IQE has announced it expects FY20 revenues to be c £178m. This is ahead of our estimates, which we revised upwards in November, reflecting outperformance in both the wireless and photonics segments. We have updated our FY20 forecasts. Given IQE’s leveraged business model, this results in a 64% uplift in EPS. Noting the uncertainty about the effect of a pandemic-related recession on the rate of smartphone sales growth, we leave our FY21 estimates unchanged for the time being.
Companies: IQE plc
The breadth of IQE’s technology portfolio and ability to serve compound semiconductor chip customers in the US and Asia puts it in a good position to benefit from rising demand for compound semiconductor applications for 5G and connected devices. Infrastructure roll-out appears relatively unaffected so far by the coronavirus pandemic. Global handset shipments are expected to pick up in 2021, potentially stimulated by new ‘must-have’ AR apps enabled by 5G connectivity and world-facing time-of-flight (ToF) devices, supporting a trebling of PBT in FY21.
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.
IQE’s revenues grew by 35% year-on-year during H120 to a record £89.9m, taking the group from a £1.9m adjusted operating loss in H119 to a £4.3m adjusted operating profit. We upgrade our FY20 estimates in line with management’s guidance. The resultant 15% revenue upgrade changes the outcome from a loss to £3.1m adjusted PBT.
IQE has announced that it expects H120 revenues to be at least £85m. This is 27% higher than H119 and a record first half performance. Despite this encouraging start to the year, we leave our estimates unchanged given the prevailing uncertainty regarding the impact of the coronavirus pandemic on global handset demand.
IQE has released its audited FY19 results following the comprehensive trading update in March. We leave our estimates unchanged after the 6% revenue downgrade in March since in IQE’s case the impact of COVID-19 on global handset demand is likely to be softened by gaining share in both the wireless and photonics markets. While the full effect of the coronavirus on the global economy and thus on demand for IQE’s epitaxy remains to be seen, management notes that Q120 was slightly ahead of internal expectations and the outlook for Q220 remains positive.
Yesterday’s trading update confirms that IQE’s FY19 results will be in line with the revised guidance it provided in November when the full extent of the impact of the US-China trade war became visible. We have cut our FY20 revenue estimate by 6%. In IQE’s case the impact of COVID-19 on global handset demand is likely to be softened by gaining share in both the wireless and photonics markets. However, the full effect of the pandemic on the global economy and IQE’s business remains to be seen.
The breadth of IQE’s technology portfolio and ability to serve compound semiconductor chip customers in the US and Asia puts it in a good position to benefit from rising demand for compound semiconductor applications for 5G and connected devices. The share price has been hit by the shift to Asian-centric supply chains caused by US-Chinese trade tensions, and resultant reductions to management guidance. Although the timing of a recovery is difficult to gauge, we see scope for earnings recovery as IQE secures additional contracts in Asia and leverages its IP portfolio into sustainable profit growth and cash generation.
IQE’s reduced guidance for FY19 revenues of £136–142m (vs £140–160m previously) reflects primarily the greater than anticipated disruption to its major US wireless customers as a result of the US/China trade war. There is good evidence to support a recovery in the medium term: the qualification of products and tools in the Asian supply chain for both 3D sensing and wireless RF is encouraging, while exposure to 5G remains attractive. However, the timing of a recovery is difficult to gauge and with Q120 expected to be seasonally quiet we downgrade our FY19 and FY20 revenue estimates by 5.3% and 15% respectively, with FY19 EPS reduced from a 0.5p profit to a 0.8p loss and FY20 EPS reduced from 2.3p to 0.3p.
Diploma (DPLM LN, £1.9bn) FY19 results (30/09) – u/l rev growth 5% y/y vs. +7% y/y in FY18; adj. operating margin +30bps y/y from stronger GM and cost controls; adj. PBT +14% y/y; DPS +14% y/y; outlook expects “moderately lower underlying growth” from political & economic uncertainty to be offset by strong acquisition contributions | IQE (IQE LN, £609m) FY19 trading update revises down rev guidance by ~7% (mid-point), expecting “mid-single digit adj. operating loss”; expects seasonally weak Q1 2020 but “cautiously optimistic about a return to growth” | Eddie Stobart (ESL LN, £269m) may receive £75m rescue package from former boss Andrew Tinkler, adding an alternative to last week’s Dbay offer (source: FT.com) | Pressure Technologies (PRES LN, £19m) confirms commencement of trial relating to prosecution by HSE following fatal accident in June 2015 | Chamberlin (CMH LN, £2m) H1 20 interims (30/09) reports 26% y/y fall in revenues; op. loss pre-restructuring increased from £0.4m to £1.0m; expect better H2 due to higher volumes from existing automotive customers; new contracts and higher selling prices but anticipate small loss for FY20
Companies: DPLM IQE ESL PRES CMH
Uber announced earnings Monday that beat analyst estimates on the top and bottom lines for its third quarter of 2019. But the stock fell as much about 5% after the company reported over $1 billion in net losses, topping its $986 million loss during the same quarter last year. The loss includes $401 million in stock-based compensation. Following the results, in an interview with CNBC’s Deirdre Bosa on Monday, Khosrowshahi (CEO) said the company is targeting adjusted EBITDA profitability in 2021. We believe Mobility companies will continue to struggle to convince the capital markets until investors see the model proven.
Companies: TRAK AMO CPX IQE MIRI QTX SEE TCM TRCS TRMR
Intel’s share price rose 7% on Friday, driving the Philadelphia Semiconductor Index to all-time highs. Intel’ stellar quarter was supplemented by improved guidance and bullish commentary from the management on the strength of demand from cloud service providers, underscoring the theme of an ‘insatiable demand for data’. The semiconductor cycle appears to be back, in spite of recent warnings from TI.
Companies: ENET CML IQE TCM
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Sumo is trading strongly, with several drivers that could lead the company to outperform 2021 earnings expectations, in our view. Even based on conservative earnings expectations, we believe shares offer attractive value to growth.
Companies: Sumo Group Plc
ZOO’s trading update in advance of its March year-end suggests that visibility continues to improve, and major new client projects have continued to deliver. A combination of a material back-catalogue focus across the industry, a growing acceptance of cloud-based dubbing, and a very modest return to new content production have combined to produce a robust outcome for FY21E, and we upgrade estimates. Just as importantly, the outlook for FY22 and beyond continues to improve, giving management confidence to invest in expanding ZOO’s dubbing service into new markets.
Companies: ZOO Digital Group plc
Synairgen (SNG.L): Completion of recruitment for at home trial | Sensyne Health (SENS.L): Research agreement with The Royal Wolverhampton NHS Trust
Companies: Synairgen plc (SNG:LON)Sensyne Health Plc (SENS:LON)
Sopheon’s trading update for the end of 2020 shows that the historical weighting to Q4 for revenues again produced a strong end to the year, ahead of Q4 2019. Revenue is expected to total around $30.0m with Adjusted EBITDA of c. $5.6m. We reintroduce estimates for FY 2020E which reflect those numbers. The proportion of recurring revenue increased again during FY 2020E. That mix shift within strong sales bookings growth of 23% during the year means that much of the associated revenue will be recognised future years. With ongoing sales traction, we continue to see Sopheon as well-positioned with highly appropriate solutions which meet the needs of businesses to innovate and digitalise at a faster pace. Sopheon is proving itself highly capable of selling despite the Covid-19 challenges, and we believe the group’s products will become more relevant and more in demand precisely because of the race to digitalisation that Covid has so clearly accelerated.
Companies: Sopheon plc
As a nation, we love knocking ourselves. However in truth, we’re actually a pretty pioneering bunch. For instance, the experts at Oxford University & AstraZeneca have developed one of the world’s 3 most important vaccines in double quick time. Plus, many other British firms are creating similar breakthrough Covid inventions, such as Kromek.
Companies: Kromek Group Plc
MySale has delivered a striking turnaround in profitability with H1 FY21 EBITDA of A$2.5m up an impressive A$6.1m YOY. We believe this marked turnaround validates its AZN First strategy and signals the Group now has a robust and cash generative operating platform on which it can scale.
Companies: MySale Group plc
Interims to October are in line with the comfortable interim trading update and unchanged forecasts. Post period end, the group continued to benefit from evident momentum through the oversubscribed £49m placing, followed by the acquisition of Huddle. ARR increased 13% to £54.8m, including 7% organic growth; 60% of all new logo wins derived from outside the UK; and each territory and each segment (Assurance, Compliance, Collaboration) delivered growth. A £50m debt facility continues to fuel the M&A machine, and adds to the organic opportunities from the TAM of $3bn in Integrated Risk Management, where Ideagen has remained in Gartner’s Magic Quadrant since 2016. Despite 1H21 (1 May to 31 October) still suffering COVID influences (client decision-making and sales cycles), with temporary effects on organic growth, Ideagen powers on. As the driving force in establishment of the group, David Hornsby’s retirement represents the end of a chapter – but no change in executive capabilities and the strategic rationale for growth that Ideagen does so well. Target price 347p (280p).
Companies: Ideagen PLC
The Panoply has reported a very positive trading update for the Q3 to December and indicates that full year results for the year to March will be significantly ahead of expectations. The group won £15m of new contracts in Q3, including the significant assignment from the Planning Inspectorate announced at the November interims. This further demonstrates the successful development of the group, notably its expansion into healthcare and establishment of FutureGov and Foundry4 as full-service brands. In November we raised our FY21 Revenue and PBT forecasts by +5%/+10% to £44.5m/£4.9m and we further raise by +8% to £48.0m/£5.3m this morning. We choose to leave our FY22 estimates unchanged at this stage, but clearly the group has very strong momentum and we see clear scope to raise our forecasts as we progress through the year. We continue to view The Panoply as ideally placed to benefit from the structural tailwinds in digital transformation and, underpinned by our increased forecasts, raise our target price to 235p (was 220p).
Companies: Panoply Holdings Plc
FY20E order intake growth of 61% means Corero's revenue for last year of $16.8m will exceed our prior forecast. The trading update confirms c73% annual growth in revenues and further expansion of the annualised recurring revenue base. This performance highlights the increasing prioritisation of protecting networks against cyber and DDoS attacks. Buy.
Companies: Corero Network Security plc
EMIS saw trading gradually improve through H220 to finish the year slightly ahead of expectations. The company continued to support customers in dealing with the pandemic, with the recently acquired Pinnacle Systems’ software now being used in the nationwide vaccination programme. Progress was also made in product development with the launch of the first EMIS-X analytics product. We maintain our forecasts.
Companies: EMIS Group plc
Sage Group released a good set of Q1 20/21 figures with organic recurring revenue growth of 4.7% in line with the full-year guidance (+3-5%). This performance was spread out across various cloud native software and essentially driven by the gain of new customers. Lastly, no deterioration in the churn rate is reassuring considering the continuing tough market conditions. All in all, Sage Group confirmed FY2020/21 guidance.
Companies: Sage Group plc
The Panoply’s update on trading for the three months ending 31 December 2020 confirms the group has enjoyed a successful third quarter and continues the trend of positive news flow from the group. Against the backdrop of COVID-19 driven macro-economic challenges, The Panoply has reported an acceleration of new business wins. In our view this further validates both the Panoply’s innovative business model and with operations now focussed on two full-stack brands, demonstrates the strategic value of the acquisitions made to date. Management has increased guidance on FY 21E performance, and we take the company’s cue and revise our revenue and adjusted EBITDA forecasts upwards by 8% and 10% respectively.
VR Education Holdings (VRE) expects FY20 revenue growth of around 38% to €1.42m. This was driven by substantial growth in ENGAGE revenue and its user base, with ENGAGE now accounting for over 40% of group revenue. While ENGAGE benefited from changes resulting from COVID, they also caused museum closures, which reduced Showcase Experience revenues. VRE has also outlined its medium-term outlook objectives for 2023 – 2025. Key targets include ENGAGE revenue of €10m, 500 active enterprise customers and 100K monthly users.
Companies: VR Education Holdings PLC
H1A delivered a very resilient performance given the backdrop of halted deliveries and reduced manufacturing capacity. Orders and shipments are resuming and a ramp up in activity levels is expected in H2. A cash outflow in H1A has been supported by new committed facilities and gross cash levels look set to support the business successfully through the second half and beyond.
Accrol Group Holdings plc (ACRL LN) Bango plc (BGO LN) Brickability Group plc (BRCK LN) Norcros plc (NXR LN) OnTheMarket (OTMP LN) Ricardo (RCDO LN) UP Global Sourcing Holdings (UPGS LN) Watkin Jones (WJG LN) Xpediator (XPD LN) ZOO Digital (ZOO LN)
Companies: ACRL BGO BRCK NXR OTMP RCDO UPGS WJG XPD ZOO NUZE
