Edison Equity Research & Stock Reports

TAKUNG ART CO

Takung Art’s Q118 results show it is making progress at reorienting its user base more towards the retail market, which significantly increases its potential reach. There has also been some success in the quarter in increasing the average listing values of the items listed on the trading platform and in diversifying the offering, with five new pieces of sports memorabilia listed in the period. The FY17 reconstruction makes direct comparison with Q117 figures of limited use. The share price is yet to reflect the scale or quality of the potential opportunity.

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PDL BIOPHARMA

PDL’s recent Q118 results reported that revenues of $38.5m were down 15.2% compared to Q117 as the company transitioned away from royalties related to the Queen et al. patents to product revenue related to its Noden and LENSAR subsidiaries as well as royalties from the Depomed assets. Excluding Queen et al. royalties, revenues were up 14.2%. Also, while the revenues associated with the Tekturna assets sold by Noden continue to be weak, LENSAR is now EBITDA positive. PDL has also repurchased approximately $12.6m of stock since March 2018 and has $12.4m available under its current repurchase program.

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Merchants Trust

The Merchants Trust (MRCH) is managed by Simon Gergel at AllianzGI. He aims to generate a high and growing level of income, with the potential for long-term capital growth, from a portfolio of UK equities. The manager considers there are great opportunities in the UK stock market for high-yield investors, and that in aggregate UK stocks are looking attractively valued compared to global equities. MRCH has a distinguished dividend history; payouts have grown in each of the last 36 consecutive years. In FY18, the annual distribution was 2.5% higher than in FY17 – a larger growth rate than in recent years, reflecting higher dividend growth from portfolio companies, but also due to MRCH’s lower interest costs following the refinancing of a tranche of its high-cost debt in late 2017.

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Few retailers can boast the enviable track record of JD Sports, the ambitious multi-channel ‘athleisure’ business with a fashion-forward offering that combines the major sportswear brands with established own-label ranges. The company’s expanding international footprint is about to be enhanced by a potentially game-changing recently announced US acquisition, which has yet to be reflected in the consensus forecasts.

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Entertainment One

An excellent performance from Family & Brands and strong growth in Television offset declines in Film to deliver EBITDA growth of 11%, which is in line with forecasts. The group is in good shape entering FY19 and is on track to deliver to its five-year plan to double EBITDA by 2020. The shares are on a c 40% P/E and c 20% EV/EBITDA discount to global peers and we believe they offer good value.

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