IQE (IQE LN) Momentum good heading into pivotal H2 | Surgical Innovations Group (SUN LN) CE mark validation indicated for Cellis range | UDG Healthcare (UDG LN) Acquisitions/disposal a wash, but Ashfield Clinical & Commercial drags
Companies: IQE SUN UDG
Gooch & Housego (GHH LN) Earnings enhancing acquisition of VITL | Hill & Smith Holdings (HILS LN) H1 revenue shortfall not expected to be recovered in H2 | UDG Healthcare (UDG LN) In line Q3 update and disposal of Aquilant
Companies: GHH HILS UDG
1Spatial (SPA LN) Focusing on key USP | accesso Technology (ACSO LN) Positive AGM statement | Applied Graphene Materials (AGM LN) James Briggs taking graphene to market in Q4’18 | Carador Income Fund (CIFU LN) CLO refinancing activity increases post risk retention ruling finalisation | First Derivatives (FDP LN) Strong growth in all markets | Halfords Group (HFD LN) Further investment + restraint on price rises = 5-6% consensus d/grades | Scapa Group (SCPA LN) Strategic progress and opportunities ahead | UDG Healthcare (UDG LN) Interims in line, FY EPS guidance unchanged
Companies: ACSO AGM FDP HFD SCPA UDG SPA
Pharmaceutical Services is a vast and varied landscape, reflecting the complexities in the discovery, development, manufacturing and monitoring of drugs and devices, all within a stringent regulatory environment. The overall growth prospects are highly favourable: drug development activity globally is on the up, led by smaller companies, which is driving demand for outsourced services. In this report we provide a breakdown of the sector into its main activity segments, and identify biologics, increasing service specialisation and consolidation as important value drivers. Finally, we present 15 companies (9 of which are publicly listed) that, in our view, are well placed to benefit from the sector’s secular growth trends.
Companies: ABZA BQE CSRT INS UDG CLIN ERGO OXB
Future (FUTR LN) Making the intangible very tangible | Grainger (GRI LN) In line trading update, PRS investment strategy continues | Harwood Wealth (HW LN) Appointed portfolio research partner by Frenkel Topping | UDG Healthcare (UDG LN) Model updated for FX and tax
Companies: FUTR GRI HW/ UDG
The recent Q1 update indicated another good start to the year, with Ashfield continuing to perform well and Sharp in the US still suffering a hangover from a soft H2. The outlook however remains positive and we expect another year of 20%+ EPS growth, assisted by recent acquisitions, a lower effective US tax rate and dollar weakness. We upgrade FY18 EPS by 4% and by 9-10% thereafter, but stay at Hold on short term valuation considerations with a SOTP/DCF-based TP of 813p.
Companies: UDG Healthcare Plc
A positive Q1 trading update, with full year EPS guidance issued of 18-21%. Ashfield continues to perform well, although volumes in Sharp US remain sluggish, though expected to pick up in H2. No major changes expected to our forecasts at this stage. The group remains in active pursuit of further acquisitions and we expect more deals to complete through the year as the ~$500m firepower is deployed.
Brooks Macdonald Group (BRK LN) +7% Q2 FuM, reiterating BUY on sustained growth | Domino’s Pizza Group (DOM LN) Strong Q4 resulting in a beat | dotdigital Group (DOTD LN) New CFO appointment | EMIS Group (EMIS LN) Loss of minor contract | Restore (RST LN) Y/E update confirms another year of strong growth | UDG Healthcare (UDG LN) Positive Q1 update
Companies: BRK DOM DOTD EMIS RST UDG
UDG’s FY17 prelims are in line / slightly ahead of expectations at the EPS level, capping what has been a busy year as the group deploys its firepower on building a global pharma services business. Underlying divisional performance was as expected, with Ashfield Communications remaining the key growth driver for the group. We make no material changes to our forecasts, having recently upgraded by 7% for the MicroMass deal. Further acquisitions in the new year should drive more upgrades. We stay at Hold on short term valuation considerations, but can see medium term upside.
We expect the upcoming prelims to show another year of solid growth. UDG continues to benefit from structural growth in its markets and deploys its firepower on margin enhancing acquisitions. We upgrade FY18/19 EPS forecasts by 7% to reflect the MicroMass deal, but leave FY17 unchanged. We expect further acquisition-led upgrades in due course, potentially of 40-50%. This underpins the medium term investment case and should support the rating, which on normal conventions looks full. We stay at Hold for now with a SOTP/DCF-derived TP of 841p (from 770p) but can see a route to 1100p-1200p over the next couple of years on successful execution.
Ergomed (ERGO LN) Clinical hold on CEL-SCI’s Phase III removed | H&T Group (HAT LN) Positive interim results, benefiting from gold price increase | Marshall Motor Holdings (MMH LN) Deep value as strong performance ongoing & net bank debt reduces | UDG Healthcare (UDG LN) Acquisition-led upgrade momentum building
Companies: HAT UDG ERGO MMH
We have updated our forecasts for the two acquisitions completed in July and the recent trading update, upgrading EPS by 1-3%. We continue to be attracted to the long term story around UDG, with the track record of acquisitions having been exemplary so far. These attributes are no longer hidden under a bushel however and, with the shares trading on ~30x P/E, a 30%+ premium to its closest peers, UDG probably needs to grow into its valuation. We stay at Hold with a TP of 770p.
Bioquell (BQE LN) Positive trading continues | Earthport (EPO LN) Partnership with Kotak Mahindra Bank | Ground Rents Income Fund (GRIO LN) Further clarification on doubling assets | Oxford Metrics (OMG LN) Further product innovation at Vicon | Porta Communications (PTCM LN) Strategic investment and debt reorganisation | Spirent Communications (SPT LN) Still waiting on return to top line growth | StatPro Group (SOG LN) Scale and sales hires should drive organic growth | UDG Healthcare (UDG LN) Solid Q3 update overall, but Sharp weakness an irritation
Companies: BQE SPT OMG UDG PTCM GRIO EPO SOG
In our second edition of “Trend spotting” we note how in the last three weeks the defensive rotation trend has gathered pace and further evidence has emerged of the “relative fading” in the UK economy. However we now see early signs of the “risk on” trend starting to reassert itself in equity markets and we look at small cap laggards plus European exposure as ways to play this.
Companies: GNS REDD SPH TRI XAR BOY VCT GHH CHH DPH INS HILS RPS LWB EKF UDG SYNT MYSL IMO BCA JUP KMK
UDG’s first material acquisition since the disposal of the Supply Chain division in April gives some flavour of the direction ahead. It is paying just over 8x EBITDA for a fast growing and high margin business, which will bring a unique service offering into the Ashfield mix. Although FX and opex related to the Future Fit programme temper our EPS upgrades to 3%, we expect further accretive deals to follow. We increase our TP to 746p and reiterate our Buy recommendation.
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Novacyt S.A. (NCYT.L*): R&D Update | N4 Pharma (N4P.L): Full year results
Companies: Novacyt SAS (ALNOV:PAR)N4 Pharma Plc (N4P:LON)
tinyBuild— a leading video games publisher and developer with global operations. tinyBuild's strategic focus is in creating longlasting IP by partnering with video games developers, establishing a stable platform on which to build multi-game and multimedia franchises is to join AIM. Offer details TBC. Due mid-March. AMTE Power, a developer and manufacturer of lithium-ion battery cells for specialist markets, announced its intention to seek admission to trading on AIM. Admission is expected to take place during March 2021. The Company intends to raise approximately £7m by way of a placing of new ordinary shares in the capital of the Company. Timing TBC. Samarkand Group Limited, the cross-border eCommerce technology and retail group opening up the world's largest market for brands and retailers, intends to IPO on the Apex Segment Aquis Stock Exchange Growth Market. Admission is targeted for March 2021. Cellular Goods a UK-based provider of premium consumer products based on biosynthetic cannabinoids announced its intention to join the main market (standard). Has raised £13M in an oversubscribed placing. £25m mkt cap. Due 26 Feb. NextEnergy Renewables to launch an IPO on the Main Market. NREN is a differentiated renewables investment Company that aims to capture the most attractive private renewables and energy transition infrastructure investment opportunities globally. Targeting a £300m raise. NREN is targeting total returns of 9-11 per cent. per annum (net of all fees and expenses but including the Target Dividend and capital appreciation) . The Company's target dividend yield for the first full financial year to 31 December 2022 is 5.5 pence. Due Early March 2021. Digital 9 Infrastructure launch an initial public offering on the Specialist Fund Segment of the Main Market of the London Stock Exchange, by way of an initial placing and offer for subscription for a target issue £400m. Digital 9 Infrastructure plc is a newly established, externally managed investment trust. The Company will invest in a range of digital infrastructure assets which deliver a reliable, functioning internet. The IPO Prospectus is expected to be published in March 2021. Team PLC announced their plans for an AIM IPO. Team owns Theta Enhanced Asset Management Ltd, trading as Team Asset Management. This is a Jersey-based active fund manager providing discretionary and advisory portfolio management services to private clients, trusts and charities. Assets under management were GBP291m in November, up from GBP140m in December 2019 . The Company is seeking to raise no less than £5m. The Placing will be priced on a pre-money valuation for the Company of £7m. Targeting March Admission. Virgin Wines UK Plc has out their plans for an AIM IPO. Virgin Wines is a direct-to-consumer online wine retailer that sells products to retail customers in the UK through two subscription schemes and a pay-as-you-go offering. The Group also sells a range of beers and spirits and operates a B2B sales channel for corporates. Anticipated mkt cap £110m. Raising £13m in new money and vendor sale of £34.9m . Due 2nd March. Fix Price announces its intention to float on the Main Market of the London Stock Exchange. Fix Price is one of the leading variety value retailers globally and the largest in Russia, with more than 4,200 stores. Fix Price has revenues of RUB 190.1bn, RUB 142.9bn and RUB 108.7bn for 2020, 2019 and 2018, respectively. Adjusted EBITDA for the same years was RUB 36.8bn, RUB 27.2bn and RUB 14.2bn, respectively. The Offer would consist of an offering of GDRs by certain existing shareholders of the Company. Great Point Entertainment Income Trust PLC announced its prospectus has been approved by the FCA. Great Point Entertainment Income Trust PLC is a newly established, externally managed closed-ended investment company. The Company will provide project finance to content makers and commissioners in the global television and film production industry via senior loans secured against pre-sold intellectual property (IP) rights. GPEIT's investment objective is to provide Shareholders with dividend income and modest capital growth through exposure to media content finance. According to media reports, Deliveroo, are expecting to release their IPO plans on 8th March. The company raised more than $180m in January with a valuation of more than $7bn.
Companies: YEW IKA UPR WYN ENW BWNG TRAK DBOX HZM G4M
Shield Therapeutics raised £25m (gross) with up to £4.2m possible via an Open Offer to provide adequate funding to launch Accrufer in the US and sufficient working capital to reach EBITDA breakeven, which is anticipated in 15-18 months. With the prospect of reaching $100m of US revenues and c.$45-50m of EBITDA in 3-4 years, the return on investment is potentially substantial. It is also underpinned by the value of royalty income from sales in Europe through Norgine and the prospect of approval and launch in China through ASK Pharma in 2023. Execution risk for what has been a largely virtual company is mitigated by the employment of a commercial team with relevant US experience to effect the US launch. We make changes to forecasts to reflect the change from a licence model (with larger US partner) to a US sales model, and introduce 2023 forecasts, which indicate adjusted pre-tax profit of £38m. Due to the additional dilution, our target price moves to 250p, underpinned by a DCF of 273p, at which level the stock would trade on a 2023 P/E and EV/EBITDA of 13.3x and 12.2x, respectively.
Companies: Shield Therapeutics Plc
UK railway privatisation, which was launched in the mid-1990s, has finally turned full circle: the Department of Transport has recently confirmed that its controversial railway franchise system will be scrapped. In this month's feature article, Nigel Hawkins, the Infrastructure analyst at Hardman & Co, examines the 25-year history of railway privatisation and chronicles its ups and its downs. The successes of railway privatisation, such as new rolling stock, are addressed, along with the many shortcomings, which included minimal vertical integration. With the winding up of the franchise system, the UK railway sector is effectively reverting to its former status as a nationalised industry, a shift started with the renationalisation of the collapsed Railtrack – later re-badged as Network Rail – in 2001.
Companies: ARBB BBGI CLIG DNL FLTA ICGT OCI PCA PIN PXC RECI SCE TRX SHED VTA YEW
IXICO plc (IXI.L): New contract
Companies: IXICO Plc
In a notable milestone, Yourgene has signed up its first US customer for the Coastal Genomics technology. Whilst “only” worth a minimum of $1.5m over five years, the agreement is important for a number of reasons: i) it validates the commercial potential of the Coastal technology; ii) it adds to Yourgene’s growing presence in the important US market; and iii) it is with a large clinical laboratory group, initially in reproductive health, but with scope to be expanded into other applications in due course. We therefore believe it could be worth significantly more than the quoted minimum value over time. This was anticipated, hence we make no change to our forecasts at this stage, but view this agreement as validating the rationale for acquiring Coastal Genomics in August. We expect this to be the first of a number of partners for the technology, opening up another growth avenue for the group.
Companies: Yourgene Health Plc
In the past two years, since Hardman & Co first started to target the IC sector, we have heard many managers of ICs and boards talk of the growth of the retail investor on their registers. Many have approached Hardman & Co for help in addressing this market, since we have a unique strength in this field relative to other providers.
Companies: AVO ARBB BBGI CLIG DNL FLTA ICGT OCI PCA PIN PHP RECI STX TRX VTA YEW
Diurnal is a commercial-stage specialty pharmaceutical company focused on diseases of the endocrine system. Its drugs target conditions where medical need is currently unmet, with the long-term aim of building an “Adrenal Franchise”. Alkindi® is being rolled out by Diurnal throughout Europe and has been launched in the US by its commercial partner, Eton Pharmaceuticals (ETON). The European and UK regulators are currently reviewing the submissions for marketing authorisation for Chronocort, with approval possible in the next month. Also, DITEST now has a clear regulatory pathway, and the development funding in place.
Companies: Diurnal Group plc
AMTE Power, a developer and manufacturer of lithium-ion battery cells for specialist markets, announced its intention to seek admission to trading on AIM. Admission is expected to take place during March 2021. The Company intends to raise approximately £7 million by way of a placing of new ordinary shares in the capital of the Company. Timing TBC. Samarkand Group Limited, the cross-border eCommerce technology and retail group opening up the world's largest market for brands and retailers, intends to IPO on the Apex Segment Aquis Stock Exchange Growth Market. Admission is targeted for March 2021. Cellular Goods a UK-based provider of premium consumer products based on biosynthetic cannabinoids announced its intention to join the main market (standard) this Spring. Target valuation £20m raising c. £8m “to finalise the development and launch of a range of the Company's premium-quality consumer products based on biosynthetic cannabinoids, which is fully compliant under UK law.” NextEnergy Renewables to launch an IPO on the Main Market. NREN is a differentiated renewables investment company that aims to capture the most attractive private renewables and energy transition infrastructure investment opportunities globally. Targeting a £300m raise. NREN is targeting total returns of 9-11 per cent. per annum (net of all fees and expenses but including the Target Dividend and capital appreciation) . The Company's target dividend yield for the first full financial year to 31 December 2022 is 5.5 pence. Due Early March 2021. Auction Technology Group is considering an IPO on the Main Market. The Group operates six world-leading online Marketplaces and proprietary global auction platform technology for curated online auctions . In FY20 the Group delivered pro forma revenue of £52.3 million, supported by notable underlying year-on-year growth from both Standalone ATG Group and Standalone Proxibid Group (12.4 per cent. and 40.4 per cent., respectively). For the same period, the Group delivered a strong profitability performance of £22.3 million pro forma Adjusted EBITDA representing a pro forma Adjusted EBITDA margin of 42.6 per cent. Expected March 2021. Digital 9 Infrastructure launch an initial public offering on the Specialist Fund Segment of the Main Market of the London Stock Exchange, by way of an initial placing and offer for subscription for a target issue £400m. Digital 9 Infrastructure plc is a newly established, externally managed investment trust. The Company will invest in a range of digital infrastructure assets which deliver a reliable, functioning internet. The IPO Prospectus is expected to be published in March 2021. 4basebio UK Societas is a specialist life sciences group focused on therapeutic DNA for gene therapies and DNA vaccines and providing solutions for effective and safe delivery of these DNA based products to patients. The Company has been divested from 4basebio AG , a German company listed on the Prime Standard segment of the Frankfurt Stock Exchange . No capital to be raised on Admission. Anticipated market capitalisation on AIM Admission: £14.53m.
Companies: SAR PAF PTRO NEXS TYM BOD CLX FAB ODX DUKE
AMTE Power, a developer and manufacturer of lithium-ion battery cells for specialist markets, announced its intention to seek admission to trading on AIM. Admission is expected to take place during March 2021. The Company intends to raise approximately £7m by way of a placing of new ordinary shares in the capital of the Company. Timing TBC. Samarkand Group Limited, the cross-border eCommerce technology and retail group opening up the world's largest market for brands and retailers, intends to IPO on the Apex Segment Aquis Stock Exchange Growth Market. Admission is targeted for March 2021. Cellular Goods a UK-based provider of premium consumer products based on biosynthetic cannabinoids announced its intention to join the main market (standard) this Spring. Target valuation £20m raising c. £8m “to finalise the development and launch of a range of the Company's premium-quality consumer products based on biosynthetic cannabinoids, which is fully compliant under UK law.” NextEnergy Renewables to launch an IPO on the Main Market. NREN is a differentiated renewables investment Company that aims to capture the most attractive private renewables and energy transition infrastructure investment opportunities globally. Targeting a £300m raise. NREN is targeting total returns of 9-11 per cent. per annum (net of all fees and expenses but including the Target Dividend and capital appreciation) . The Company's target dividend yield for the first full financial year to 31 December 2022 is 5.5 pence. Due Early March 2021. Digital 9 Infrastructure launch an initial public offering on the Specialist Fund Segment of the Main Market of the London Stock Exchange, by way of an initial placing and offer for subscription for a target issue £400m. Digital 9 Infrastructure plc is a newly established, externally managed investment trust. The Company will invest in a range of digital infrastructure assets which deliver a reliable, functioning internet. The IPO Prospectus is expected to be published in March 2021. Team PLC announced their plans for an AIM IPO. Team owns Theta Enhanced Asset Management Ltd, trading as Team Asset Management. This is a Jersey-based active fund manager providing discretionary and advisory portfolio management services to private clients, trusts and charities. Assets under management were GBP291m in November, up from GBP140m in December 2019 . The Company is seeking to raise no less than £5 million. The Placing will be priced on a pre-money valuation for the Company of £7m. Targeting March Admission. Virgin Wines UK Plc recently set out their plans for an AIM IPO. Virgin Wines is a direct-to-consumer online wine retailer that sells products to retail customers in the UK through two subscription schemes and a pay-as-you-go offering. The Group also sells a range of beers and spirits and operates a B2B sales channel for corporates. Deal details TBC but media reports suggest a £100m valuation. Targeting 2nd March Admission Fix Price announces its intention to float on the Main Market of the London Stock Exchange. Fix Price is one of the leading variety value retailers globally and the largest in Russia, with more than 4,200 stores. Fix Price has revenues of RUB 190.1bn, RUB 142.9bn and RUB 108.7bn for 2020, 2019 and 2018, respectively. Adjusted EBITDA for the same years was RUB 36.8bn, RUB 27.2bn and RUB 14.2bn, respectively. The Offer would consist of an offering of GDRs by certain existing shareholders of the Company. Great Point Entertainment Income Trust PLC announced its prospectus has been approved by the FCA. Great Point Entertainment Income Trust PLC is a newly established, externally managed closed-ended investment company. The Company will provide project finance to content makers and commissioners in the global television and film production industry via senior loans secured against pre-sold intellectual property (IP) rights. GPEIT's investment objective is to provide Shareholders with dividend income and modest capital growth through exposure to media content finance. According to media reports, Deliveroo, are expecting to release their IPO plans on 8th March. The company raised more than $180m in January with a valuation of more than $7bn.
Companies: IRR MKA GHH LEK POW KRM DRUM ODX FA/ ALBA
Further media reports that Dr Martens, the British Boot brand is planning an IPO on the LSE. It is currently owned by PE group, Permira who is expected to sell down its stake at the IPO. March 2020 YE the group had revenues of £672m and EBITDA of £184m. Deal size TBC. Upon Admission to AIM, Nightcap will acquire The London Cocktail Club Limited (the "London Cocktail Club"), which is an award winning independent operator of ten individually themed cocktail bars in nine London locations and one location in Bristol. Offer TBC Due mid Jan. HSS Hire Group, HSS.L transfer from Main to Aim. Mkt Cap c. £70m. Recently raised £52.6m. Leading supplier of tool and equipment for hire in the United Kingdom and Ireland and has provided equipment hire services in the United Kingdom for more than 60 years, primarily focusing on the B2B market. Due 14 Jan. VH Global Sustainable Energy Opportunities plc, a closed-ended investment Company focused on making sustainable energy infrastructure investments, today announces intends to launch an initial public offering of shares on the Official List (Premium) of the Main Market of the London Stock Exchange. Due by Early Feb.
Companies: SAG DXRX CALL BBSN ASTO DNL FIPP IIG GROW TCN
Benefiting from new product launches and improving ophthalmic market conditions, both the Surgery and Vision care segments returned to growth in Q4 20. In our view, the recently-introduced products (Vivity, Precision1 for Astigmatism and Pataday), along with the geographic expansion of PanOptix and Prescision1, should bolster the top line in the mid-term. Moreover, the favourable product mix and cost-cutting should result in sustained operating margin expansion. Nonetheless, the uncertainty around the pandemic would remain a near-term headwind.
Companies: Alcon, Inc.
Verici Dx has made a strategic step with the initiation of the first three clinical trial sites in the US for its validation trial for its lead products, Clarava, Tuteva and the pipeline fibrosis test. Collaborative investigators at these sites are internationally renowned, and their support highlights the global interest in this validation trial and the next-generation sequencing technology. The company is on boarding more sites in the US and EU, and are confident it will meet IPO expectations of completing the clinical testing for Clarava and Tuteva in the validation trial by the end of 2021.
Companies: Verici Dx Plc
Benefiting from robust growth in the Injectables and Generic segments and an acceleration in sales in Europe and ROW, Hikma reported better than expected results in H2 20. The recently-approved Vascepa’s generic is likely to be a key source of growth in the coming years. Moreover, the upcoming launch of Advair Diskus should bolster growth in the mid-term. Success in cracking one of the most difficult drugs, Advair Diskus, reiterates Hikma’s generic manufacturing prowess.
Companies: Hikma Pharmaceuticals Plc
Arix Bioscience (ARIX) is a listed global venture capital (VC) company that presents an opportunity for institutional and retail investors to participate in the high riskreturn profile of early-stage biotech investing. ARIX minimises risk through a combination of an expert investment team and portfolio diversification. Along with its 2020 interim results, management provided the market with some aspirational targets for the next three years, which would see the NAV double to ca.£500m. News that Merck & Co is to acquire portfolio company, VelosBio, for $2.75bn cash, giving ARIX >12x return on its investment, will help to smash these targets.
Companies: Arix Bioscience Plc
