Arden Partners Equity Research & Stock Reports
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08 Dec 16
The H217 trading update confirms S&U tracking to our FY17 earnings growth forecast of 28%. The group has accelerated investment in FY17 into the strong demand for non-prime used vehicle loans which has been supported by significant available funds. This has generated inherent “momentum in the system” that will sustain superior earnings growth rates into FY18 and FY19. Despite this, the shares have underperformed in recent months, weighed down by adverse sub-sector sentiment. Consequently, a rating around 12x is inconsistent with growth prospects and we expect confirmation of superior growth rates in FY17 should now provide the catalyst for a meaningful share price recovery. S&U warrants at least a mid-teens rating implying 50% upside from current levels and we re-iterate our conviction Buy stance.
Interim results review
07 Dec 16
Interim results support our 9% earnings growth forecast for FY17 with robust underlying trading supported by lateral hires, investment in Reading and a £0.8m contribution from acquisitions. Deal flow has held up well into the post-Brexit UK landscape with no sustained deferment of activity in core areas such as financial and property markets. The shares have recovered earlier gains increasing by 6% on the back of the results and now trade on an FY17 rating of 12x with a yield of around 6%. This is a modest valuation given the growth prospects in an opportunity-rich corporate landscape.
02 Dec 16
On 30 September 2016, when the company announced its full year results, it reported that the UK business had seen a slow start to the year, with particular weakness in repair and renewal spending by the NHS as well as “reticence” in the education sector. However, with the UK only representing about a third of the business, this weakness was expected to be more than offset by the positive effect of a weakened sterling on its overseas business, given the benefits for competitiveness and margins.
Response to Government consultation
02 Dec 16
In the 2015 Autumn Statement, the Government stated the intention to remove the right to general damages for minor soft tissue injury claims with compensation for injuries such as whiplash now being made in medical care rather than cash. In addition, the Government proposed to raise the small claims limit for personal injury cases from £1,000 to £5,000.
Trading update; 6% earnings upgrade
01 Dec 16
Revenue growth of 5.2% in the year to date reflects sustained replacement-driven demand for flooring in the UK enhanced by a inflationary price environment from August 2016. This has created a positive trading environment for Headlam reflected in another profit upgrade today and enhancing the prospects for a sustained earnings upgrade cycle in 2017. The shares are trading on 12.6x conservative FY17 earnings and offer a potential total yield of around 8% should the special dividend be triggered which, we believe, is the balance of likelihood. Headlam remains a conviction Buy at current levels.
H1 FY 2017 results
30 Nov 16
KSK has released its H1 results to the end of September 2016. These report a period of continued significant generation at Mahanadi (higher than H1 FY 2016, though lower than H2 2016), although transitory coal sourcing issues have resulted in revenues and profits behind our expectations, and we adjust our numbers for the full year (detailed below – we leave FY 2018 unchanged). More positively, the grid access and PPAs for Mahanadi are performing as expected, and construction is progressing apace on the next two 600MW units, which when completed will take capacity to 2.4GW. We expect further updates on this in H1 next year, which could help drive continued improved sentiment among investors, and positively impact the shares.
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