constituents is modest with only 9 leavers and joiners despite the extended time-scale since inception. We will refresh again in five to six months’ time.
Companies: WIL GHT AVON CHH ZYT DOTD MAB1 GTLY FCRM VANL
This quarter we use finnCap’s Slide Rule to provide both top-down and bottom-up analysis of the UK’s Technology and Telecoms sectors. Our findings are very reassuring: the Tech sector scores the best (across all sectors) when considering Growth and Quality – Taptica*, Frontier Developments* and dotDigital* in particular stand out on these metrics. Given these attractive characteristics and growth prospects, the Tech sector is unsurprisingly one of the most expensive – currently trading at 17.2x FY1 EV/EBIT and 23.8x FY1 P/E, versus 15.0x and 18.5x respectively for the wider market. Despite valuations appearing high, we believe there are value opportunities. For example, Proactis* features in finnCap’s QVGM+ portfolio (ranked 17/462) – the company offers attractive organic and inorganic growth, with earnings forecast to grow by 26% CAGR over the next two years, but despite this, only trades on 15x FY1 earnings and offers 8% FCF yield in FY2.
Companies: 7DIG ALT AMO ARTA BOTB BLTG CTP CFHL CYAN ISL DTC DOTD ELCO ESV FDEV GBG IDEA IDOX IMTK IGP IOM KBT KCOM KWS LRM MAI MMX NASA NET ONEV PHD QTX QXT RCN 932 SSY SEE SIM SPE SRT STR TAP TAX TEP TPOP TRAK UNG VIP ZOO
Bango has announced what is, in our view, a significant new payment route in Nigeria, giving 9mobile’s 17.2m subscribers the ability to charge purchases of digital content from the Google Play store to their 9mobile 9pay mobile wallet. The release follows the recent announcement with Victory Link in Egypt, but contains no details on the contract terms and we make no revisions to forecasts at this stage. With a growing mobile subscriber base, high Android penetration and low banking/credit card adoption, we continue to believe that Africa represents an attractive growth opportunity.
RhythmOne has announced H1 revenues of $114.5M (H12017: $66.8M), up 72% year-on-year, slightly ahead of the range given in the trading statement of $112-114m. Adjusted EBITDA of $3.1M, an improvement of $5.7M (H12017: $2.6M Loss), is ahead of the $1.5-2m range given in the recent trading statement. RhythmOne on-platform revenues of $44.4M (H12017: $35.5M), were up 25% year-on-year. The company closed the period with $39.3M in cash. We are reducing our revenue forecasts to reflect the decline in non platform programmatic revenues, and our EBITDA to reflect slower cost turnaround at RadiumOne, and we now expect a small loss at RadiumOne vs small profit in year to March 2018. We retain our Buy and PT770p.