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Epwin Group

Trading in line with FY18 expectations

Trading in the first five months of the year has been in line with expectations despite the impact of adverse weather in the January to April period. As expected, the UK RMI market remains stagnant, weighing on the operating environment across the building products industry. This is being exacerbated by continuing cost input pressures, particularly in PVC resin. The reiteration of FY18 guidance should be viewed positively in the face of these headwinds. With one of the customer issues encountered last year resolved, and the other being worked through, forecast visibility has improved relating to the wider market back drop. Whilst lacking in growth, the underlying market does not appear to have deteriorated materially YTD. FY18 estimates have taken a realistic assessment of the potential impact from the issues faced in FY17 assuming a c. 14% decline in profitability before growth of c. 15% in FY19. On current forecasts the shares trade on 7.6x earnings, 4.9x EV/ EBITDA, have less than 1.0x net debt/EBITDA and yield 6.5%.

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  • 22 May 18
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Mortgage Advice Bureau

Investment case

We observe four attractive characteristics, which ensure MAB delivers predictable revenue, profit and dividend growth: Currently, the main driver of growth in MAB’s revenues, profits and dividends is the number of advisers employed or self-employed by its Appointed Representative firms (ARs); High cash conversion: operational cashflow is over 100% of post-tax profit; MAB is capital light: it is able to pay out 90% of reported earnings; MAB’s management team has a material equity interest.

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  • 22 May 18
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Ceres Power

Major Chinese Strategic Partnership

Ceres has announced a very meaningful strategic partnership with and equity investment from Weichai Power. Weichai is listed in both Hong Kong and Shenzen, employs 74k people, and is currently valued at c. $10bn. The agreement includes £40m of equity investment for a 20% equity holding payable in two stages; £17m today at a price of 15.08p and £23.2m later in 2018 at a price of 16.46p, premiums of 18% and 29% to last night’s close respectively. In addition, the agreement provides the potential for significant revenue through engineering services and technology transfer, license and royalty payments, initially in the Chinese electric bus market. Forecasts remain prudently unchanged at this juncture, ahead of the second equity tranche. However, we believe this provides strong commercial validation for Ceres’ SOFC technology, particularly in the automotive sector, and we see scope for material catalysts over the medium term.

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  • 16 May 18
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Harvey Nash Group

Acquisition of eMenka NV

Harvey Nash has announced the acquisition of Belgian IT solutions company eMenka, a focused provider of Microsoft specialists on both a contracted and permanent basis. The deal is a good strategic fit for the Group’s existing Belgian operations and cements Harvey Nash’s market leading position in this specific skills niche. eMenka is the Group’s third acquisition in the last year, following the purchase of Swedish HR consultancy PAT Management AB in July 2017 and UK technology talent provider Crimson last September, and proves management are delivering on the acquisition strategy that motivated their move to AIM last June. The shares have performed strongly over the last 12 months, up 34% YOY but still offer an attractive entry point to a business that is delivering against its stated objectives, supported by a solid balance sheet with FY19 net debt/EBITDA of just 0.1x. The shares trade on an FY19 PE of 7.5x offering an attractive 4.4% yield.

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  • 15 May 18
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Elegant Hotels Group

Market stabilising

Elegant has this morning announced H1 results that should position it well to deliver our FY expectations. YoY improvements have been delivered across most KPIs and the company has confirmed trading is in line with expectations, we are therefore leaving our full year forecasts. We believe the shares represent good long-term value, trading below IPO price and at a 41% discount to NAV, with a yield of 4.7% which remains ahead of the sector average with solid cover in excess of 2.3x.

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  • 15 May 18
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Lookers

Execution remains strong

Lookers have this morning released a trading update for the three-month period to 31 March 2018, essentially confirming the group continues to trade in line with expectations and is seeing good trading momentum, particularly in used and aftersales. The group has a strong balance sheet, supported by positive operational cash flow. We continue to believe the shares look oversold, particularly in the context of its balance sheet flexibility, undemanding valuation and progress delivered to date based on strong management execution across all areas of the business.

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  • 15 May 18
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