Strategic and operational momentum has continued in Q2, and gross margin has increased further. Helped by platform automation and the focus on overheads, operating leverage has driven a A$6m BITDA uplift YoY. While still conservative, we have raised our FY21 EBITDA by A$0.3m, a 21% upgrade on a pre-IFRS16 basis. We also have raised our net cash forecast to A$10m. The investment case hinges around the very substantial growth opportunity in ANZ where the channel shift has accelerated. On good execution and growing EBITDA margin, a pathway to A$500m valuation appears plausible, implying c£275m (30p) vs £85m (9p) today.
Companies: MySale 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.
MYSL’s online capability and operating flexibility allowed it to navigate CV19 and pivot from loss to profit in Q4, a trend that strengthened in recent FY21 trading with EBITDA margin already 5%. There is substantial potential for MYSL post-CV19 as the channel shift accelerates in ANZ, and by leveraging counter seasonal opportunities and providing brands with access to its ANZ customers. This includes fresher stock at lower discounts/higher margin. Excess inventory in the northern hemisphere is clearly an opportunity too. With a highly scalable business model, expanding EBITDA margins, and now with net cash and a working capital surplus, prospects are bright. We have reinstated forecasts given the improved visibility.
MySale has announced results for FY20A, a year of significant transformation for the Group with the business restructured, recapitalised and repositioned for sustainable and profitable growth. MySale is now a well invested, inventory light e-commerce platform, backed by a solid balance sheet with no debt and cash of A$15.9m at 31 October. We see potential for significant operational gearing to be realised as the business begins to re-scale its international partnerships and build out a new stock model focused on shallow buys using a test and repeat strategy, evidenced by profitable and cash generative trading delivered in Q4 FY20 and the first quarter of FY21E.
MySale has proposed a direct subscription to raise c£5.1m (A$9.3m). The new capital is being provided by the founders of Catch.com.au, one of Australia’s most successful online retailers, and should boost confidence in MYSL’s business model and future upside potential. The new holders will have a 9.1% stake. Some proceeds will be invested into its proprietary market place platform. Some may also be used to take advantage of new global branded inventory opportunities, resulting from the pandemic. Trading in FY21 has started strongly and MySale is well placed to take advantage of the accelerated shift online both short & long term.
Following its strategic pivot to an ANZ-first marketplace platform, MySale’s improved online capabilities and operating flexibility have enabled it to navigate successfully through this period of unprecedented disruption, and to take advantage of the increased online demand in Q4, including in homewares. There are significant opportunities for MySale in a post covid19 world as the channel shift accelerates in its core ANZ markets. Taking advantage of counter seasonal opportunities, and providing global brands with access to its ANZ customers, is one of MySale’s core strategic pillars - and disruption to supply chains and excess inventory build in the northern hemisphere represent a major opportunity. Having delivered positive EBITDA margin and cashflow in Q4, and with the business model very scalable, prospects are bright. In this context, valuation looks very undemanding on 0.5x historic EV/sales.
Despite the opportunities for MySale’s digital marketplace platform presented by sector inventory/supply chain disruption + a rapid online channel shift, there can be no assurances that the recent sales surge is sustained. Indeed NZ rules changed today. Given the uncertainty, the Board is sensibly adopting a prudent approach and has taken immediate steps to preserve its cash position and has at its disposal numerous levers to reduce costs and manage cashflow until certainty re-emerges.
Calisen Group. Potential Intention to Float. Owner and manager of essential energy infrastructure assets through its subsidiaries Calvin Capital and Lowri Beck . Consolidated FY Dec 18 revenue £162.1m and operating profit £25.4m. Raising up to £300m in primary plus partial vendor sale. Expected Admission February 2020 The Global Sustainable Farmland Income Trust will invest in a diversified portfolio of operational farmland assets located in major agricultural markets including the United States, Europe, New Zealand, Australia and certain countries within Latin and South America. Raising up to $300m. Due 28 February. Investment firm Nippon Active Value fund is seeking to raise up to £200m at an issue price of 100p per share via an IPO. The company aims to invest in a portfolio of quoted Japanese stocks with market capitalisations of up to $1bn. First day of dealings expected early February.
Companies: STKR DBOX CLL EME MSYS AEE MYSL THR TEK ECR
MySale is executing a clear strategy, focused on the sizeable ANZ market. It is leveraging its proprietary Marketplace platform, which is highly cost efficient, scalable and inventory light. Also the balance sheet is now debt free and cash positive. This facilitates execution of the strategy through to positive EBITDA next year. The new strategy has a near zero risk approach to inventory, and the release of stock/receivables tied up by its previous own buy/wholesale activities is progressing well. Once complete, MySale will operate with negative working capital. It has a unique and appealing proposition for global suppliers and ANZ consumers alike. On good execution value creation could be significant.
Alumasc Group plc, the prem ium building products, system s and solutions group, has announced its intention to m ove from the Premium Segment of the main market to AIM. Expected market cap of £33.4m. Expected 25 June 2019 Expected market cap of £36.5m
Argentex a UK-based forex service provider founded in 2011 by its current management team which operates as a Riskless Principal for nonspeculative and forward foreign exchange as structured financial derivatives is looking to join AIM. Offer TBC, expected 25 June
Companies: SO4 VEL THR TERN SENS TILS MYSL SIXH IMMO
Following the RNS 2 weeks ago, MySale has today confirmed the disposal to Brandalley UK of its UK business Cocosa has completed (for £1.5m). The review of its SE Asia operations, which generated c11% of group revenue in FY18 (and incurred a loss) is ongoing. This is in line with the group's strategy to rationalise its non-ANZ divisions and focus on its sizeable core ANZ markets where there is significant growth potential. However, the update indicates current trading remains challenging and that the focus is on reducing the cost base, where it continues to make progress. Once these changes are completed, the more streamlined and focused approach will allow MySale to provide an improved offering for its customers and brand partners with the aim of rebuilding profitability. For now though, and pending clarity around the various changes to the group and their financial effects, we are temporarily withdrawing forecasts.
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. Offer TBC, expected 29 May 2019. Induction Healthcare Group plc—a healthcare technology company focused on streamlining the delivery of care by Healthcare Professionals looking to join AIM. Expected raise of £14.58m at 115p, market cap of £34.07m. Expected 22 May 2019. SDX Energy plc—a North Africa focused oil and gas company, announces its intention to complete a Canadian plan of arrangement under section 192 of the Canada Business Corporations Act and will have shares de-listed from the TSX-V and admitted to trading on AIM. Expected 28 May 2019, anticipated market cap of £76m 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
Companies: SAR MYSL SEE BLV IND ERGO DDDD AEO
MySale has agreed the disposal of Cocosa to Brandalley UK for £1.5m. Although small, the disposal is accretive as Cocosa incurred a loss before tax of A$0.4m in the year to June 2018. This disposal is in line with the group's strategy to rationalise its non-ANZ divisions and focus on its core and sizeable ANZ markets where there is significant growth potential. Completion of the disposal is expected on 9 May. Prior to this transaction the stock was trading on 0.15x EV/sales and, given some accretion, this will reduce slightly post completion.
SDX Energy plc—a North Africa focused oil and gas company, announces its intention to complete a Canadian plan of arrangement under section 192 of the Canada Business Corporations Act and will have shares de-listed from the TSX-V and admitted to trading on AIM. Expected 28 May 2019, anticipated market cap of £76m
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.
Distribution Finance Capital Holdings plc — specialist lender which builds relationships with manufacturers and then provides working capital solutions up and down their supply chains to drive their growth is looking to join AIM. No raise, secondary offering of £19.8m at 90p, expected market cap of £95.98m. Expected 09 May 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
Arbuthnot Banking Group plc, primarily involved in banking and financial services including commercial banking, private banking, wealth planning and investment management, is looking to joining the NEX Exchange Growth Market. Expected 17 May 2019
Companies: ITM SML MYSL NUM SYM SFOR VGAS RMM ITX DPP
In line with revised guidance, H1 EBITDA declined to a A$5.0m loss reflecting worse than expected market disruption in Australia following sales tax changes, and related execution challenges incl. geographic stock locations. Net cash increased to A$2m reflecting good w/c performance. Although immediate actions were taken in response, including accelerating platform automation and cost savings, improvements are taking longer to flow through. Management is also adopting a more prudent view of wholesale. This means an EBITDA loss is now expected in H2. It should return to profit in FY20 but our forecasts are being withdrawn temporarily pending further clarity on the various moving parts.
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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
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
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
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)
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
GB Group (GBG) has sold its marketing services business to HH Global Group for an undisclosed amount. This was not an area of focus for GBG and has been in managed decline for several years. Just before Christmas, GBG boosted its Fraud business with the acquisition of fraud investigation automation software from HooYu for £4m in equity. We have revised our forecasts to reflect the disposal and acquisition, leading to small upgrades to our EPS forecasts. Both deals emphasise the company’s strategy to focus on Identity, Location and Fraud.
Companies: GB Group 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
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
Strong Q4 performance from Audioboom plc, the leading global podcast company, as it continues to outpace the global podcasting market. Audioboom bounced back from the Q2 CV-19 lull in Q3 and growth accelerated in the final quarter. Q4 revenue of c. $8.5m was a record, up 25% on the same period last year and the previous record, and FY20 revenue of c. $26.8m (+20%) was comfortably ahead of forecast (ACLe: $25.5m). There were also record KPI performances (brand count, eCPM and available ad inventory). Coupled with continued cost control, adj. EBITDA loss fell to c. $0.2m in Q4 and c. $1.8m for FY20 (FY19: $2.9m, ACLe: $1.9m). The company has good access to capital ($6.6m at year end) and management expects to achieve a maiden positive adj. EBITDA for FY21. We introduce FY21 forecasts and set a fair value of 420p/share, equivalent to an FY20 EV/Revenue of 3.3x and 2.5x FY21. Although a premium to the current price, this still represents a significant discount to recent industry transaction multiples.
Companies: Audioboom Group 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.
Tern plc* (TERN.L, 7.1p/£23.5m) Portfolio update: Strong business momentum (12.01.21) | Audioboom plc* (BOOM.L, 276p/£43.3m) Expanded content network (15.01.21)
Companies: Tern Plc (TERN:LON)Audioboom Group PLC (BOOM:LON)
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.
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
ZOO’s H1 FY21 included a tumultuous few months as COVID-19 effectively shut off work on new media content production which impacted subtitling projects, but studios rapidly adopted Cloud-based dubbing and the group’s digital packaging business enjoyed a dramatic rebound in fortunes. We note the positive commentary in today’s RNS and upgrade our FY21E and FY22E estimates to reflect the recent performance and, in particular, the exceptionally strong H2 trading that the group is enjoying.
Companies: ZOO Digital Group plc