finnCap Equity Research & Stock Reports

We initiate coverage on Velocity following its recent IPO and £10m (£9.2m net) equity placing. Our initiation coincides with the group’s interim results, trading at broadly breakeven in the first half with the second half expected to be profitable with the benefits of capacity expansion and output growth from additional aircraft programmes. Velocity is an exciting growth stock, which has an almost unique product offering and strong market position in the rapidly growing aerospace composites market. We see significant growth ahead, as further expansion and additional customer programmes are awarded. Our 144p price target illustrates strong upside to current levels.

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Photo-Me International

Record FY17 profits were in line with expectations and showed a fourth consecutive year of double-digit earnings growth. We are leaving our PBT and earnings forecasts largely unchanged and forecast 3-year EPS CAGR of 5% to 2020. We expect DPS to increase 20% in FY18E and then grow in line with earnings thereafter, and forecast net cash to rise to £48m by 2020. We retain our 215p price target which values Photo-Me on 22x FY18 adj. EPS.

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Flowtech Fluidpower

Last week the group acquired Hi-Power, a complementary bolt on acquisition, for a total consideration of up to a maximum £3.5m. Hi-Power offers additional hydraulic products, wider geographic coverage and medium-term synergies and wider collaboration opportunities. This acquisition is in line with existing strategy and we expect management to achieve further acquisitions over the coming year as it deploys cash raised through its recent placing. This potentially offers future upside to forecasts. We increase our EPS forecasts by 2.4% in 2017 and 4.7% in 2018. The shares remain attractively rated on a P/E of 10x and offer good upside.

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