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GMP FirstEnergy ― UK Energy morning research package
06 Dec 16
Transglobe Energy (TGL CN); BUY, C$5.25: Homeward bound… back to Canada | Great Eastern Energy Corporation (GEEC LN) (not covered): Reserves update in India | BP (BP LN) (not covered): Acquiring interest in Tangguh in Indonesia | Exillon Energy (EXI LN) (not covered): Production update in Russia | Genel Energy (GENL LN); SPECULATIVE BUY, £2.60: Receipt of payment for Taq Taq export in Kurdistan | ExxonMobil (XOM US) (not covered): Relinquishing blocks in Kurdistan
Making Mobiles Better
17 Jan 17
Mobile phones are increasingly the key connection for the modern world. This means that the performance of mobile phones, and their networks, is going to become more critical for all the apps and businesses that rely on them. New technologies such as VR, AR, and AV will need better, more reliable connections to really move into the mainstream. In this thematic piece we attempt to identify some of the most important issues facing mobile phone networks and their users, and start to identify solutions and enablers that will solve these problems and create value by doing so.
The Slide Rule
12 Jan 17
What is The Slide Rule? The Slide Rule has been designed to dramatically simplify the identification of the best companies in the UK small/mid-cap sector by making a quantitative assessment of the relative potential of each company. At its core, The Slide Rule aims to identify those companies that create genuine shareholder value through strong returns on capital and solid growth, but also present a value opportunity with the potential tailwind of earnings momentum. Companies are assessed within a Quality, Value, Growth and Momentum (QVGM) framework.
N+1 Singer - NCC Group - Interims confirm underlying business sound
19 Jan 17
NCC’s interim results were largely flagged in the detailed trading update released in December. Group revenue increased 35% to £125.8 (organic growth +18%) and adj. EBITDA grew 15% to £21.3m. The group’s issues relating to contract losses/deferrals in the period were previously announced and are already included in our forecasts. The group has maintained its interim dividend at 1.5p, which we believe is an indication of the strong underlying business. Separately, NCC has announced that Paul Mitchell intends to step down as chairman in May ’17. We continue to believe that NCC remains a highly attractive asset in an area seeing strong structural growth and see the current share price weakness as an opportunity. We retain our Buy recommendation and 233p target price.
Panmure Morning Note 18-01-2017
18 Jan 17
Blancco technology, a leading provider of data erasure solutions and mobile device diagnostics, has announced that its underlying profits are ahead of expectations. Organic sales growth remains strong, the group continues to win larger ticket orders and the mobile diagnostics is performing ahead of plan. Consequently, we are raising our FY17 PBT forecast from £8.0m to £8.3m.
Retain forecasts for FY17E and FY18E
05 Oct 16
While LFL sales growth of 1.8% for the first 12 weeks of FY17 looked a little light, this was on the back of 2.8% growth in the prior period. H2 comps become easier to lap and Christmas bookings (festive trading comprises 15% of FY sales on average) are up 10% YoY.
Videos and Podcasts
Mid-term growth drivers remain intact
21 Jan 17
Carl Zeiss Meditec’s (CZM) Q4 FY16 revenue came in below our estimates but profitability outperformed. Revenue at CER was down 1.9% (vs AV estimate: +4.3%), primarily due to a slowdown in the ophthalmology (-8.3% vs AV estimate: +7%; accounts for c.31% of Q4 16 revenue) and microsurgery segments (-4.5% vs AV estimate: +0.5%; accounts for c.29% of Q4 16 revenue). High prior year comparables suppressed the growth in surgical ophthalmology and microsurgery (+34% and +24%, respectively) during the quarter. However, the ophthalmic systems business was up 5.7% (vs AV estimate: +5%; accounts for c.40% of Q4 16 revenue), wherein, the good performance in the refractive laser business was slightly offset by competitive pressure in the diagnostic business. Geographically, the growth momentum sequentially decelerated in the APAC region (+11.3% vs Q3 16: +25.3%; accounts for c.36% of Q4 16 revenue), primarily due to a slowdown in Japan. The dismal performance continued in the EMEA region (-6.4% vs Q3 16: -6%; accounts for c.31% of Q4 16 revenue), on the back of the challenging economic/political situation in Southern Europe and the Middle East. The Americas region was also under pressure (-9.7% vs Q3 16: -6.7%; accounts for c.33% of Q4 16 revenue) due to the intense competition in the US diagnostics market and the weak macro environment in Brazil. Total revenue decreased by 0.5% (vs AV estimate: +6.5%), reflecting a +1.4% currency effect. However, the EBIT margin strengthened to 15.1% (vs AV estimate: 13.4%), largely driven by a favourable product mix in the ‘cash cow’ microsurgery business (25.4% vs AV estimate: 21.9%). Moreover, a lower than expected tax expense further underpinned the EPS (€0.38 per share vs AV estimate: €0.28). For FY16, the total revenue (€1,088m) came in at the lower end of the company’s guidance (€1,080-1,120m). Similarly, the 14.2% EBIT margin was also within management’s expectation (13-15%). Management has proposed a dividend of €0.42 per share (vs €0.38 in FY15), which translates into a c.35% payout ratio. For FY17, management expects revenue to grow at least in par with market growth (low to mid single-digit) and the EBIT margin to be in the 13-15% range.
Struggles easing but tough US, Brexit and rising competitive threats a bit concerning
20 Jan 17
After a challenging FY15, Coloplast ended FY16 on a better footing, albeit not devoid of new troubles (additional mesh litigation provision of DKK750m incurred in September 2016, totalling DKK5.3bn now). Q4 16 sales – +3% to DKK3.7bn (7% organic growth and a 4% forex headwind) – were slightly below our as well as consensus expectations while adjusted net income came in marginally below ours but a tad above consensus estimates. On an adjusted basis, EBIT is up 3% yoy (margin constant at c.34% yoy) and net income by 10% yoy. For the full year, sales increased by 6% – 7% organic and 1% negative currency impact – to DKK14.7bn while adjusted EBIT rose by 7% to DKK4.8bn. Management has recommended a final dividend of DKK9 per share (total dividend for the year DKK13.5 vs. DKK12.5 for the previous year) and bought back shares worth DKK500m as part of its current DKK1bn programme running until the end of FY 17. Coloplast acquired Comfort Medical, a US-based direct-to-consumer dealer of catheters and ostomy supplies, for $160m (c.DKK1,120m), in an effort to boost its direct sales while it remained locked out of GPO contracts in the US. Based on Comfort’s expected FY 16 sales of $38m, the deal translates into an EV/Sales multiple of c.4x. Subject to the completion of the deal by Q1 FY 16/17, Coloplast has increased its revenue growth guidance in DKK of 5-6% for FY 16/17 by 1-2%. The rest of the FY 17 guidance remains unchanged – 7-8% organic revenue growth, the EBIT margin in the range of 33-34% at CER and c.33% in DKK, capex of c.DKK700m and an effective tax rate of c.23%.
New ThioBridge licence agreement
20 Jan 17
Abzena has achieved a significant licensing deal for its proprietary site-specific ThioBridge antibody drug conjugate (ADC) linker technology with a San Diego-based biopharmaceutical company. The agreement covers the use of ThioBridge in up to 10 ADCs across a wide range of indications. The agreement also includes a master services agreement, which enables access to Abzena’s chemistry services. This provides important validation of both its proprietary ADC technology and its hybrid business model. Our valuation is under review, but we expect upside on the basis of this positive newsflow.
Container shipping improved in Q4 16
20 Jan 17
HHLA saw the number of TEUs falling by 5.7% to 3.2m in H1 16 but increasing by 5.7% to 1.72m in Q3. Indications suggest that this positive trend has continued in Q4. We use the activity at the Port of Singapore as an indication. While trade between Asia and the US West Coast continued falling in the last months (see the line for Long Beach), Singapore has experienced a sharp recovery. The number of TEUs handled there fell by 9% in Q1 and by 1% in Q2 but recovered by 4.6% in Q3 and by 6.1% in the last quarter. As a result, the full-year number was about unchanged at just below 31m (33.9m in 2014). HHLA’s 12-months moving average reached a low of 531,000 TEUs in June of last year with a moderate recovery to 538,000 by the end of September. Singapore’s trend in recent months indicates that growth has most probably also accelerated in Hamburg.
Updates on several products
20 Jan 17
AFT Pharma recently made announcements affecting several of its marketed products. Importantly, the Australian Therapeutic Goods Administration (TGA) has made an interim decision that all products containing codeine (a key competitor to AFT’s Maxigesic) are to be rescheduled to prescription-only as of 1 February 2018. Also, AFT has licensed its cold/flu product Maxiclear to Angelini in 16 European countries. Additionally, due to continued Metoprolol shortages, the New Zealand government pharmaceutical buying agency, PHARMAC, has requested proposals from alternative providers, potentially affecting AFT’s sales of the product.