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Profit growth continuing at a slower pace
21 Feb 17
Boosted by an exceptionally strong gaming performance and currencies Synectics delivered an 83.9% increase in adj. PBT to £2.6m (SSL forecast £2.4m) on revenue of £70.9m (£71.0m) for FY2016. Net cash of £2.2m was also slightly better (£2m) although the 2p dividend was below (3p). We have adjusted our forecasts to reflect a more normal outlook for gaming in FY2017E and we still do not anticipate any meaningful recovery in oil & gas until FY2018E. Despite this we maintain our DCF-derived 315p target price and Buy rating.
Robust 2016 trading offset by 2017 outlook
20 Feb 17
Brave Bison on Friday published a trading update for 2016, and described the outlook for 2017. The 2016 outturn was ahead of our expectations in terms of revenue, materially in line with our EBITDA loss forecast, and with a far better-than-expected cash balance. The RNS highlights slowing growth in H2, the loss of two contracts, and a decision to migrate the model away from low-margin revenues. We materially downgrade expectations for 2017E. We downgrade our Target Price from 9p to 4p but retain our Buy recommendation.
17 Feb 17
FY16 PBT was ahead of expectations at US$150.4m but the 90c dividend was as expected ie no further specials. GPW stabilised YoY and the reported combined ratio remained impressive at only 76.5%, but also reflected no major insured catastrophe losses. The group is maintaining its downside protection with more reinsurance bought. A pricing floor is clearly getting closer but margins remain under pressure, affecting PBT. Lancashire continues to wait for the upturn, whilst paying investors to sit tight. Neutral, Add for income.
The Money Bin
15 Feb 17
In the week to 14 February the FTSE All Share rose 1.1% vs. +0.9% for the Insurance Index and -0.5% for the Lloyd’s Index (some share rerating.) The best performer was Lancashire (+1.3%, results due 16th); Beazley was the worst performer (-2.9%). This week we look at Beazley’s combined ratio from 2010-2016 in a bit more detail. The average combined ratio in this period is 89.4%, including an average reserve release of 10.9%. NB The ratio reflects the longer tail nature of the group’s portfolio – which is currently its key profit driver.
Share & share alike
14 Feb 17
The rally in the last fortnight, highlighted in the table, reflects a continued flow of positive updates and economic news. The FTSE 250, Small cap and Fledgling indices have reached record highs. We are in the lull ahead of results for those companies with a December year end, a welter of economic data regarding the UK economy, the State of the Union address in the US on 28 February and the UK Budget on Wednesday 8 March. We will learn at that stage the latest forecasts from the Office of Budget Responsibility. As highlighted previously, the reaction to corporate updates will continue to set the tone.
Outlook for 2016 remains broadly in line
09 Feb 17
The electrical and oil & gas equipment group’s pre-close statement expects FY results to be “broadly in line” with its expectations, with little change in trading but slight headwinds from sterling’s weakness, affecting its more dollarexposed O&G business. We have trimmed our 2016 underlying loss before tax from -£3.8m to -£4.1m but have not changed our estimates of an improved EBITDA and narrowing loss before tax for 2017. Despite the shares recovering since the interims, we believe the EV/EBITDA of 7.2x 2017 looks undemanding
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