Mirada plc* (MIRA.L, 72.5p/£6.5m) | Osirium Technologies plc (OSI.L 19p/£3.7m) | Corero Network Security plc (CNS.L, 11.0p/£54.7m) | Tern plc* (TERN.L, 7.7p/£23.2m)
Companies: MIRA OSI CNS TERN
Tern plc* (TERN.L, 8.0p/£24.1m) | Corero Network Security (CNS.L, 8.25p/£40.8m) | Eagle Eye Solutions Group plc (EYE.L, 288p/£86.9m)
Companies: TERN CNS EYE
The momentum in new orders and growth in recurring revenues seen in H1A, coupled with continued momentum into H2E, leads us to upgrade our recommendation to Buy. The macro backdrop for the utilisation of cloud services and the inherent risk to network security suggests the market for DDoS protection is only going in one direction.
Companies: Corero Network Security plc
Order growth in H1E is running at a sustained high level and the sale of annuity based contracts is creating a material recurring revenue base for the business. This is pushing revenue recognition forward so while the H2E weighting in our unchanged forecasts looks high, a high quality business underpinned by ARR growth is currently being built.
The FY19A results show both very strong growth in recurring revenues. These recurring revenues now form a substantial majority of Group sales. This transition in the business model reduces reliance on lumpy hardware sales and helps de-risk the investment. The macro environment lends caution but Corero is in its best shape for years.
Significant DDPaaS contract wins in FY19E meant that while there was a revenue shortfall versus our target, underlying cash generation was better than would otherwise have been expected. The stock is trading on around 3.5x recurring revenues which is a low multiple for the sector.
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: PEN SEEN SENS LPA PRM HDD BRD IGR CNC CNS
The Pebble Group, a provider of products, services and technology to the global promotional products industry, announces its intention to seek admission of its shares to trading on the AIM market of the London Stock Exchange, which is expected to take place in early December 2019.The Group delivered revenue of £99.8m in the year ended 31 December 2018.No mention of bottom line and a suggestion that funds raised would provide an exit to private equity shareholders and the repayment of debt. Offer TBA. Longboat Energy raising £10m. Expected admission November 2019. The company has been established by the former management team of Faroe Petroleum to create a new full-cycle North Sea oil and gas company .The strategy to achieve this will initially be through the acquisition of assets where the management team can add value through subsurface and operational improvements, follow-up deal opportunities and nearfield exploration; and by value creation through the drill bit. Sapo PLC - Seeks to invest in the developing market for rural broadband in the UK. Due 2 Dec. Taseko Mines - North American focused copper producer and developer, seeking a London Listing. No capital raise. Due 22 Dec SDIC Power - “potential intention to float”. Proposed GDR listing. Leading power generation company in China, with a diversified portfolio of projects across hydropower, coal-fired power, wind power and solar power. Offer TBA. Octopus Renewables - Seeking raise of up to £250m. Will seek to provide investors with an attractive and sustainable level of income returns, with an element of capital growth by investing in a geographically and technologically diversified spread of renewable energy assets—Due 10 Dec
Companies: SPO WAND CNS IDOX IGP BRCK LTHM CBOX NQMI SAV
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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
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
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
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
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