finnCap Equity Research & Stock Reports

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Cambridge Cognition

Interim results to 30 June 2018 showed like-for-like (IAS18) 13% revenue growth to £3.63m, which resulted in a reduced pre-tax loss of £0.22m (£0.39m). Period-end cash was £0.88m. The transition to IFRS 15 standards, in which software revenues will be recognised over the period of a contract rather than immediately, has proved to be more egregious than anticipated, resulting in IFRS15-based revenues of £2.75m. Consequently, we are reducing our FY 2018 and 2019 revenue and EBITDA forecasts by £1m and £0.9m, respectively. That said, the company is considered to be in a most interesting phase of commercialisation with clearly identified sales drivers and a raft of new products generating substantial interest from large pharma, as manifest in yesterday’s first contract for its voice biomarker cognition product, NeuroVocalix. A book to bill ratio of 1.77, strong order book (129% up on prior year) and watershed moment in mental health assessment underpins our belief in the investment case and, therefore, we maintain our 175p price target.

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Iofina

Iofina’s interim results demonstrate encouraging progress towards its operational turnaround, with higher volumes, lower unit costs and better pricing all contributing to an improved bottom line. Moreover, the pace should accelerate in H2 now that the new IO#7 plant has ramped up. Our expectation for the timing of the next newbuild Iosorb plant has shifted slightly to the right, resulting in small adjustments to our forecasts. Nevertheless, this should not detract from the ongoing underlying improvements taking place within this business. Years of cost cutting and plant optimisation leave Iofina at the bottom of the cost curve and highly leveraged to the improving pricing environment. The restructuring of its debt is ongoing, but once concluded paves the way for Iofina to pursue additional growth plans – the performance of its IO#7 unit should give investors confidence in management’s ability to execute on its growth strategy.

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ASO COG CLL HDD IDP NIPT QXT UNG TSL

Avesoro Resources (ASO): Corp New Liberty mineral resource upgrade | Cambridge Cognition (COG): Corp NeuroVocalix – first contract | Cello Health Group (CLL): Corp Trading well with good visibility | Hardide (HDD): Corp Upbeat trading update | InnovaDerma (IDP): Corp FY 2018 results – Boots to range Skinny Tan | Premaitha Health (NIPT): Corp Settlement with Illumina – freedom to operate globally | Quixant (QXT): Corp Weighting on a record H2 for gaming platforms | ThinkSmart (TSL): Corp Credible innovator, now developing new opportunities | Universe Group (UNG): Corp Interims

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Premaitha Health

Premaitha has announced a partnership agreement with Illumina that brings to an end the 3½-year patent infringement litigation for non-invasive pregnancy testing (NIPT) that has over-shadowed the investment story. Premaitha has taken a licence under Illumina’s patent pool for NIPT, giving the company total freedom to operate in the global NIPT market. Premaitha will develop the IONA® test for use on Illumina’s Next Generation Sequencing (NGS) platforms, with a launch expected in early 2020. With the litigation overhang removed and settlement consideration (£0.6-0.8m) quantified, investors can focus now on the opportunity that exists for Premaitha to exploit the large (c.$1bn+) and growing NIPT market as well as adding content to both NGS platforms. Pending FY results, we put our target price under review but leave forecasts unchanged. This is a significant development, however, as this resolution should drive increased market penetration and higher growth rates, implying future upside to our forecasts.

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Innovaderma

Full-year results were in broadly line with the 19 June trading statement, with revenues rising 21% to £10.7m (£0.3m shortfall attributed to timing and despatch of June sales into July), resulting in a pre-tax profit of £0.7m and year-end cash of £1.9m. Confirmation that Boots is to range Skinny Tan online and in 1,250 (50%) of its UK stores from February/March 2019 significantly expands the retail footprint to more than 2,000 stores (2.7x), whilst Roots should benefit from a 4x expansion to more than 1,600 stores by year-end. We retain a 220p target price, which implies a calendar-adjusted 2019 P/E, EV/EBIT and EV/Sales of 24x, 14.0x and 1.8x, respectively. Strong growth expectations justify these premia.

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