When in doubt about pandemics, ask an expert. One of the best being former FDA Commissioner Dr Scott Gottlieb (non-exec director of Pfizer & Illumina), who has been calling for widespread COVID-19 workplace testing for some time. Today came news that there is now one such test available for all American businesses, freelancers, ‘gig’ workers &/or sole traders. This new tech-enabled solution is powered by CLSU’s ClearContact, ClearID and Virtual Badge (strategic partnership) applications, in conjunction with Clinical Reference Laboratory’s (CRL) expertise in blood/antibody & saliva tests.
Thankfully pandemics don’t come around very often. The last one of such virulence as COVID-19 being the ‘Spanish Flu’ in 1918-20. So how is ClearStar faring? Today’s 2019 results (see below) were in line with our revised expectations - reporting adjusted EBITDA (post SBPs) of $370k (-$108k LY) on turnover up 14.1% LFL to £23.0m ($20.1m). Driven by strong top line growth from Medical (+21.4%, MIS) & Direct (+31.9%), together climbing 26.2% to $16.5m (71.8% of group). Albeit partly offset by an 8.3% contraction at channel partners (non MIS), which reduced gross margins to 54.1% vs 56.4% LY, reflecting adverse divisional mix.
Intention to float by Gemfields Group. No Capital Raise. Currently listed on JSE. (GML:JNB) at circa £122m. The Group's key producing assets, the Kagem emerald mine in Zambia (believed to be the world's single largest producing emerald mine) and the Montepuez ruby mine in Mozambique (one of the most significant recently discovered ruby deposits in the world), are both expected to have long mine-lives with potential for expansion. Also owns the Faberge brand. Due Valentines Day 2020.
Companies: CCS TRP TEK BOOM 9537 ACT THR VRS SRB MWE
It’s been a ‘FTSE slug fest’ over the past 3 months. Firstly investors were rattled by US/China trade tensions, then uncertainty about Brexit/General Election, and more recently by conflict in Iran/Iraq and the deadly Coronavirus. The latter sending Chinese equities, travel stocks, crude oil, commodities and many other assets plummeting.
Underlying demand for ClearStar’s tech-rich background & medical (MIS) screening services remains buoyant, as evidenced by its record orderbook and healthy pipeline – augmented by November’s ebullient US jobs report, where unemployment fell to a 50- year low of 3.5%
Recruiting skilled, trustworthy and committed staff is a tricky & often cumbersome process, especially in today’s tight US labour market (3.7% unemployment). Get it wrong, and capable candidates go to rivals. Equally hiring poor employees can damage an organisation’s results, brand & culture. No more so than in the regulated areas of healthcare, transport, petro-chemicals, defence, logistics, education and financial services.
If you’re concerned about Brexit, Sterling’s devaluation, currency wars and/or the slowing global economy, then look no further than Uncle’s Sam’s backyard. To us, America remains the ‘destination of choice’ for many investors, given its resilient consumer (>70% GDP), low unemployment (3.7%), solid GDP (2.1% Q2’19) and muted inflation (CPI 2.1%). The only problem is finding the right companies to buy at attractive levels. Step forward ClearStar, a tech-enabled background & medical (MIS) screening expert, based in Atlanta (Georgia), serving almost exclusively the US domestic market (c. 95% sales).
ReAssure Group plc - The Group is a leading closed book life insurance consolidator in the United Kingdom with 4.3m policies, £68.7 billion of assets under administration on a Post-L&G Illustrative Basis. It is considering a premium listing segment of the main market.
Voyager AIR The Com pany w ill focus on the acquisition, leasing and m anagement of prim arily widebody aircraft, w ith asset management services to be provided by Amedeo Limited he IPO will comprise a Placing and Offer for Subscription of Shares to raise up to approximately US$200m·
Uniphar, a diversified healthcare services business w ith a workforce of over 2,000, is looking to join AIM. Raise TBC, expected mid-July 2019
Companies: CPT RENX TMT ADT RDT IPEL 9537 CWR
There are few principles in life that work consistently through ‘thick and thin’. One of the most important (& usually hardest to find) for investors is purchasing ‘quality growth stocks at attractive prices’. Enter ClearStar, who this morning (ahead of its AGM) said that LFL sales had climbed 14% in the first 5 months of 2019.
Tech firms are often faced with trade-offs. Take Amazon, who for years prioritised growth ahead of profitability in order to build dominant positions in online retail, cloud services and voice-search (re Alexa/Echo). Likewise, we think ClearStar is adopting a similar long term strategy to create shareholder value. Sure if it decided to switch off the ‘expansion button’ today, then earnings would immediately flow through. However, what we’re talking about here is a much bigger opportunity – disrupting an addressable market worth c. $4bn pa.
World class companies have one thing in common. They are all totally committed about delighting their customers. Knowing that this can create a powerful feedback loop, and likewise trigger more client wins, higher hit rates, positive referrals and follow-on work. Today we saw this virtuous circle in action again at ClearStar, a specialist in background & medical screening solutions. Announcing that it had secured a new 3 month $350,000 contract. Both extending and expanding the services it already provides to a relatively new professional services client within the financial services space.
Long term value creation is all about customer focus, profitable growth and 1 st class execution. Concentrating on what clients want today and in the future - and doing it better than anyone else. We think that Clearstar, a technology-rich background employment and medical (MIS) screening provider, has this in spades. Saying this morning, that its strong growth in 2018 (+13% to $20.1m) had continued into Q1’19 - posting record turnover, up 11% LFL to $5.1m ($4.6m LY).
Many day traders think they know better than the market, yet get royally ‘tumbledryered’ whenever the FTSE goes into ‘psychosis mode’. For long-term value investors though, volatility means ‘opportunity’.
Circassia Pharma (CIR.L) - specialty pharmaceutical company focused on respiratory disease transferring from the Main Market. No funds being raised. Due 4 Feb.
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 late January 2019.
Chaarat Gold Holdings—RTO, the Company intends to acquire Kapan Mining and Processing CJSC, which owns the Shahumyan mediumsized polymetallic mine in Kapan in the Republic of Armenia. No raise, market cap of £110.1m, due early Feb
Companies: BLOE SOG HAT HW/ ESC EMR SCLP 9537 HOTC EYE
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The H1 results are as announced in the October update; COVID delayed several new contracts until earlier this month, leaving H1 revenue at £5.1m. However, management remained comfortable with a FY sales forecast of £21.7m on the basis of a strong pipeline and the substantial tranche of annually renewed revenue billed each H2. Reassuringly, the new contracts have now been signed for both the Celebrus Customer Data Management (CDM) solution and the Celebrus Customer Data Platform (CDP), and they cover a range of verticals from financial services to automotive manufacture and ecommerce provision. With significant net cash, D4t4 is in a strong position for long-term sustainable growth on the back of rapidly growing global demand for CDP/CDM. It remains confident on prospects in new geographies (N America and APAC) and new use markets (fraud, risk analysis and healthcare) plus a high level of recurring revenue. Our forecasts and target price remain unchanged save for a tweak to cashflow and raised dividend expectation. We reiterate our 310p target price.
Companies: D4t4 Solutions plc
Interims, in line with the October trading update and unchanged forecasts, follow a second (November) purchase order from the new US Department of State contract, highlighting momentum. The 5Cs that form management’s measure of strategic development have all generated positives: colleagues, with employee NPS rising, and no furloughs or paycuts; new & renewing customers, high-profile names and sectors; a broadening channel including generating new clients; code increasing with the addition of FIDO and increased reach through MyID Enterprise/ MyID Professional; and cash of £8.1m with £4.8m debt all in the form of in-the-money December 2021 convertibles. Strong 1H performance and cashflow derisks full-year expectations. Target raised to 125p (100p).
Companies: Intercede Group plc
IQE has announced that the strong performance in H120, which resulted in record first-half revenue, has continued into the second half. It has updated FY20 revenue guidance from at least £165m to over £170m, with adjusted EBIT guidance remaining at the mid-single-digit million level. We have updated our FY20 and FY21 forecasts accordingly, giving adjusted PBT upgrades of 34% and 10% for FY20 and FY21 respectively.
Companies: IQE 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
Eckoh’s fast growing US SecPay business and robust UK business model have minimised the impact of lockdowns with u/l H1 revs down just 3% yoy and profits flat. ECK reintroduces FY21 guidance, expecting H2 revenues comparable to H1 and FY21 AOP comparable to FY20. US SecPay is now a meaningful >30% group revs, growing 80% in H1 and with larger customers now re-engaging. We expect growth to continue in FY21 and beyond; the opportunity is multiples of current sales (FY21E $13m- +60% yoy). We similarly expect the cash cow UK business to continue to recover and return to c. 5% secular organic growth over time. It is especially continued success with US SecPay that is likely to lead to group FCF exceeding that of £5-6m achieved in FY20/19 over time and a FCF yield well above 5%. That’s attractive.
Companies: Eckoh plc
H1 Results: Ready to reinvest
Companies: First Property Group plc (FPO:LON)First Property Group plc (GXZ:BER)
After a challenging 2H21 for the events and traffic data business, Tracsis has delivered FY results to July in line with the reassuring August trading update. With £48m (FY19: £49.2m) revenue, the group has quantified an estimated £10m set back to COVID-affected activities within the Traffic & Data Services (T&DS) Division, implying underlying outperformance compared with expectations for the higher-margin Rail Technology & Services (RT&S) Division. Forecasts describe prospects: continuing growth in FY21 and FY22 for RT&S, with two major contracts identified in latter stage of negotiation; and a still hampered FY21 for events and traffic surveys within T&DS – but forecasts for FY22 show a return to an ex-COVID environment, regaining the original growth path. With £17.9m of cash (no debt) and delivering multiple fundamental elements of the UK rail ecosystem, Tracsis has weathered the storm better than expected, with organic and acquired growth prospects as strong as ever. Target 900p reiterated.
Companies: Tracsis plc
Earnings in H1A were better than flat and H2E has got off to a good start. Margins are up and so too is recurring revenue as proportion of total business. First half order deferrals are now materialising and renewals are positive. Free cash generation was strong and the outlook is positive. We see no fundamental reason for the recent share price underperformance and we reiterate our Buy recommendation.
Companies: Shearwater Group 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
Sensyne Health (SENS.L): Research agreement with Hampshire Hospitals NHS Foundation Trust | RenalytixAI (RENX.L): First Quarter results for 2021
Companies: Sensyne Health Plc (SENS:LON)Renalytix AI Plc (RENX:LON)
Nanoco has secured just under £1m grant funding for a life sciences project to develop a heavy metal-free quantum dot testing kit to detect COVID-19. The project will last 18 months and represents a potential third segment for generating future revenues in addition to established activities in sensing and display applications. We make minor adjustments to our estimates, although there is no impact on EBITDA or cash flow.
Companies: Nanoco Group PLC
Following Fonix successfully raising £45m through an oversubscribed IPO on 12 October, we initiate our coverage with a target price of 150p. The investment case is focused upon Fonix leveraging its proprietary, cloud-based platform to expand with existing clients and win new clients within a robust UK phone-paid services market. The structural strength of Fonix’s platform is demonstrated by Fonix experiencing no churn from major customers in the past six years, which reflects that Fonix benefits from strategic integration and strong relationships with its clients. Fonix’s FY20 gross profit and EBITDA grew by +22% and +36% respectively, and we conservatively forecast +11-12% EBITDA and EPS growth in FY21 and FY22. On 12m forward EV/EBITDA of 10x and an EFCF yield of 7%, Fonix looks considerably undervalued compared to AIM payment and finnCap Tech 40 peers that are trading on 12m fwd EV/EBITDA of 17-20x with 7-17% EBITDA growth, and EFCF yields of 1-3%. We base our 150p target price on 15x FY22 EV/EBITDA or a 5% FY22 EFCF yield, and look forward to Fonix’s trading update in early 2021.
Companies: Fonix Mobile PLC
The Panoply will report interims for the 6m to September on November 30th . The group reported a very robust Pre-Close Trading Update on 12th October, which stated that H1 revenues were not less than £20.5m, with LFL growth of +18% rising to over +50% on a reported basis. We note LFL growth was +10% in Q1 indicating an acceleration to comfortably over +20% in Q2. The group guided to Pre-IFRS16 EBITDA of not less than £2.4m, which is nearly triple the £0.9m reported in 1H19 and up not less than +25% LFL. This robust H1 performance firmly underpins guidance for LFL revenue growth of 10-15% and EBITDA growth in excess of this for FY21. The Panoply secured £25m of total contract wins in H1 and it also provided colour on the significant contract win for the Planning Inspectorate, while the recent launch of a managed service proposition at foundry4 Intelligent Automation led to contract wins for Kettering General Hospital, the University of Law, Linc Cymru and UCL. Kainos recently reported interims in which it stated public sector clients remain committed to key digital transformation programmes with particularly strong growth expected in healthcare; we believe this provides a positive read across to The Panoply. We have prepared our forecasts conservatively and believe the robust H1, strong contract momentum and positive market backdrop firmly underpin our FY expectations, with forecast risk to the upside.
Companies: Panoply Holdings Plc
In FY2019/20, organic recurring revenue growth (+8.5% despite a negative impact from COVID-19 in H2 19/20) and the organic operating margin (22.1% of revenue) were in line with guidance. The big disappointment was on 2020/21 guidance for the operating margin (up to 3pts below the FY2019/20 level depending on the amount of additional investments), the result of a significant slowdown in organic recurring revenue growth (+3-5% anticipated) and the acceleration in R&D to increase the cloud native growth rate in the medium term.
Companies: Sage Group plc
Immotion is a leading UK-based Virtual Reality (VR) experience provider. The group yesterday announced a successful £1.2m fundraise at 4p, a 5.3% premium to the previous day's closing price, to support the strength of demand being experienced for its new ‘Let's Explore Oceans' in-home VR entertainment offering.
Companies: Immotion Group Plc