MJ Hudson has confirmed that it expects to achieve profits in line with expectations for FY20E. This is a good result linked to new client wins during the COVID-19 disruption and timely cost management. Whilst much of the group's activities are proving resilient, uncertainty remains and in line with most of the peer group, MJ Hudson is withdrawing guidance for FY21E. We similarly withdraw our FY21E forecasts until visibility improves, moving our rating to Under Review. Meanwhile, the shares are now down 30% since their pre-COVID-19 highs, which is beyond that seen at outsourcing peers (Sanne, JTC). Whilst COVID-19 is presenting challenges for many businesses, we believe that: 1) the structural growth drivers in alternatives that underpin MJ Hudson's growth will continue to remain highly relevant, and 2) its strong balance sheet gives it a relative advantage.
Companies: MJ Hudson Group
MJ Hudson's shares are down c27% YTD, which we consider to be overdone, noting that core peers, Sanne and JTC, have bounced back to the levels they traded at before the wider market sell-off. The price fall is despite the business: continuing to trade well, being underpinned by durable structural growth trends, and having c£20m of net cash on the balance sheet (now >25% of the market cap) which will help fuel both organic and inorganic growth. Recent M&A by JTC highlights the value of secure revenue models in the peer group, and applying the EBITDA multiple paid, would imply c35% upside to MJ Hudson's share price.
MJ Hudson has reported an excellent H1/20A, with organic revenue growth of +12.5% YoY. Improving brand recognition is helping to drive new (and larger) contract wins, and cross-selling initiatives are paying off. Net cash of c£20m at period end puts the company in a strong position to capitalise on acquisition opportunities. Trading on an FY21E EV/Adj EBITDA of 11.3x, we see excellent value in this high growth company.
MJ Hudson (MJH) is a financial services infrastructure platform business. The company is capitalising on the shift in the asset management industry to alternative investments, and filling a vacuum left by banks withdrawing their support for the sector in the aftermath of the global financial crisis. We estimate MJH's fair value to be up to c30% higher than its current share price, noting that the peer group has performed strongly since the company's IPO. We initiate with a Buy recommendation.
Calisen Group. Potential Intention to Float. Owner and manager of essential energy infrastructure assets . Consolidated FY Dec 18 revenue £162.1m and operating profit £25.4m. Raising up to £300m in primary plus partial vendor sale. 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: MJH FIPP PGH BOOM TPFG OSI D4T4 OMG SAV RMM
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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
Accelerating activity in to FY21
Companies: Manolete Partners
Equals' FY19A results confirm another year of strong, double-digit revenue and adj EBITDA growth. The move to a B2B focused offering continues to progress and looks well timed in view of Covid-19's impact on overseas travel. While the pandemic impacted Q2/20E trading early on, we note June KPI's indicate a positive rebound. Given the continued uncertainty as to Covid's full impact upon FY20E trading, we refrain from reissuing forecasts and thus leave our recommendation under review.
Companies: Equals Group
Record delivered full year results matching expectations with assets under management equivalent (AUME) slightly ahead as positive inflows more than offset the impact of market moves and fee margins were broadly stable. The group also demonstrated its operational resilience and expertise to clients during the onset of COVID-19 and accompanying volatility. Looking ahead, the group has a fresh focus on growth and to support this is investing in a measured way in IT and its staff.
With a new CEO, Amanda Blanc, Aviva’s shareholders could dream of a possible change in the group’s strategy, with a more focused insurance business. The new Chief has an opportunity to take painful decisions in a year where no one will require a high operating performance.
Companies: Aviva Plc
S4 Capital has announced the merger of Lens10, a leading Australian digital strategy & analytics consultancy, with MightyHive, its data & programmatic media practice. Founded in 2010, Lens10 provides a range of data services including digital strategy, digital analytics, optimisation and tag management. It is a certified Google Partner in Google Analytics, Google Cloud & Google Marketing Platform and is an Adobe Analytics partner. It has 25 data specialists in Melbourne and Sydney, and has a blue-chip client list including CottonOn, National Rugby League, Australian Ballet and ME Bank. Data analytics continues to grow in importance as marketers accelerate their digital transformation and S4 Capital indicates it has seen explosive demand for these services. No financial information has been disclosed, though we note the group reiterates its commitment not to compromise its balance sheet, which remains net cash. Separately, the group has announced that Miles Young, previously Chairman & CEO of Ogilvy, is joining the board. He has particular expertise in creative work and talent, new technologies and Asia Pacific developed over 35yrs at Ogilvy
Companies: S4 Capital
Trading Well in Tough Market
Companies: Palace Capital
The covid-19 pandemic has had a devastating effect on the share price of property companies, with 31% wiped off the value of their total market capitalisation during the first quarter of 2020.
Companies: AEWU CREI CSH BOOT INL HLCL THRL SUPR RESI RGL DIGS GR1T SOHO PHP BOXE ASLI UTG AGR UAI BLND UANC CAL SHED CWD WHR EPIC WKP GRI YEW HMSO PCA INTU NRR
Wirecard UK’s suspension by the FCA has been lifted, allowing U Account business through Shelby Holdings and Morses Club to resume as normal, permitting customers full access to cash, which was previously frozen, albeit ring-fenced in a safe Barclays UK account. Morses Club has offered its U Account customers free use of the previously affected U Account accounts in July as compensation for the issue, helping to mitigate any negative impact and ensuring the relationship with customers remains strong.
Companies: Morses Club
Hipgnosis Songs Fund (SONG LN) has today announced a trading update for the full year ending 31 March 2020. The unaudited NAV has risen 13% YoY to 116.7p, up 14.3% since the last published NAV of 102.2p as at 10 January 2020. This represents a like for like valuation uplift of 11.4%. All equity has been fully deployed and shareholder approval has been sought to increase net debt from 20% to 30%. Revenue is strong with £64.7m generating an EPS of 10.7p (more than 2x the annual 5p dividend target). NAV growth has been driven by revenue statements which were up 2%, and an increase in streaming growth rate assumptions by the independent valuers. The portfolio comprises 54 catalogues, with 13,291 individual songs, now valued at £757m which was acquired at purchase price of £697m on an acquisition multiple of 13.9x – now valued on 15.0x historical earnings.
Companies: Hipgnosis Songs Fund Ld
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
Blackbird plc* (BIRD.L, 19.25p/£64.7m) | Mirada plc* (MIRA.L, 92.5p/£8.2m) | Tern plc* (TERN.L, 10.75p/£29.0m) | Checkit plc (CKT.L, 39.5p/£24.5m)
Companies: BIRD MIRA MIRA TERN CKT
Ground Rents Income Fund (GRIO) has today released its interim results for the period ending 31 March 2020. The fully diluted NAV is 110.1p down marginally from previous NAV of 111.3p as at 30 September 2019 year-end. This valuation included a material valuation uncertainty clause as a result of the COVID-19 pandemic, which has subsequently been removed since the period end for long dated ground rent valuations given the defensive nature of the income streams and continued market/transactional activity. The latest valuation represented a decrease on a like for like basis of £0.36 million or -0.3%. Two Interim dividends were paid during the six-month period ending 31 March totalling 1.98p, and a further dividend of 0.99p has been declared today (ex 16 July / payable 10 August). Dividend cover excluding the non-recurring litigation costs on Beetham Tower was 90%. Assuming a full year dividend of c4p this puts the shares on a flat yield of 4.9% and a discount of 26%.
Companies: Ground Rents Income Fund
S&U released its preliminary FY20 results yesterday morning, which demonstrate considerable resilience against a backdrop of election and Brexit turbulence and weakening consumer demand - although that already feels like ancient history.
REACT Group plc (REACT) is exploiting a gap in the market for specialist deep cleaning services for customers in the public and private sectors, with revenues split 50/50 between reactive work and regular maintenance. The Covid-19 pandemic has led to a significant upturn in activity in certain sectors (such as healthcare and transport) but temporarily weaker demand from others (such as hospitality). While its Covid-related work is by no means its biggest revenue generator, the legacy of the pandemic is likely to have a profound impact on future levels of activity as all businesses and organisations become more aware of the importance of maintaining high standards of cleanliness and hygiene. With a new management team and strengthened balance sheet, we believe the outlook is positive, a view that has been supported by the Group’s interim results which have generated maiden profits.
Companies: React Group