Four plays for growth
Summary – In this report we outline the investment case for four companies that we believe have transformative growth potential: Bigblu Broadband, Audioboom, ULS and Beeks. We also include the current sector valuation, our recent research, and a profile of all of the companies covered by the 4-strong Tech Research team at finnCap.
ALT AMO CTP 9537 D4T4 DOTD ELCO WJA IDEA IGP IOM KBT MAI MMX NASA NET QTX QXT RCN SPE SRT TRMR TEP UNG ZOO PTRO TRCS IQG TCM PCIP KRM FTC BGO ACC ARC
29 Nov 19
Building the base
Altitude has delivered interims highlighting revenue growth of 43% vs 1H18 including the benefit of the January acquisition of US-based AIM Mastermind. US revenue increased to $2.8m in the period ((vs $0.3m in 1H18) including $2.5m from AIM, of which $1.9m related to 2Q. The focus remains on the development of the US business, with accelerated hiring and training and establishment of a new office to cultivate and execute on the three key variables in the model: the total c.$1.2bn spend of the combined AIM member base (currently $2.1bn of aggregate sales 2,185 members); the preferred supplier coverage of that spend (currently 25% of the c.60% of addressable non apparel promotional products member gross revenue); and the service fees payable by the Preferred Suppliers based on the resulting purchase orders (expected to be in the range of 3-6%). We look forward to updates and reiterate our 12-month target of 120p, as the model firms up, given the January acquisition and bedding in, then only one quarter in effective operation in the period to interims.
30 Sep 19
Morning Note – 30 September 2019
Altitude Group (ALT): Corp Interims: building the base Altitude has delivered interims | Nasstar (NASA): Corp Interims: efficiencies delivered | President Energy (PPC): Corp Interim results | Tri-Star Resources (TSTR): Corp Interim results 2019
ALT NASA PPC TSTR
30 Sep 19
Small Cap Feast
Entertainment AI (EAI) - This was an RTO into Blockchain Worldwide (BLOC), It has also transferred from the standard list to AIM. Focused on providing its global automotive and lifestyle audiences and its strategic partner audiences with real-time access, in a frictionless way, to "in the moment" opportunities from more relevant short form video content to "one-click" e-commerce, £8.6m raised. H1 2019 actuals - GTChannel subsidiary's MCN gross advertising revenue at $8.7 m, up 107%
ALT MPM PYC IQE THR CPT SOLI SAV SEE AMYT
30 Sep 19
Morning Note – 5 September 2019
Altitude Group (ALT): Corp Trading update – growing up in public | Alumasc (ALU): Corp Full-year results in line | M.P. Evans (MPE): Corp Purchase of minorities accretive to sum of parts | Morses Club (MCL): Corp Strong position confirmed | PPHE Hotel Group (PPH): Corp Returns from investment programme growing
ALT ALU MPE PPH MCL
05 Sep 19
Prelims: Progress since acquisition
Altitude prelims are in line with expectations and lead to unchanged forecasts. The focus on the performance of AI Mastermind (since rebranded AIM Smarter (“AIM”)) has continued to deliver momentum in member numbers (up 10% since January 2019). With the extension of the supplier partner agreements to cover all transactions with members, not just transactions on the AIMPro platform, the focus on ‘onboarding’ is now eased in favour of signing up suppliers to commit to service fees to Altitude/AIM regardless of how the order is placed with the supplier – this has already been achieved for 149 suppliers. Prospects remain strong, the acquisition is delivering the potential outcome in line with unchanged forecasts, and the valuation continues to expose more and more upside as proof of execution success is forthcoming. Our 140p target is reiterated and we look forward to a continuing news flow and the development and execution of a simplified set of KPIs to demonstrate growing service fees from a growing transaction flow from a growing number of distributors.
28 May 19
Small Cap Feast
Essensys plc—a provider of mission-critical SaaS platforms and on-demand cloud services to the high growth flexible workspace industry, plans to join AIM. £28m raised. Half primary, half shareholder sell down expected 29 May 2019. Mkt cap £72.6m. Issue price 151p. Renold plc—a leading international supplier of industrial chains and related power transmission products, announced that it will cancel the listing of the Company from the premium segment and apply for admission on AIM. Expected 06 June 2019. Alumasc Group plc, the premium building products, systems and solutions group, has announced its intention to move from the Premium Segment of the main market to AIM. Expected market cap of £33.4m. Expected 25 June 2019
ALT OBD RFX DX/ PRES GAN AFHP COM NKTN BYOT
28 May 19
Morning Note – 10 April 2019
Altitude Group (ALT): Corp Update | Chariot Oil & Gas (CHAR): Corp Cost controls and efficient drilling drives cash beat | ClearStar (CLSU): Corp A strong Q1 leaves ClearStar on track for FY 2019 | Frenkel Topping (FEN): Corp A welcome recovery now provides a stable springboard | SRT Marine Systems (SRT): Corp FY 2019 confirmed as a pivotal year | Tracsis (TRCS): Corp On track at interims
ALT CHAR 9537 FEN SRT TRCS
10 Apr 19
Morning Note – 15 January 2019
Altitude Group (ALT): Corp Placing and acquisition – completion | Frontier Developments (FDEV): Corp Jurassic World Evolution drives earnings upgrade | Tax Systems (TAX): Corp Strong FY trading update | Telit (TCM): Corp FY 2018 earnings in line
ALT FDEV TAX TCM
15 Jan 19
Altitude has initiated an accelerated bookbuild to acquire AI Mastermind (AIM), channel partner for Altitude’s white label ChannlPro solution (AIMPro), and largest promotional product distributor member group in the US. The acquisition is to be funded by a £7.0m fund raising at 68p (assumed), including £3.2m for working capital purposes. Customers of AIM members spend an estimated $1.7bn per year in a US market worth $23bn, with only c.11% of transactions online – AIMPro creates an end-to-end solution for distributors to online sales, in addition to order flow management and a CRM, with Altitude benefiting from a percentage share of gross transaction revenue (GTR), from suppliers. The acquisition will improve gross margin from AIMPro, offer the opportunity for enhanced tiered AIM member fees, and allow Altitude to drive AIM expansion directly, to the benefit of the group. Target price under review pending conclusion of the ABB (formerly 105p).
11 Jan 19
Morning Note – 11 January 2019
Altitude Group (ALT): Corp Taking AIM | ANGLE (AGL): Corp Parsortix used in breakthrough CTC cluster research | Lighthouse Group (LGT): Corp Stability amidst testing markets | NAHL (NAH): Corp Difficult Q4 | Sopheon (SPE): Corp Positive trading update
ALT LGT SPE AGL NAH
11 Jan 19
Morning Note – 27 November 2018
Altitude Group (ALT): Corp Trading update; NED appointment | D4T4 Solutions (D4T4): Corp Strong H1 weighting built on recent contract wins | Gooch & Housego (GHH): Corp FY results in line; strong order book | HML Holdings (HMLH): Corp KCOM (KCOM): Corp Interims
ALT D4T4 GHH HMLH KCOM
27 Nov 18
Small Cap Feast
Kropz, an emerging plant nutrient producer with an advanced stage phosphate mining project in South Africa, a phosphate project in the Republic of Congo and exploration assets in Ghana, is looking to join AIM. Offer TBC, expected late Nov Titon holdings—international manufacturer and supplier of ventilation systems and window and door hardware. No capital raise. Due 10 Dec. Mkt cap c.£22m. Greenfields Petroleum (TSX-V:GNF) production focused company with operated assets in Azerbaijan seeking AIM dual listing including $60m private placement. Mkt cap $12.6m CAD. Expected early December. Finncap—proposed acquisition of M&A adviser Cavendish Corporate Finance and AIM admission. Offer TBA. Due early Dec Crossword Cybersecurity PLC* (NEX:CCS)—the technology commercialisation company focusing exclusively on the cyber security sector is investigating the possibility of AIM admission. The Company is proposing to raise up to £2.25 million before the end of December, conditional on Admission. The Panoply parent company of a digitally native technology services group founded in 2016 with the aim of identifying and acquiring best-of-breed specialist information technology and innovation consulting businesses across Europe, is looking to join AIM. Offer £5m new capital, £400k sell-down, market cap of £30m, expected late 4 Dec 2018.
ALT PPC INL OPG NCYT AGY C4XD ALSP HMLH SAV
27 Nov 18
Interims – capture then convert
Interims highlight the substantial progress in the development of the distributor and supplier base of the ChannlPro platform. Members processing orders increased to 164 (Feb: 24; May: 57), of which 120 had placed multiple orders. The development of gross transaction revenue on the platform ($9.9m in the past 16 weeks) has advanced in anticipation of the margin Altitude takes from those suppliers, with the current focus on growing the scale and making ChannlPro the go-to platform for leading industry participant, distributors and suppliers. We review forecasts to accommodate lower near-term revenue, albeit all the operational KPIs are progressing in line with expectations as the scale of the platform develops. Twelve-month target price remains 105p, equivalent to an unchallenging 9x FY19 EBITDA, 13x P/E and a 5.4% free cash flow yield, target parameters which can be easily lifted with demonstration of execution credibility.
25 Sep 18
Morning Note – 25 September 2018
Altitude Group (ALT): Corp Interims | Independent Oil & Gas (IOG): Corp Thames pipeline integrity confirmed | Savannah Resources (SAV): Corp Additional licence optioned at Mina do Barroso | Scientific Digital Imaging (SDI): Corp Acquisition – 7% accretive in first full year
ALT IOG SAV SDI
25 Sep 18
Small Cap Breakfast
Path Investments (PATH) -RTO of a 50 per cent. participating interest in the producing Alfeld-Elze II gas field located 22 kilometres south of Hannover in Germany. Offer TBA. Due late Aug. Vitesse Media (VIS) — To be renamed Bonhill Group. RTO of the trade and assets of InvestmentNews, a Business Information and Data & Insight brand supporting the US financial adviser and wealth manager community Due 17 Aug. Raising £18.6m at 80p. Mkt cap £26.7m. Kropz PLC-Intention to float by the emerging plant nutrient producer with an advanced stage phosphate mining project in South Africa and exploration assets in West Africa
ALT OMG ALM ASO IXI IMMO FAB HUW CHG ZEN
13 Aug 18
Prelims on track – proving ChannlPro
With prelims delivered in line with expectations, a strengthened board and momentum in the development of the key AI Mastermind (AIM) partnership, Altitude is doing exactly what is needed in proof of execution of the ChannlPro platform. The build-up of active AIM member distributors on AIMPro, the first iteration of the ChannlPro platform, encourages further suppliers, and further AIM membership utilisation of the platform… leading to interest from further suppliers and so on, in a virtuous circle. On track for our year-end expectations of ChannlPro revenue (a percentage of gross revenue transacted over the platform), we look forward to further proof points of the positive trends. Having raised funds in March, Altitude is expected to be in a comfortable £2.0m net cash position at FY18 after allowing for accelerating investment in the on-boarding of further distributors, and we look forward to the rapid development of scale and profitability: growth in platform participants in FY18 should then lead to a very strong financial performance in FY19. Target 105p reiterated.
05 Jun 18
Morning Note – 5 June 2018
Altitude Group (ALT): Corp Prelims on track – proving ChannlPro | discoverIE (DSCV): Corp Driven by technological change | Europa Oil & Gas (EOG): Corp The prize is getting larger | Gooch & Housego (GHH): Corp Interim results – order book points to stronger H2 | Independent Oil & Gas (IOG): Corp Thames pipeline update | KCOM (KCOM): Corp Prelims | Netcall (NET): Corp MatsSoft contract renewal
ALT DSCV EOG GHH IOG KCOM NET
05 Jun 18
Small Cap Breakfast
Avast, global cybersecurity provider with 435m users worldwide. In 2017, the Group's Adjusted Billings was $811 million, Adjusted Revenue was $780 million, Adjusted Cash EBITDA was $451 million. Seeking to raise $200m. Due in May. Fundamentum Supported Housing REIT. Raising £150m. Focussed on UK Social Housing assets. Due 2 May Vivo Energy—retailer and marketer of Shell-branded fuels and lubricants in Africa, Due in May. 100% secondary sell-down of existing Shares by Selling Shareholders, No new Money. Pricing TBA Gore Street Energy Storage Fund—Seeking to raise £100m for the purposes of investment in a diversified portfolio of utility scale energy storage projects. Due 03 May. Odyssean Investment Trust—Raising £100m at £1. Due 1 May. The Company will primarily invest in smaller company equities quoted on markets operated by the London Stock Exchange.
ALT ECR TIDE AMC ECHO LVCG DKL TLY TRAK ATYM
13 Apr 18
Having demonstrated the opportunity for the combination of Channl with the proprietary cloud-based CRM and order management system (ChannlPro) to create AIMPro for members of the AIM buying group, Altitude has the opportunity to invest for accelerated growth. The announcement of NAPCO as a further aggregated partner organisation brings with it a further 80,000 potential distributors, compared with AIM with 1,500 members and aggregated annual revenue of $1.3bn. Having strengthened the balance sheet by raising net £1.4m at 60p (subject to General Meeting), Altitude is positioned well to enhance the existing opportunity through accelerated customer and supplier on-boarding and increased utilisation of the platform for AIM members, NAPCO associates, or yet further partner organisations. Target price 105p with further upside once proof of execution of very strong growth prospects begins to flow through.
01 Mar 18
The 2H17 progress update reveals increased focus on the AiM partnership (a distributors’ buying group) with a clear path to increased monetisation of the opportunity. The combination of Channl with Altitude’s existing business management tools (to create AiMPro) delivers revenue related to total transaction spend on the platform, a potentially significant improvement compared with the former model, which was wholly reliant on online transactions. We look forward to continuing positive newsflow surrounding AiM and the other potential distribution and supplier partners, in addition to the launch of AndEverything.com – an online market place, claimed to be a world first for promotional products.
14 Dec 17
Iofina* (IOF): H2 production set to exceed guidance & IO#7 update (CORP) | Omega Diagnostics* (ODX): Short-term headwinds (CORP) | Byotrol* (BYOT): Interims – H2 weighted with deal flow (CORP) | Synairgen* (SNG): £5m payment from Pharmaxis (CORP) | Keywords Studios (KWS): Doubling up (BUY) | Altitude Group* (ALT): Taking AiM (CORP) | CityFibre* (CITY): Further demonstration of the model – Aberdeen (CORP)
ALT IOF ODX BYOT SNG KWS CITY
14 Dec 17
The Joy of Techs
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.
ALT 7DIG AMO ARTA BOTB BLTG CTP CITY D4T4 DTC DOTD ELCO FDEV GBG IDEA IDOX IGP IOM KBT KCOM KWS LRM MAI MMX NASA NET PHD QTX QXT RCN 932 SEE SIM SPE SRT STR TRMR TAX TEP TPOP TRAK UNG VIP ZOO CYAN ONEV SSY ABAL WJA
09 Nov 17
OptiBiotix* (OPTI): LP-LDL supply agreement (CORP) | Victoria* (VCP): Acquisition of Serra (CORP) | Shoe Zone (SHOE): Trading update (BUY) | Altitude Group* (ALT): Further enterprise partnership (CORP) | GB Group (GBG): H1 in line boosted by licence fee (BUY)
ALT OPTI SHOE GBG VCP
24 Oct 17
Interims on track, opportunity grows
Strong 1H17 interims lead to unchanged headline forecasts, in a seasonally 1H weighted model for profit, and 2H for cash flow. £0.8m EBITDA (£0.7m adj PBT) was delivered from revenue of £2.9m, with the anticipated pressure on the legacy business offset by initial revenue from AdProducts, acquired in June. The excitement and growth potential for Altitude remains focused on development of Channl.com, the platform for rapidly enabling online presence with end-to-end supply chain capabilities for smaller promotional product distributors. The group has gained significant experience in developing the model in the UK and US markets, including the extension of a key US partnership (AI Mastermind) with 1,400 members, to include integration of a CRM and sales order management, and evolution of the model to focus on distributor utilisation of the platform, encouraged through support. We look forward to further newsflow as the Channl model evolves towards meaningful revenue generation. Target 105p reiterated.
26 Sep 17
Transense Technologies* (TRT): Full-year results – at a turning point in commercial traction (CORP) | Altitude Group* (ALT): Interims on track, opportunity grows (CORP) | Universe Group* (UNG): All to play for (CORP) | Minds + Machines* (MMX): Fruits of labour (CORP) | Taptica* (TAP): 47% YoY H1 earnings growth with cash to match (CORP) | Netcall* (NET): Consistency and opportunity (CORP) | Castleton Technology* (CTP): Delivery of milestone contracts (CORP) | Sopheon* (SPE): Industry recognition (CORP) | 7digital* (7DIG): Interims (CORP) | Mortgage Advice Bureau (MBA1): Building IP (HOLD)
ALT UNG MMX TRMR NET CTP SPE 7DIG MAB1 TRT
26 Sep 17
STM* (STM): Regulation changes…demand doesn’t (CORP) | Mortice* (MORT): Forecast upgrade and target price increase (CORP) | OptiBiotix* (OPTI): A sweet opportunity (CORP) | Amino Technologies* (AMO): Gross margin strength (CORP) | Altitude (ALT): Senior management appointment (CORP)
ALT STM MORT OPTI AMO
11 Jul 17
Preparing the wayINITIATION OF COVERAGE
Prelims reveal profitability and free cashflow at the successful culmination of two years of restructuring. With a refreshed board adding further experience to the team, the focus on Channl.com has the potential to fundamentally change the landscape of the fragmented promotional product distribution industry and make the online battle for distributors’ market share more even. To exploit the opportunity the group has undertaken a placing at 60p to fund working capital requirements to expand in the $21bn US market by taking smaller distributors and even end users directly online; and to acquire a small, UK-based supplier to facilitate the UK launch of Channl.com to distributors. Target price 105p.
17 May 17
Small Cap Breakfast
I3 Energy –Schedule 1. Independent oil and gas Company with assets and operations in the UK. Offer TBC, 26 May admission. | Opera Investments –Reverse Takeover of Kibo Mining’s subsidiary Kibo Gold. Raising £1.5m. Expected mkt Cap £6.5m. 23 May. | Eve Sleep—Schedule 1 from the e-commerce focused, direct to consumer European sleep brand. Raising £35m at £1.01. Expected mkt cap £140m. Expected 18 May 2017. | Velocity Composites—Schedule 1. Manufactures advanced carbon fibre and ancillary material kits (predominantly carbon fibre) for use in the production of aircraft. 18 May 2017 admission expected. Raising £14.4m at 85p. Expected mkt cap £30.4m. | Verditek—Schedule 1 update. On Admission, the Company's subsidiaries will be involved in advanced solar photovoltaic, filtration and absorption technologies specialising in providing environmental services. Issue price 10p. Admission in late May. | AEW UK Long Lease REIT—Intention to Float. Up to £150m raise. Admission early June. UK specialist and alternative property | Alfa Financial Software –Intention to float. Mission-critical software platform purpose-built for asset finance enterprises. Vendor sale of 25% plus. FYDec16 rev £73.3m (CAGR of 24% from 2012). Adjusted EBIT £32.8m. | Kuwait Energy— $150m raise plus vendor offer. Admission due June. 2p reserves 810.0 mmboe | ADES International— Provider of offshore and onshore oil and gas drilling and production services in the Middle East and Africa, seeking raise up to $170m plus vendor sale under a Standard Listing of the Main Market. Admission due May 2017. | Tufton Oceanic Assets– Extended to 9 May on specialist funds segment of Main Market to enable further due diligence. | PRS REIT—Private rental sector REIT raising up to £250m. Admission due 31 May.
ALT LND NASA ATQT CNS INL SOU PURE WRES SMRT
17 May 17
Small Cap Breakfast
Global Ports Holding—Intention to float on Standard List. International cruise ports operator. Seeking $250m raise including $75m primary offer. Dorcaster—Schedule One Update. Admission now expected 3 May. RTO of Escape Hunt raising £14m at 135p Verditek— Intention to float on AIM. On Admission, the Company's subsidiaries will be involved in advanced solar photovoltaic, filtration and absorption technologies specialising in providing environmental services. Raising £3.5m. Admission in May. Eddie Stobart Logistics— Schedule 1. Admission expected 25 April but capital raising details TBC. ADES International Holding— Intends to join the Standard List in May raising up to $170m plus a vendor sale. Provider of offshore and onshore oil and gas drilling and production services in the Middle East and Africa. Admission expected in May. Tufton Oceanic Assets– Offer extended to 9 May to enable investors to complete further due diligence.
ALT RBD SGI LRM VNET EMH SYS1 BIRD MAGP
19 Apr 17
Small Cap Breakfast
Xafinity –Publication of prospectus. The pensions actuarial, consulting and administration business has conditionally raised £179.6m. At 139p. Due to join main market 16 Feb. Guinness Oil & Gas Exploration—Publication of prospectus. Seeking to raise £50m and invest in 15 exploration companies at launch, with plans to grow the portfolio to 30 positions during its lifetime. Issue closing 23 Feb. Arix Bioscience — Intention to float on the main market from the global healthcare and life science company supporting medical innovation. Raised £52m in Feb 16 with investors including Woodford Investment Management Ramsdens Holdings –Schedule One from the financial services provider and retailer, operating in the core business segments of foreign currency exchange, pawnbroking loans, precious metals buying and selling and retailing of second hand and new jewellery. Expected admission to AIM 15 Feb raising circa £15.6m. Expected mkt cap £26.5m.
ALT ELE SLP ALBA RWS AGY KRS XSG SRT BRD
14 Feb 17