IIP has announced a further decline in its NAV per share from 28p as at 31 March 2018 to 21p as at 30 September, reflecting continuing delays to completion of the container terminals at its key asset, DLI. These delays are being caused by a lack of available funding, which the financing agreements announced on 31 July should address. The company now expects these agreements to be completed by the end of the year. The company flags that these financing agreements will be dilutive to NAV per share. The Nagpur terminal has continued to ramp up activities, the IHDC hydro portfolio production increased YoY and the IEL wind energy portfolio production was marginally down YoY. At period end the company had unaudited cash balances of £1.7million and on balance sheet loans of £56.1million. Completion of the financing agreements will see the company sell 24% of DLI for $50million with a further $75million injected over time directly into DLI through the issue of convertible securities, which will result in an ultimate holding in DLI of between 20% and 49%.
Companies: Infrastructure India
Elementis (ELM LN) Interims confirm FY guidance, Mondo acquisition under review | Infrastructure India (IIP LN) Proposed financing to generate $125m
Companies: Elementis Plc Infrastructure India
IIP’s half year results to 30 September 2017 reflect weakness in the Indian Rupee exchange rate around the period end and ongoing difficulties in progressing the development of the main transport and logistics asset, DLI. The reported NAV per share has declined from 41p at 31 March 2017 to 35p at the half year point. While the policy background remains favourable to the logistics sector in India, current operating conditions are tough and IIP requires additional finance to compete the build-out of its container terminals. The well-publicised discussions to raise this finance are reported to be advanced, but given the inherent uncertainty our forecasts remain withdrawn.
Advanced Medical Solutions (AMS LN) In line FY trading update | Infrastructure India (IIP LN) NAV declines further - financing discussions continue | IQE (IQE LN) Apple investment in VCSELs highlights upgrade potential | ReNeuron Group (RENE LN) Interim results and IND approved to commence Phase IIb in stroke | Severfield (SFR LN) Significant Google contract confirmed | Synairgen (SNG LN) Revised terms with Pharmaxis | Tribal Group (TRB LN) Financial performance materially ahead | Vernalis (VER LN) Trading update highlights Tuzistra® XR run-rate below expectations
Companies: AMS IQE VER SNG IIP TRB SFR RENE
Frontier Smart Technologies Group (FST LN) (VIDEO SUMMARY) Value in innovation, growth and cash generation | Infrastructure India (IIP LN) Difficult conditions cause DLI delays | Microsaic Systems (MSYS LN) Difficult H1, but new focus showing +ve signs | Midatech Pharma (MTPH LN) H1’s & £6m Placing; key trials to start in Q4 | Mobile Streams (MOS LN) Argentina still tough, growing pains in India | Vp (VP/ LN) Positive half year update
Companies: VP/ MOS IIP MTPH MSYS FST
Huge difference between Management fair value estimates and market cap remains
Infrastructure India’s portfolio performance in the half year to 30 September was characterised by difficult operating conditions for the key asset, DLI, offset by a significant benefit from a strengthening Indian Rupee and an improvement in the Indian risk free rate used for asset valuations. Balance sheet liquidity improved with the disposal in the period of the toll-road interest for £22.4m. However further measures or renegotiation will be needed to deal with the £13.4m working capital loan due in April 2017. While the DLI asset is under pressure from a disrupted transport sector and delays to completion of its terminals, it will be difficult to make substantial inroads to the still huge 81% discount to NAV. This looks an opportunity for the future.
COLEFAX GROUP PLC (CFX LN) | COLLAGEN SOLUTIONS PLC (COS LN) | CRAWSHAW GROUP PLC (CRAW LN) | CRONIN GROUP PLC (CRON LN) | FRANCHISE BRANDS PLC (FRAN LN) | INFRASTRUCTURE INDIA PLC (IIP LN) | MEDAPHOR GROUP PLC (MED LN) | POWERFLUTE OYJ (POWR LN) | PURPLEBRICKS GROUP PLC (PURP LN) | TRIBAL GROUP PLC (TRB LN)
Companies: COS MED POWR CRAW TRB FRAN DMTR PURP CFX IIP
Greene King (GNK LN) Stronger than anticipated finals | Harwood Wealth (HW LN) Interims in-line, healthy acquisition pipeline | Infrastructure India (IIP LN) Sale of interest in WMP toll road completes | OMG (OMG LN) Appointment of Non-Executive Chairman
Companies: OMG GNK IIP HW/
EKF Diagnostics (EKF LN) Appointment of Christopher Mills as Chairman | Infrastructure India (IIP LN) Asset disposal and DLI update | Liontrust Asset Management (LIO LN) Positive flows in volatile Q4, Euro income acquisition | Minds + Machines Group (MMX LN) Transformative outsourcing contracts | Senior (SNR LN) High quality Aerospace manufacturer
Companies: EKF IIP LIO MMX SNR
IIP has achieved a decent sale of the toll road minority interest (WMP), albeit at a small discount to balance sheet valuation, and provided an encouraging operational update on the key logistics business, DLI. Under the circumstances, the WMP disposal offers some validation of the NAV approach, while of course also increasing balance sheet liquidity. In the context of movements in the Rupee exchange rate and the risk-free rate, we expect any change to NAV arising from this update to be immaterial and accordingly do not alter our March ’16 NAV per share estimate of 49.8p. In light of this the discount, which has widened again to 70%, looks to us too high.
As foreshadowed by the company’s notice of results on November 25th, the Rupee exchange rate and softer background business conditions have caused the NAV per share to fall to 48p from 55p at the March 2015 year end. Most of this impact was seen in the valuation of the key logistics investment DLI, where nonetheless steady progress towards completion of the 4 container terminals has been made. Operationally, the other assets have performed broadly in line with expectations during the first half of the year. The shares stand at a sharp 62% discount to the current NAV reflecting macro headwinds in the near term.
NAV of 55p per share at 31 March 2015 was better than expected. This was driven mainly by movements in the Indian risk-free rate and INR exchange rate and means that despite some recent movement in the share price, it remains at a 71% discount to NAV. This looks too high as the key DLI subsidiary increasingly transitions from regulatory/bureaucratic/financial risk to operational risk. Operationally, all assets have performed broadly in line with expectations during the second half of the year.
Infrastructure India has provided an encouraging update today on expected year-end NAV, the ramp-up of business in the all-important DLI container transport and logistics business and the steady state of the other assets. Management’s expectation that the NAV has resumed upward progress to about 55p as at 31 March (our estimate was 47p), after the difficulties of recent times, suggest strongly that the implied 74% discount to NAV should start to narrow.
Infrastructure India (IIP LN) NAV resumes progress, discount looks too high | Latchways (LTC LN) Results in line; Outlook improving | Premier Technical Services Group (PTSG LN) First acquisition enhances offering with turnaround potential | Redcentric (RCN LN) Delivering organic growth
Companies: IIP PTSG RCN
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Litigation Capital Management has announced FY20 results with gross profit up 7% to A$21.7m and PBT of A$9.2m, slightly behind expectations albeit the Group had already flagged that delays to 3 cases during the year would result in resolutions in FY21, thereby impacting FY20 results. That said, excellent strategic progress through the year and good news flow as well as increasing scale suggests more value to come. Reiterate buy
Companies: Litigation Capital Management Ltd.
To achieve YoY revenue growth over H1/20A despite the challenges of Covid-19 and its impact on the travel sector is testament to Equals' resilience and increasing focus on B2B and International payments services. While weaker gross profit and EBITDA margins have impacted profitability in H1/20, we see potential for an earnings recovery in H2/20 given cost reduction measures currently being undertaken. This should lead Equals to cash breakeven in Q4/20 and FCF positive by early FY21.
Companies: Equals Group Plc
FY20A results largely reflect a period prior to the Covid-19 lockdown, yet show Duke entering a more challenging FY21E with momentum. Yesterday's trading update demonstrated another notable rise in quarterly cash receipts for Q2/21, as royalty partner trading continues to improve. As some partners' forbearance measures will expire this month, Q3/21 receipts should continue this upwardly momentum. This opens the door to a return to cash dividends at some future point. Today, Duke also confirms it is now seeking new royalty partners, alongside follow-ons.
Companies: Duke Royalty
Interim results demonstrate YoY growth and a resilient outcome that has exceeded management's expectations from the start of the Covid-19 pandemic. This is testament to the degree of recurring revenue generated across the business. FY21 trading looks to be more challenging, as notably lower new insurance sales post-lockdown will translate into lower premium income. A number of organic opportunities are being worked on to fill the shortfall. Rising UK redundancies and their impact on policyholder retentions creates great uncertainty, hence our forecasts remain withdrawn and recommendation remains Under Review.
Companies: Personal Group Holdings Plc
Sigma Capital (“Sigma”) has partnered with global alternatives manager EQT to deliver and manage a £1bn GDV private-rented sector (“PRS”) housing fund focused on Greater London. EQT will invest £300m equity, complemented by debt (including a Homes England facility), to build 3,000 homes in 5 years. Sigma will generate fee income as development manager, a recurring fee income stream from managing completed assets, as well as participation in returns via a minority co-investment (£16m) and a profit share. We estimate that the fee income alone is worth £45m to Sigma in the first five years: 50% of the current market cap. Crucially, this is a step up in AuM bringing a high quality long-term recurring earnings stream. We will reforecast following interim results (expected tomorrow) to provide full context.
Companies: Sigma Capital Group Plc
In June, faced with the task of replacing its longstanding portfolio manager, Alistair Mundy, Temple Bar Investment Trust’s (TMPL’s) board reiterated its commitment to a value style of investing. The board has now opted to hand the management contract to Nick Purves and Ian Lance of RWC Partners, two managers with considerable experience of managing income portfolios using a value-style approach. Value investing, where managers buy stocks that are valued more cheaply than market averages – based on measures such as price/earnings, price/book and yield – is deeply out of favour. The RWC team says that value stocks have never looked more unloved in the 30- odd years that they have been managing money. In their view, this makes it imperative that TMPL investors keep faith with the strategy and it also means this is an attractive entry point for new investors. One important change, however, is a cut to TMPL’s dividend to a level that the RWC team believes will be more sustainable.
Companies: Temple Bar Investment Trust
In line interim results to 30 June 2020 show the strength of this business amid a difficult environment. This is the first step in what should be an exciting growth trajectory toward a larger, scaled up business with high recurring revenues and ownership of the full supply chain in the personal injury and clinical negligence market for clients requiring long-term, risk-adjusted returns. We reiterate our TP of 50p, noting further upside potential as acquisitions are completed.
Companies: Frenkel Topping Group Plc
HSBC’s future should be clarified as soon as the US and China come back to the negotiation table. This will not happen before the US elections are over. In the meantime, HSBC will continue to be instrumentalised and its share price will remain under pressure.
Companies: HSBC Holdings Plc
Today's news & views, plus announcements from VOD, POLY, SMDS, BLND, BYG, WEIR, DC, SNR, SHI, INTU, IHR, CNC, ARE, INCE
Companies: INTU SHI INCE
The impressive full year 2019 results included some eye-catching numbers, including a record PBT of £40.1m (nearly 3x FY18 @ £14.3m), £620m of reserves acquired over 16 legacy deals, and $842m of (estimated) Contracted Premium in the Program business – on track to breach $1bn in FY20 as previously guided and $1.5bn-$2bn in 2022-2023.
Companies: Randall & Quilter Investment Holdings Ltd.
As anticipated, Record has confirmed a material uplift in AUME following the rebound in financial markets from April. We upgrade FY21E forecast EPS by +18%, with higher staff costs offsetting some of the benefit. We expect AUME growth to be more modest from herein. While no performance fees have been recognised over Q1/21 and will be harder to achieve due to Covid-19, any future recognition would have a materially positive impact on earnings. Covid has temporarily paused new client wins, but we expect further additions to come as conditions improve.
Companies: Record Plc
Mercia’s FY20 results reflect continued progress, delivering on management’s three-year strategy. AUM climbed 58% to £0.8bn, while FUM rose 73% to £658m. Following the acquisition of the NVM VCT fund management business, the company is operationally profitable on a monthly basis, with annual revenues exceeding operating costs for the first time in FY20. Net assets rose 12% to £141.5m, with the direct investment portfolio stalled at £87.5m reflecting the impact of COVID-19 fair value adjustments and a £15.7m net investment. The group remains well-placed for a downturn with £30m of unrestricted balance sheet cash and £320m of group cash. Post period end the group exited The Native Antigen Company, with £5.2m in cash (8.4x return, 65% IRR) expected. Despite the group’s progress, Mercia’s shares continue to trade at a material discount to NAV (0.60x), even before considering the embedded value of the third-party fund management business (> 4.5p at 3% of AUM).
Companies: Mercia Asset Management Plc
COVID-19 and a further cut to power price assumptions saw NAV per share fall to 309p in H120 (FY19: 337p). However, PPP performed well, bidding momentum has picked up recently and John Laing Group (JLG) expects ‘modest’ NAV growth in H2. New CEO Ben Loomes highlighted digital connectivity and energy transitions as potential future investment themes, and will set out further details in November. We cut our FY20 NAV per share forecast by 14% to 308p. The share price stands at an 8% discount to FY20e NAV per share.
Companies: John Laing Group Plc
Trident Royalties Plc (AIM: TRR) has, this morning, announced the acquisition of a 1.5% Net Smelter Royalty (NSR) over the resourcestage Lake Rebecca Gold Project located in the highly prospective Eastern Goldfields province in Western Australia. The royalty package is being acquired from a private seller for a total consideration of A$8.0 million (c. US$5.63 million), comprising of A$7.0 million in cash and A$1.0 million in new ordinary shares in Trident. The acquisition is Trident’s fifth overall and its third gold deal. As per strategic guidance the company is moving fast assembling a diversified portfolio with a paying cashflow stream from iron ore and copper production and several strategic gold royalties with the potential for near term revenues. The market is paying attention with TRR shares up 49.8% since its IPO on AIM in June this year. There is clearly more to come with c. US$7.5 million of uncommitted cash as well as the potential for debt funding and the ability to use equity as acquisition consideration. The Lake Rebecca Gold Project operated and wholly owned by Apollo Consolidated (ASX: AOP), is located 150km ENE of Kalgoorlie in the Eastern Goldfields Province of the Yilgarn Craton. The Project, envisaged as a simple open pit operation, is close to existing gold infrastructure namely Saracen Mineral Holdings Limited’s (ASX: SAR) Carosue Dam Operation whose processing plant is in the process of being upgraded to increase throughput to 3.2 Mtpa.
Companies: Trident Royalties Plc
A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA