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20 Oct 17

It’s now ‘when’ not ‘if’ for HomeSend

HomeSend, eServGlobal’s JV with Mastercard and BICS of Belgium, has always represented a very exciting prospect. With the backing of the giant credit-card agency, it stood a good chance of securing a significant share of the US$600bn global remittance market. With a relatively minimal cost base, the transaction volumes from even a tiny share would have delivered US$100m in earnings for eServGlobal’s 35% stake – and Mastercard’s 26% of the global credit-card market suggested a far greater share was possible. Now, after recent announcements, we realise: firstly, that the applicable market size was woefully underestimated; secondly, that its share will not be tiny but significant; and thirdly, that success for HomeSend is becoming a certainty. On the contracts already signed, HomeSend will generate revenue and profits of hundreds of millions of dollars; it is now simply a matter of when its transaction corridors go live and the commission streams ramp up. We understand that that, too, will be faster than thought.

Companies: ESERVGLOBAL

18 Oct 17

PG:GP – Issue 5

We upgrade our sector stance to POSITIVE, as the next 9 months is due to be a strong period for UK life science company news, with multiple significant trial readouts expected, companies generally well-funded and many of the headwinds seen in previous quarters easing.

Companies: ABC AMS AGY ANCR BTG C4XD CTH CSRT DPH DNL EKF FARN HZD HCM IMM MXCT MTPH PLI SCLP VEC VLG VER

10 Oct 17

UK Housebuilding Sector: Q3 2017

‘The $64,000 Question’

Companies: ABBY BDEV BWY BKG BVS CRN CSP CRST GLE INL MCS PSN RDW TW/ TEF WJG

05 Oct 17

Conviction List Q4 2017

Since its inception in 2010, the Panmure Gordon Conviction List has outperformed the market, returning 278% against a Small Companies index that would have returned 232% over the same period. Our Q4 portfolio reflects our view that the UK equity market stands to benefit from a coordinated upturn in global growth. Low nominal fixed income spreads continue to provide a valuation underpin for global equities. There are increasing signs that the world’s central bankers are making a concerted effort to wean markets off near zero interest rates. However with global debt exceeding 200% of GDP and unfavorable demographic trends, we think their chances of rapid progress are slim.

Companies: CPI CTH CINE JE MJW NOG RPC VM/ XAR

19 Oct 17

- Solid well results kick off the campaign

SDX Energy has announced two successful well results in recent weeks, with additional oil discovered in Egypt and more net pay found in its first Moroccan gas well than expected. The next six months are busy ones for SDX, with eight more wells to be drilled in Morocco to supply a high value gas market. Two wells will be drilled in Egypt to delineate its existing South Disouq discovery and two exploration wells will target prospects that could materially increase the gas resources. In addition, programmes at NW Gemsa and Meseda should materially increase production. Our NAV increases from 64p to 65p/share (increases in absolute terms are partially offset by foreign exchange movements).

Companies: SDX ENERGY

24 Aug 17

Sonora DFS nearing completion

In this morning’s progress update on its Sonora soft-rock lithium development in Mexico, Bacanora reported that cost estimation work is nearing completion, reiterating that opex is likely be below the level typical of hard-rock deposits that are the focus of the majority of its project-developer peers. The company also revealed that the definitive feasibility study (DFS) is now focusing on a sodium-sulphate roasting route in the processing circuit, in preference to the more expensive gypsum-roast route that had been contemplated previously. We believe this should help limit cost inflation over the estimates published in last year’s prefeasibility study (though some inflation is in our view inevitable), but it is presumably one of the reasons for the DFS overrunning – Bacanora is now targeting completion “by the end of the year”, versus previous guidance of Summer 2017 (and original guidance of Q1 2017). But the delay does not appear to be holding up financing arrangements – discussions are underway with long-term debt providers, including in Japan where they are being facilitated by the company’s strategic offtake partner Hanwa Co Ltd. We therefore continue to believe Sonora will be one of the first new lithium operations off the rank, capitalizing on market tightness which continues to push lithium prices higher.

Companies: BACANORA MINERALS

29 Jun 17

HomeSend looking ever more exciting

The focus is on the growing strength of the JV with Mastercard and BICS in the first 6 months of a 14-month period to December. At a headline level, sales in the core PayMobile mobile money business are down 30% on timing of pipeline conversion, seeing a H1 adj. EBITDA loss of A$6m despite significant cost cutting. This was exacerbated by A$4.3m exceptional trade debt/WiP impairment. Meanwhile, HomeSend delivered a A$1.9m loss in H1 as it begins a sales function expansion, transitioning from its setup stage to commercial rollout, signing major agreements with large banks and supporting Mastercard Send. The management team is clearly very excited by the ever-increasing prospects for this global payment network, emphasising an anticipated increase in value, even above previous hopes. However, the group’s H1 -A$6.1m FCF left a cash balance of just A$2.9m at 30 April (A$10.6m net debt) and to address this, a further A$4.2m (£2.5m) of debt has been secured from a major shareholder on the same terms as the existing facility, but with a covenant on net asset growth in H2.

Companies: ESERVGLOBAL

19 Oct 17

Cloud revenue growth continued

Better than expected SAP reported strong Q3 17 results. Total revenues increased 4% to €5.59bn (market estimates of €5.68bn, our estimate €5.55bn) and the gross margin improved from 69.4% to 70.1%. Revenues of cloud subscription and support grew 21.8% to €937m. Licence revenues remained flat at €1.03bn and maintenance revenues increased 1.3% to €2.69bn. The marginal increase in licence and maintenance revenues is mainly due to the change in the business model from licence fees to cloud subscription. The real EBIT margin increased substantially from 19.7% to 23.6% due to lower adjustments (-40%) whereas the virtual (non-IFRS) EBIT margin declined from 29.7% to 29.3%. Net income jumped 34.6% to €983m (estimate €872m). In the first nine months, revenues grew 8.6% to €16.66bn. Cloud subscription revenues increased 28.1% to €2.77bn. The real EBIT margin declined from 19.6% to 17.4% and the virtual non-IFRS EBIT margin from 30.3% to 26.4%. Net income grew 2.6% to €2.17bn.

Companies: SAP

19 Oct 17

Q3: restructuring speeds up

9M update: Sales grew organically +2.6% (cons. +2.5%, Q3: +3.2%) with real internal growth (RIG) up +1.8% and pricing +0.8%. On reported figures, sales were down 0.4% (FX: -0.4%, net acquisitions: -2.6%). OG by division: the Americas +1.3% (cons. +2%), EMENA +1.9% (cons. +1.3%), AOA 5.3% (cons. +4.8%), Waters +2.2% (cons. +4%), Nestle Nutrition +1.0% (cons. +1.2%), Other Businesses +5.1% (cons. +3.4%). Developed markets increased +0.8% organically, whereas emerging markets posted 5.1% OG. The group expects organic growth for the FY to be in line with 9M. The underlying trading operating profit margin is expected to improve +20bp, whereas the trading operating margin (including restructuring costs) should be down 40-60bp at constant FX. EPS at constant FX is expected to increase.

Companies: Nestle

20 Oct 17

Acquisition of Exa in simulation software

Dassault Systèmes signed an agreement to acquire all the shares of Exa in the US at the end of September 2017. The tender offer, which represents $400m on a fully-diluted basis, was launched on 12 October 2017. Exa is specialised in solutions that solve fluid problems for customers in the automotive sector essentially, and the aerospace and oil sectors to a lesser extent. The company has a number of major customers in both sectors, such as BMW, Tesla, Toyota in automotive, NASA, Embraer in aerospace, British Petroleum in oil & gas. In 2016/17 (ended 31 January 2017), Exa had total revenue of $72.6m, o/w c.84% was derived from licence revenue, an adjusted EBITDA of $6.5m (adjusted for the stock-based compensation expense), reported EBIT of $0.4m and net losses of $-1.1m.

Companies: Dassault Systemes

29 Sep 17

“Assembled Here Together”

A debate about why major US food manufacturers’ margins appear consistently higher than those achieved in Europe is, in our view, worth having. In particular, should greater willingness to outsource production processes and focus more on marketing, new product development, finance and strategic M&A be the answer, there could be significant revenue growth opportunities for those who act as food industry solution providers.

Companies: BN NESN ULVR CA GNC PIL CWK

12 Oct 17

Show me a drug developer that doesn’t experience delays, I’ll show you a company that does nothing

Fundamentally, there has been no letup in progress across both drug discovery platforms. PBI-4050 has made further advances with Idiopathic Pulmonary Fibrosis (IPF), Alstom syndrome, and Diabetes and Metabolic syndrome. The plasma platform has generated further positive long term clinical data on RyplazimTM , which has also received a Rare Pediatric Disease Designation from the FDA. On regulatory approval, RyplazimTM will be eligible to receive a rare pediatric disease priority review voucher. The financial markets, which have rewarded FibroGen and Galapagos handsomely for positive IPF data, however, continue to focus on the short delay in RyplazimTM approval as if such occurrences are very rare in the drug development industry. Despite a larger, more diverse and advanced clinical pipeline, Prometic’s market cap of C$1.1bn seems wholly unjustified in relation to FibroGen (US$4.5bn) and Galapagos (US$5.2bn). We expect the shares to at least recover to their previous peak of C$3.54 when RyplazimTM is commercially launched

Companies: ProMetic Life Sciences

18 Oct 17

On track to meet FY17 organic growth target

Esker saw strong growth in revenues in Q317, with 17% reported growth and 14% growth on an organic, constant currency basis. The recent e-integration acquisition is performing in line with expectations and management has reconfirmed its FY17 outlook for double-digit organic revenue growth. We leave our forecasts unchanged.

Companies: Esker

15 Feb 16

Restructured core business

eServGlobal’s FY15 results reflect the impact of the restructuring programme undertaken to reduce the cost base and streamline the sales and implementation process. With a materially lower cost base and high margin deals in the pipeline, the company is targeting revenue growth and EBITDA and operating cash break-even in FY16. Evidence that the core business is winning new business and starting to generate cash will be the key to share price upside from this point.

Companies: ESERVGLOBAL

12 Sep 17

Tailings

We take another look at lithium, where there is a growing realisation that the forecast massive increase in demand is already upon us. This realisation has been matched by an awareness that there is no shortage of lithium in geological terms. However, there is still a considerable degree of ignorance about which types of lithium mineralisation are commercially valuable using current processes and technologies; this will require the development and proving of new processes. In this note, we look at what attributes are required for a lithium-bearing deposit to be attractive for development into a successful mine in the present technical and economic environment.

Companies: APF ACP ATYM ASO BKY CAML FDI GEMD HZM PAF PDL SAV SHG WTI WLF

15 Dec 16

Executive Interview - Paragon

10 Aug 17

VolitionRx announces second quarter 2017 financial results

23 May 17

Capital Network's James Dolman on Midpoint Holdings Ltd

07 Aug 17

Executive interview - Mondo TV

15 Feb 16

Endeavour Mining - Update at 121 Mining Investment

07 Aug 17

Executive interview - Mondo TV (Italian)

10 Feb 17

Lithium Australia - 121 Mining Investment Cape Town 2017

25 Jul 17

Executive Interview - DeA Capital

13 Dec 16

Executive Interview - RNTS Media

18 Jul 17

Executive interview - Volition Rx

21 Nov 16

Lithium Australia - Update at 121 Tech Investment

14 Jul 17

Executive interview - Banca IFIS

10 Aug 17

Executive interview - 4SC

30 Jun 17

Executive interview - UMT

15 May 17

Executive Interview – MedServ

Latest Content

Telefonaktiebolaget LM Ericsson

Networks stabilising at last, but be wary of too much optimism

Ericsson reported Q3 revenues of SEK47.8bn, corresponding to a decrease of 6.4% yoy on a reported basis, while on a comparable basis (comparable units and currency) the decline was 3%. North America (-10%), North East Asia (-9% and Europe & Latin America (-6%) were the biggest down-movers, while the Middle East & Africa was almost flat. By business unit, Networks fell by 4.1% yoy (SEK35.5bn), IT & Cloud by 12.4% (SEK10.3bn) and Media by 13.2% (SEK2bn). The gross margin came in at 25.4% (for an adjusted gross margin of 30%), down 290bp yoy. The EBIT margin came in at -10%. This was impacted by SEK1.5bn of higher amortisation than capitalisation of development expenses and higher recognition than deferral of hardware, leading to an adjusted operating profit of SEK0bn. EPS came in at SEK-1.34. The company made no change to its RAN equipment market forecast, with an expected decrease of 8%. The previously announced increased market and customer project adjustments, expected to lead to a negative impact of SEK3-5bn on the results in the coming 12 months (30% cash), are likely to hit the top of the range. The target of SEK10bn of annualised savings by mid-2018 compared to the annualised Q2 17 run rate is also maintained. However, the restructuring charges are now expected to be at about SEK9-10bn, vs. SEK6-8bn previously.

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20 Oct 17
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TomTom

When a downgrade doesn't come as a negative announcement

TomTom reported Q3 revenues of €217.6m, down 9.1% yoy and 14.1% sequentially. Consumer decreased by 29.1% yoy to €97.2m, as well as Licensing (€33.8m, -1.7%). The two other businesses grew by 50.8% for Automotive (€47.2m) and 7.9% for Telematics (€39.4m). The three non-legacy businesses combined grew by 17.8% to €120.4m, accounting for 55% of the business. The gross margin came in at 64.6%, up 420bp yoy, while EBIT came in at -€5.9m. EPS came in at €-0.02 and adjusted EPS at €0.08. The company updated its guidance for FY17: the target for adjusted EPS remains at around €0.25, but revenues are now expected at about €900m due to the reorganisation in Consumer Sport. Capex and opex are also expected to grow marginally compared to 2016 (vs. modestly). Concerning the €50m share buy-back programme, 63,797 shares worth €6.1m have been acquired during the quarter.

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20 Oct 17
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Husqvarna

Disappointing Q3 17, good growth on a rolling 12m period

Q3 17 was below expectations. The main disappointment was sales with total growth of +1% and +4% excluding the currency effects and including a scope effect in the Construction division. Restated to before the change in perimeter, organic growth is estimated at c.+2%, below our expectation (+5%E). Q3 17 figures: - Sales reached SEK7,449m (+1%, +4% at constant currency). Restated to before the change in perimeter (Pullman Ermator and HTC in the Construction division), organic sales are estimated at 2%. Organic sales growth at Husqvarna (+2%), Gardena (+3%) and the Construction activity (+5%) were all below expectations. Organic sales decreased in Consumer Brands (-5%). - Operating income was flat at SEK433m (+0.5%) due to restructuring costs of SEK50m in the Construction division related to the integration of the acquired companies. This was not a surprise as restructuring costs (SEK65m estimated) were announced in August 2017. Conversely, the currency effect was positive at the operating level (SEK+40m). The reported operating margin was rather stable (5.8% of sales, -0.1pt) and would have been higher excluding the restructuring costs (6.5% of sales). - Group net profit was SEK210m (+2.4%) after lower net financial expenses (-16%) and higher income tax rate (+3pts to 36.2%). 9 months 2017: - Sales reached SEK33,264m (+10%, +7% at constant currency and including a positive scope effect). Operating income was up to SEK3,860m (+16%), corresponding to a margin rate of 11.6% of sales (+0.6pts). Group net profit was SEK2,593m (+16.8%) after higher net financial expenses (+8%) and a rather stable income tax rate (+0.1pt to 25.6%). - The operating cash flow surged by 23% to SEK3,776m after a favourable change in inventories while capex increased by 9% to SEK1,147m. Investments in shares were significant (SEK1,628m) and corresponded to the acquisitions in the Construction division. - On 30 September 2017, total net debt (net financial debt and pension liabilities) amounted to SEK6,440m, close to the level in Q3 16.

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20 Oct 17
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Atlas Copco

Order growth driven by strong Vacuum business

Atlas Copco reported solid figures in Q3 17 at both the top line and the operational side. Q3 17 revenue increased to SEK28,499m from SEK25,843m (including 10% organic growth). Orders grew by 17% organically yoy (from SEK26,038m to SEK30,552m). The adjusted operating profit was SEK6,187m, an increase of 18% compared to last year and corresponding to a 21.3% margin (20.3% in Q3 16). The cash flow remains flat due to currency headwinds and some hedging contract impacts. These results led to a sharp improvement in profit for the period to SEK4,414m (+30% yoy) corresponding to an EPS of SEK3.63 versus SEK2.78 last year. Management confirmed it bullish near-term outlook “to remain at its current high level”.

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20 Oct 17
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mic

- Clean-up continues

The latest filings show an improved H117 and a strengthened balance sheet. Liquid funds of €175k in late September stand against target monthly fixed costs of €35k due to be reached in November 2017. The key driver for the share price will be the outcome of refinancing talks, described as being at an advanced stage. Given the scale of the difficulties mic encountered, we see potential for large-scale dilution of existing holders’ interests.

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20 Oct 17
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ESVSEEPLIFARNCSRTBTGAMSPHTMSYMDPHLGTEKFANCRRGDIMMVECAGYTSTLCTHBOTBDOTDVERBVXPSCLPABCFULDNLVLGHZDSHOECAKEC4XDSCSMTPHIDPRBGFISHHOTCJOULHCMMXCT

Swiss Re

Profit warning for Q3 17 and FY2017

Swiss Re estimates its preliminary combined claims burden in Q2 17 from the hurricanes Harvey, Irma and Maria and the earthquakes in Mexico to be c.$3.6bn, net of retrocession and before tax. Of the total combined losses, claims from the two earthquakes in Mexico are expected to be c.$175m. Swiss Re estimates the total insured market losses of the industry caused by these events to be c.$95bn. The CFO said Swiss Re maintains a very strong capital position and high financial flexibility.

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20 Oct 17
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Daimler

Q3 profit growth only in Trucks and Financial Services

Consolidated revenue increased by 5.7% to slightly less than €41bn in Q3 which brought the 9M number to €120.7bn, an increase of 7.6%. The respective EBIT and net profit numbers were -14% to €3.46bn, +19% to €11.2bn and -16% to €2.18bn and +15% to €7.32bn. We had expected 9M revenue of just below €122bn, an EBIT number of €11.8bn and a net profit number of €7.76bn, i.e. all three numbers were short of our projections.

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