finnCap Equity Research & Stock Reports
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£39m placing to fund and accelerate growth
24 Mar 17
CareTech is a national UK provider of specialist social care services (children and adults with learning disabilities and mental health), operating in a large fragmented, market estimated to be worth c.£10bn. With an 11-year AIM-listed track record of growth and progressive dividend policy, we initiate coverage with a target price of 425p, implying a calendar-adjusted 2018 PE and EV/EBITDA of 11.8x and 10.0x, respectively. The purchase, integration and subsequent development of acquired assets in 2015/16, at a cost of c.£50m, illustrate the opportunities that exist for consolidation and should be seen as proxy for the oversubscribed £39m placing.
Solid performance in a challenging year
24 Mar 17
Robinson has reported full-year results for FY2016 that are inline with our expectations. A revenue decline of 5.5% reflected a challenging year with some previously announced business losses plus delays to the introduction of new business wins. Despite this, the business has delivered solid gross margins and cash flow. We expect the business to return to growth in FY2017, to continue to invest for growth and possibly enjoy the upside from its surplus property which has now achieved planning permission. We are not changing FY2017E forecasts materially or our 180p price target which is justified by a sum of the parts analysis.
Acquisition and placing
23 Mar 17
Ideagen has announced the acquisition of PleaseTech, a software provider specialising in providing simultaneous, controlled, and secure collaboration for document review, co-authoring and redaction, incorporating an audit trail of transparency and accountability. The acquisition includes £10m initial cash consideration and £2m deferred conditional consideration, funded by a £10m placing at 75p. The acquisition, as ever, demonstrates the Ideagen strategic logic of adding complementary quality compliance software with significant cross sales potential; this deepens potential relationships in existing core sectors (life sciences, aerospace & defence) as well as adding new customers, and strength in the US; and provides an additional source for recurring revenue, encouraging group visibility and earnings quality. Target lifted to 98p.
Stronger and stronger
23 Mar 17
Sopheon has reported strong prelims in line with the January trading update which had demonstrated that revenue delivery had been achieved on cost underspend, leading to EBITDA (+7% vs FY16E) and adjusted PBT (+22%) outperformance. Strong licence sales, high levels of recurring revenue retention (94% by value), and ever upgrading product portfolio in terms of functionality delivered revenue strength. Gartner recognition illustrates the transition from a product which needed to be described then sold, to a solution set sought by customers to deal with the increasingly acknowledged enterprise problem of efficient product lifecycle management. Sopheon is well positioned for future growth, and board confidence for future growth leads to planned increase in investment, yet still delivering $5.6m ($5.3m pre FX) EBITDA. Having smashed through our FY16 forecasts and target price, we restore FY17 forecasts and lift the 12-month target from 360p to 620p.
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