Hewlett Packard Enterprises is showing encouraging signs early after the takeover was first announced last year.
Companies: Micro Focus InternationalHewlett Packard Enterprise Co
The top 20 companies using the CF Growth Profile beat the bottom 20 by 16% pa over last two years
Whilst it's only early days, our users are already comfortably beating the market
Attractive corp tax regime, and dovish on energy, infrastructure, and bank regs
Software specialist saw revenues decrease due to divestitures and currency headwinds
Companies: Micro Focus International
HPE valued at 11.4x EBITDA, giving MCRO access to HPE's 50,000 customers
Companies: Micro Focus InternationalHP
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The ‘Moving Forward Act', the strongest automotive safety bill in decades, has now been passed in the House of Representatives. The bill is focused on advancing safety technologies proven to reduce crash and harm and to make sure strong safety standards are in place to save lives. The bill, which now needs to be passed in the Senate, will mandate automatic braking, lane-keeping, blind-spot detection, event data recorders as well as DMS in all cars and trucks sold in the US from 2024. This aligns with the European General Safety Regulation, which passed into law in November 2019.
However, in the EU, the European Association of Automobile Manufacturers (ACEA) has requested a 2‐year delay for the introduction of the 2022 Euro-NCAP protocols due to the projected lengthy time that will be needed to recover from the effects of COVID-19. Euro NCAP has agreed, and a delay is now expected to the 2022 and 2024 rating. The new dates will give automakers and Tier 1 suppliers more time to incorporate the necessary changes given the events of recent months with a number of manufacturers announcing 12 month delays to new models.
Companies: Seeing Machines
The FY 2020 results are in line with our expectations and reflect the impact of the previously announced switch from large perpetual licences to recurring annual term licences during the year. Despite the COVID strictures, with its large global partnerships, D4t4 continues to close numerous lucrative data gathering and data management contracts with major blue-chips around the world. It is successfully converting a high proportion of its new sales to recurring revenue contracts, but this will sacrifice growth and earnings in FY 2020 and FY 2021. Nevertheless, with growing recurring revenue base, an exciting pipeline and a very strong balance sheet, D4t4 is very well positioned for continued long-term growth and security.
Companies: D4T4 Solutions
ECSC Group plc* (ECSC.L, 71.5p/£7.2m) | Trackwise Designs plc (TWD.L, 90.5p/£20.0m) | Transense Technologies plc (TRT.L, 59.5p/£9.7m)
Companies: ECSC Group Trackwise Designs
Gresham continues to show strong progress in difficult times. 18% yoy organic growth in Clareti ARR is amongst the fastest growth of any UK software company. It is being achieved because Gresham has built a disruptive product that is now replacing incumbents at Tier 1 financial institutions around the world. These results underpin our FY20 EBITDA expectations. The implied valuation of Clareti’s ARR is <6x revs, which we think offers value for an emerging leader.
Companies: Gresham Technologies
SDL held an introductory session for the Group’s new SLATE proposition (launched in June). Good traction has been seen within the Group’s existing base presenting an attractive upsell opportunity, whilst also enabling expansion of the Group’s TAM with a market-leading, highly automated and immensely scalable solution. Management estimate SME and ‘off-grid’ translation projects to be a market worth in excess of $10bn, with SLATE allowing the Group to target these areas in a more meaningful way. The new product fits with SDL’s strategic objectives of building deeper relationships with existing customers and building leadership in Language technologies. N1Se conservatively forecast Language Tech segment revenue growth of +4% and +6% for FY’20E and FY’21E. Outperformance in FY’21 by £2m of sales (FY’21E LT growth: +10% y/y) could deliver £1m uplift to EBITDA and FCF we estimate (+3% and +4% vs current forecasts). N1Se FY’21E forecasts currently generate an FCF yield in excess of 8%, with risk to the upside.
Gfinity plc* (GFIN.L, 1.625p/£14.0m) | Blackbird plc* (BIRD.L, 16.5p/£55.4m) | Tern plc* (TERN.L, 11.5p/£31.1m) | The Panoply Holdings (TPX.L, 72.5p/£39.9m)
Companies: GFIN BIRD TERN TPX
IMImobile has issued an encouraging trading update, highlighting resilience in the Group’s core cloud communications operation. Gross profit rose 20%, with core Cloud comms (c.90%/revs) up >30% (inc. 3C acquisition). We estimate underlying organic decline at -5% y/y, in the middle of our scenario based range (-15% to 7%) with slow decline implying stabilisation in underlying communication traffic volumes post-lockdown. This stabilisation has been driven by growth in core sectors offsetting decline in sectors adversely impacted by the pandemic. Significantly, demand for the Group’s IMIConnect platform (SaaS revenues model) has remained robust as customers look to accelerate Digital Communication strategies, whilst upsell of additional channels in Q1 is also likely to drive future additional volumes from the Group’s existing base. Net cash of £2m is only modestly light of previous N1S forecasts for H1’21 prior to lockdown (£6.3m) and implies positive FCF through the previous 9-month period. We keep forecasts under review at this stage. In the medium-term, we see a path based on undemanding assumptions to FCF of £15m, offering a 7% yield at current valuation. The Group trades on 12x FY’19 EV/EBITDA (c.10x FY (Mar)’20E EBITDA based on previous forecasts), below recent sector acquisition multiples whilst offering a higher proportion of recurring revenue and operating further up the CPaaS value chain.
A concerted move into managed services is improving the quality of revenues. Management is targeting the growth in recurring revenues to cover the cash cost base of the company by 2022. This event will mark a material derisking of the investment case and is the pathway to the share price doubling or more over the next 2-3 years. Buy.
LoopUp has provided an update on trading to coincide with today’s AGM…in essence, the group continues to see activity “materially” above pre-COVID levels, and is confident of exceeding expectations for 2020. We choose to leave our forecasts (that we believe to be roughly in line with consensus estimates) unchanged for now, in advance of further detail likely with a fuller H1 update in early July.
Companies: Loopup Group
EBITDA of £10.5m (£10.4mE) was delivered from revenue of £49.2m (£46.7mE) with net cash of £24.1m, (as revealed in August), comfortably ahead of our £21.5m year-end forecast. Newsflow in the period included three acquisitions, the securing of a five year framework agreement for deployment of TRACS Enterprise with a major Train Operating Group, and the successful transition of the CEO role to Chris Barnes. The Group continues to deliver the proven mix of self-funded acquisitions and organic growth, demonstrating comfortable delivery of forecasts reiterated at interims, and a very strong balance sheet giving capacity to deliver much more of the same. With the new CEO able to deliver operational efficiencies to a Group already well versed in delivering successful acquisitions, we look forward to the next part of Tracsis journey. Target 775p reiterated.
A strong interim period to January 2020 delivered the expected £26m revenue as reported in the February trading update, with a 31 January net cash balance also of £26m – EBITDA of £5.6m (post IFRS16), and adjusted PBT of £4.6m highlighting a strong performance. The Group has unchanged strategic ambitions – organic growth and M&A, both in evidence in Rail Technology & Services (RT&S) with 13% organic growth and the post period end acquisition of iBlocks. We withdrew forecasts last week due to the impact of COVID-19 on the 2H-weighted Traffic & Data Services business, given the exposure to cancelled large scale summer events, and uncertainty over traffic surveys; however, the potential for the Group is unchallenged when the world normalises. New contract wins, new product launches, new acquisitions and a hearty balance sheet continued to offer significant upside in 1H and post period end. Target price 900p remains based on our FY21 forecasts, which in theory should be consistent with previous forecasts and we look forward to reinstating numbers when the virus dust settles.
LoopUp recently updated on the first four months of 2020, which have seen an exceptional level of customer activity and new client wins. This is largely driven by the COVID-19 pandemic and the associated shift towards remote working with additional use of conference calls, but the group has also recently implemented an increased focus on Professional Services, which in our opinion could boost long-term potential. This note focuses on current activity levels within the business, the opportunity within Professional Services and the attitude of investors towards remote meetings companies.
Following the announcement of a business restructure and temporary cost reduction measures to reduce costs by A$12m, we have updated our forecasts for Seeing Machines. We believe that the significant measures taken by the management offset a weaker revenue outlook, as the impact of COVID-19 looks likely to continue for longer than anticipated. The net result is a similar to previous expectations in terms of cash, which we believe remains sufficient to see the company through FY22 ahead of profitability in FY23. The long-term effects of the business restructure is expected to be positive for shareholder value as demonstrated by our DCF based valuation which increases to 7.2p (from 7.0p).
AGM statement as expected; Resume with a Buy
Companies: Cloudcall Group
Whether we know it or not, advanced materials are a core component in the everyday life of the everyday person. They are the key material in items we often disregard, such as printer inks and lotions, to objects which defy the laws of gravity like the Airbus A380 and London’s Shard. Furthermore, these materials are not only essential to many objects and structures, but, due to their superior qualities, are the key to the advancement of many industries. One such example is the use of carbon fibre which offers five to ten times more rigidness, stiffness, and strength than its aluminium counterpart. As a result of these impressive qualities, motorsport and athletics have improved ten-fold since their mainstream use and new records are broken every year.
Companies: AGM AUTG BIOM BOY CAR CKT EMH EXO GRPH HAYD IKA ITX CRPR MGAM NANO OXIG SYN SCE SYM VCT ZEN HDD