Edison Equity Research & Stock Reports

Fidelity European Values (FEV) aims to achieve long-term capital growth from its European equity portfolio by focusing on companies that are able to deliver medium-term dividend growth. This approach gives FEV a defensive bias as well as a yield close to the sector average. Although he acknowledges a number of positive indicators for the near term, manager Sam Morse sees an upcoming turning point in the economic cycle and the prospect of rising bond yields as negative catalysts for equity valuations. His caution is reflected in FEV’s low gearing and the recent concentration of the portfolio, as a number of holdings with weakening fundamentals have been sold into market strength during the first half of 2017.

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The Marketing Group (TMG) has published H117 numbers, laid out the new management’s vision for a global marketing platform and drawn a line under legacy issues. With the (post period end) disposal of the three agencies that had dragged down Q117 figures, the Q217 EBITDA has shown good growth over the adjusted Q1 figure, with margin building to 10.9% from 7.3%. The group has a strong client list, a highly experienced management team and a wide geographic spread (with Australia the largest region at a quarter of H117 revenues). The current market valuation is not according credit for any of these factors.

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Henderson Alternative Strategis Trst

Henderson Alternative Strategies Trust (HAST) has continued in H217 to produce solid absolute returns from its portfolio of specialist and alternative funds investing in areas such as private equity, property, emerging markets and specialist credit. The three-year process of rebuilding the trust’s portfolio after its move to Janus Henderson was concluded nearly a year ago, and the managers are pleased with the progress made towards the informal target annualised return of 8%, measured over a three-year period. Share price returns over one year have kept pace with buoyant equity markets but with lower volatility, and over the same period HAST ranks third in its peer group for NAV total returns. The improved performance and a narrower discount may provide support as the trust approaches a three-yearly continuation vote in January 2018.

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Evolva Holding

Evolva is transforming itself into a product-based company, and the new CEO is evaluating the organisational structure and operational strategy. R&D-based revenue is likely to fall due to the transformation. EverSweet remains on track for 2018 launch, nootkatone is on track for US regulatory approval in pest control in H218, and resveratrol revenues were up strongly. Our fair value falls to CHF0.69 as we cut our sales forecasts, but we continue to believe the current share price offers a good entry point.

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aap Implantate

aap Implantate announced its H1 results with a 5% increase in l-f-l sales to €5.4m. This increase was predominantly due to a reported 14% Trauma sales growth in H1 despite Q2 Trauma sales remaining flat versus the previous year’s €2.3m, though still broadly in line with management’s expectations. H1 positives include growth in established markets where aap Implantate has focused initiatives to drive sales (North America +26% and DACH region +10%). Traction in these markets (Europe and the US) remains key to a sustained return to growth.

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Marshall Motor

As indicated in the pre close trading statement, Marshall Motor Holdings (MMH) made good progress in H117, outperforming a weaker UK new car retail market. While uncertainty remains over the direction of end market demand, management’s growth strategy is facilitated by the strengthened balance sheet. Our forecasts are unchanged and assume ongoing market pressure in the second half of the year, with the rating discount to its peers likely to unwind further on any signs of market resilience during H2.

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