Edison Equity Research & Stock Reports

Growth from Mexico and Spain, combined with ongoing operational efficiencies, continues to offset pressure from the Argentine division (23% of Q219 revenues). Codere is maintaining FY19 EBITDA guidance with positive net cash flow for the year. The net debt/LTM EBITDA ratio is 2.7x and the company is successfully navigating the Argentina uncertainty. We maintain our underlying EBITDA forecast for FY19, although we are lowering our FY20 EBITDA estimate by 7.1% to €368.4m as we now expect Argentina to continue contracting next year. The stock is very illiquid and trades at 4.1x EV/EBITDA for FY19e, which is at a deep discount to peers.

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Keywords Studios

Keywords saw strong revenue growth in H119 (17.5% like-for-like, l-f-l) and although investment and some one-off factors compressed margins, the company looks well placed to sustain double-digit EPS growth in the future. We upgrade our FY19 revenue estimates by 5.2% and FY20 by 4.3% and although H1 investment, together with a revision to the adjusted tax calculation, compresses FY19 earnings by 15.8%. FY20 EPS reduces by 2.5% as margins normalise on a higher sales figure. The FY20 P/E of 22.2x is in line with peers, before factoring in the potential for organic upside and further accretive acquisitions.

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Finlab

Deposit Solutions, FinLab’s largest fintech holding (which until recently made up nearly 30% of its NAV), has completed a new funding round with Deutsche Bank, which acquired a c 4.9% stake in the business. Although the deal volume is relatively small (and may be partially non-cash), we note that the transaction values Deposit Solutions at more than €1.0bn, which means it has now reached ‘unicorn’ status (ie a privately held company valued in excess of US$1.0bn) and has become one of the most highly valued fintech companies in Germany. We estimate that this translated into a significant write-up of FinLab’s c 7% stake of over €40m (c €7.6/share).

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Onxeo

On 18 September 2019, Onxeo released initial results from the first cohort of patients (n=3) in its ongoing Phase Ib DRIIV study with AsiDNA. The three patients had a progressive metastatic cancer (non-small cell lung cancer, triple negative breast cancer, gastric cancer) and were treated with AsiDNA plus carboplatin. No dose-limiting toxicity was observed. Two of the three patients have shown stable disease (RECIST) since the start of the treatment (more than four and five months). While it is too early to draw any conclusions on efficacy, stable disease status in 2/3 patients and a good safety profile appear encouraging. In the second part of the study, patients with various solid tumours will receive a combination of AsiDNA plus carboplatin and paclitaxel (standard of care in many solid tumours). Preliminary results are expected by end 2019.

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Esker

Esker reported another period of strong revenue and profit growth while continuing to invest in product development, consulting and sales & marketing resource. This policy of ongoing investment has fuelled double-digit revenue growth, 80% of which is recurring, over the last five years and supports the company’s premium rating. Progress towards the company’s stretching 20% revenue growth target should support further upside to the share price.

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Nuernberger Beteiligungs

Nurnberger Beteiligungs (NBG) was able to moderately grow its gross premiums booked on the back of a solid 10% y-o-y increase in new premiums to €266m in H119. Meanwhile, the low interest rate environment dampens NBG's investment income, with the recent central bank rate decisions suggesting this will continue for now. We note that NBG’s relatively high exposure to unit-linked and disability products somewhat limits the impact of accommodative monetary policy. A cap on fees earned on life insurance contracts is still being discussed in Germany. If introduced, it is likely to constrain new life insurance business.

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