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Tekmar’s H1 results were well flagged in the 30th October update. Revenue was slightly lower YoY at £15.2m (H1’20: £17.1m), with EBITDA of £0.8m (H1’20: £2.0m), reflecting the impact of COVID-19. Whilst there continues to be some short term disruption, the COVID-19 backdrop is improving and we believe Tekmar is well placed to return to growth as its markets recover. The balance sheet is robust, with net cash of £0.7m, and demand is strong, with the enquiry book increasing by 21% YoY to £225m. Industry forecasts point to significant long term structural growth in Tekmar’s end markets and new CEO Ally MacDonald is conducting a strategic review focused on positioning the Group to capitalise on this. N+1 Singer has been appointed joint broker and we will initiate coverage in due course. We believe the historic EV/EBITDA rating of 7.7x is undemanding and see the current share price as an attractive entry point given the scale of the growth opportunity and strong recovery prospects.
Companies: Tekmar Group Plc
Ince has announced excellent interim results with promising trends for the near and medium term which bode well for the Group's earnings and cash progression. First half revenue has grown 6% YoY, a strong result considering the impact of COVID during the period.
Companies: Ince Group plc (INCE:LON)Ince Group plc (W1G1:BER)
Today's news & views, plus announcements from AZN, LLOY, WEIR, TATE, GFTU, INCE, DELT, SOLG, HYVE
Companies: LLOY SOLG INCE
Trading to date in FY 2021 has been positive, with no sign of an adverse impact from the second national UK lockdown. Net new business across both divisions is described by management as encouraging and the new business pipeline remains very healthy. With volumes better than expected and margins improving DX is on track to perform materially better than market expectations and we have, consequently, upgraded FY 2021 EPS by 29% and FY 2022 by 15%, driven by stronger assumptions in DX Freight. We have also raised our FCF-based target price from 29p to 33p and reiterate our view that the group is in a strong position to rebuild profitability by winning new business and improving efficiency, productivity and margins.
Companies: DX (Group) Plc
Management is delivering right on cue to its resumed guidance as per the 1 October trading update. H2 revenue recovery is back close to pre-pandemic levels and operating margins have returned to target 3% in quick time – and are sustainable at that level too. Having upheld dividends through this challenging period and actually extended the order book (up 17% YoY and also c3% higher than last reported), TClarke is firmly re-establishing a growth trend on arguably more solid foundations. The share price is 10% higher since the last trading update but in our view remains significantly undervalued against a prospective FY21E EV/EBITDA ratio of 3x, a PE of c6x, yield 4.6% and double-digit FCF yield.
Companies: TClarke plc
The new ammendments to the UK CfD renewable energy support scheme opens up an opportunity for tidal energy to compete against floating offshore wind. We think the two technologies can deliver similar costs but that tidal, and specifically the already permitted capacity at Atlantis’s MeyGen site, has a marginal advantage in terms of readiness.
Companies: SIMEC Atlantis Energy Ltd.
Checkit has emerged from a period of corporate activity as a pure-play business focused on driving the adoption of its connected SaaS software, in particular its workflow management application. Checkit’s software is designed to enable smarter operations management, exploiting Internet of Things technology to connect people, processes and assets. With a proven ability to sign up blue-chip customers across a number of target verticals, growth in recurring revenues and an expanding customer base should help to close the valuation discount to software peers.
Companies: ECKTF CKT EKC
President Trump likes to project himself as a highly successful businessman, but surprisingly little is known about his true financial position. Various articles, including a 2016 in-depth analysis by The Wall Street Journal, have speculated about his income and asset base. All sorts of claims and counter-claims have been made about his wealth – by Trump himself, pitching his fortune at some $9bn, and by journalist Timothy O'Brien, suggesting that it is as “low” as $150m-$250m. It is doubtful whether we shall ever know the truth, but we can use Trump’s UK corporate filings to gain an insight into his businesses in Scotland.
Companies: AVO ARBB ARIX CLIG DNL FLTA ICGT PCA PIN PHP RECI STX SCE TRX SHED VTA YEW
SThree has released a brief update ahead of the scheduled Q4 trading update expected on 12th December. The key headline is that an improving trading backdrop over the last few months has driven a better than expected profit performance. Market consensus was clearly too light with the company now guiding for an FY’20 outcome above the top end of the range of expectations. We have updated our forecasts accordingly and now look for FY’20 PBT and EPS of £28.1m / 13.3p respectively – a PBT upgrade of +53% on our previous estimate. Although the company has not formally reinstated full guidance, we are taking this opportunity to publish our estimates for FY’21. SThree has shown good resilience through this pandemic. The combination of STEM industry specialism and the inherently higher short term visibility of the contract focus has afforded SThree management a greater degree of flexibility when it came to aligning the necessary cost actions with the strategic ambitions of building market share in the key, global STEM markets. Costs and headcount have been cut, but they have been targeted and selective. The net result has been an increasingly positive tone in trading commentary, culminating in yesterday’s explicit upgrade. Has this been fully priced in by the market? To an extent yes, with the shares now standing +57% above the May 2020 lows and outperforming the peer group year to date. However, despite this outperformance (share price and operational) SThree still stands at a material valuation discount to its peers. We continue to find the extent of this valuation gap hard to justify.
Companies: SThree plc
The Group's cash generation and profitability remained robust in H1/21A despite the onset of COVID-19. This enabled the Group to pay down a further £8.2m of term loan principal, resulting in net debt declining 44.6% to £34.9m. In light of improving visibility in industrial electricity demand we release prudent FY21E and FY22E forecasts. We believe OPG is undervalued, trading at a c50% discount to its peer Group. We move our recommendation from Under Review to Buy.
Companies: OPG Power Ventures Plc
H1F21 revenue was £107m, down 14.8% y/y (H1F20: £125.6m) and down 11.9% sequentially (H2F20: £121.5m). Q2F21 revenue was up 5.3% y/y, indicating a trend to recovery in the post-lockdown period across both, Ireland and the UK. The strength of LTHM's business model is supported by the diversity of its customer base and the expanse of its product offering, allowing it to withstand fluctuations in demand across market sectors. We believe LTHM stock is a relatively low risk investment given the strong cash position (131.6p/share), no debt and a stable yield. The stock trades at 8x EBITDA, compared to its peer average of ~11.1x, on what are more compelling metrics.
Companies: James Latham Plc
Volex has reported interim results that are in-line with expectations following a strong trading update in mid-October. Of far greater significance is today’s announcement of the proposed acquisition of DEKA for a consideration of up to €61.8m on a debt free basis. DEKA is a leading and highly profitable power cord manufacturer, strategically located in Turkey, that serves leading European white goods manufacturers. The acquisition should close in early CY2021, subject to expected Turkish Competition Authority approval. We foresee 15% earnings enhancement in FY2022E with further opportunities for revenue synergies with Volex in the Far East as its operations also vertically integrate, production efficiencies increase and the cost of production falls. The statement highlights that pro forma net debt/EBITDA remains under 0.4x and this provides scope for further bolt-on acquisitions alongside a new $70m RCF and $30m accordion, also announced with the interims.
Companies: Volex plc
Today's news & views, plus announcements from AV, BVIC, PZC, RQIH, PMI, MUL, AEXG, INCE
Companies: AEX RQIH INCE
We launch coverage of IQGeo with its proposed acquisition of OSPInsight (OSPi). IQGeo is a Cambridge-based supplier of geospatial software for planning, building and maintaining dispersed network infrastructure. It sells this directly to global Tier 1 and 2 telecoms and utilities. It is raising £5.3m to help buy OSPi, a Utah-based supplier of similar systems to Tier 3 and 4 telcos, mainly in the US.
Companies: IQGeo Group PLC
Seeing Machines has announced its FY20 results which show a steady underlying improvement in financial performance with the company surpassing our expectations set in May despite a highly challenging operating environment for the transportation sector. Looking forward, whilst the ongoing pandemic is continuing to affect the business, and we have tweaks to our divisional expectations to account for this, visibility into the path to profitability is increasing and the funding of this has been significantly de-risked by the recent US$20m placement to Federated Hermes Inc. With the risk reducing and the macro environment improving and considerable upside left in our numbers from Aftermarket, Aviation and further technology license deals, we reiterate our Buy and increase our DCF valuation to 8.6p.
Companies: Seeing Machines Limited