06 Nov 18
THE MONTHLY November 2018
In addition to Hardman’s monthly analysis of client stocks, the thorny issue of market disruption – a popular theme currently - is also addressed. In a wide-ranging article, Hardman’s utilities analyst, Nigel Hawkins, assesses the impact that market disruption has already made. In some sectors, notably telecoms and aviation, market disruption has been apparent for many years, as the rise of Vodafone, Ryanair and easyJet demonstrates. However, in some sectors, such as oil and housebuilding, structural changes have been modest – the dominance of the big players endures. For investors, there is real interest in those sectors where changes are underway. The UK groceries market, which may shortly become a duopoly, is a case in point. And, intriguingly, who knows if there is a company currently languishing in AIM, which will attain a £50bn market valuation within the next decade?
Companies: OPM AVO AGY APH ARBB AVCT DISH BNO BUR CMH CLIG CSH DNL DPP GTLY GDR HAYD KOOV MCL MUR NSF OXB PHP RE/ REDX SCE SIXH TON VAL VTA W7L
23 Oct 18
Quarterly Research Outlook
The June IPO of Knights Group Holdings, a Top-100 regional law firm, marked the fifth entrant to the burgeoning UK-listed legal sector. Following recent expansion of our coverage across all five listed legal firms, complemented by coverage of three broader support services peers with exposure to the sector, we revisit and build upon our views on this rapidly evolving sector.
Companies: ARS GTLY GENL KEYS KGH MNO RBGP TWD 7DIG ABBY AMS AMER ANX ARS ATYM AVON BLVN PIER CGS CAML CALL CSRT TIDE DTG DEMG ELM EMR FPM FPO FST GTLY GENL GRI GEEC HDY HMI HAYD HEAD HILS HTG HUR IBPO IOG INDI JHD JOG KEYS KGH LAM MACF MNO MKLW NAH OXIG PCA PKG CAKE PDG RBW RMM REDD RSW RNO RKH RBGP ROR SUS SCPA SHG SOLG TWD TRAK TRI VNET VTC ZTF
07 Nov 18
International brands driving performance
Alliance Pharma (APH) is a profitable, cash-generative, specialty pharma business. The proportion of sales generated from higher margin international star brands is rising rapidly, and will be boosted by the recent acquisition of Nizoral in APAC, and UK approval and launch of Xonvea for nausea and vomiting in pregnancy, where conservative management has failed. Investment behind these brands together with compliance with new regulatory directives will limit short term growth but positions the company well for the medium term. APH is cash-generative allowing it to pay down debt at a fast rate. Meanwhile, it offers a dividend yield of 2.0%.
Companies: Alliance Pharma
07 Nov 18
Continuing progress in a receptive market
Following a 15-month financial period to March 2018 these interim results include a full six months contribution from Vocare (acquired 24 October 2017). Progress has been made with existing contracts being renewed/extended and new contracts won. The Group continues to refine and reorganise Vocare’s operations and procedures which were deemed by management to be inadequate post-acquisition and already much has been achieved. The buy & build strategy remains in place and the Group is very well placed financially with £9m of net cash still on the balance sheet (over 80% of the current market cap). We make no changes to our forecasts which see a continued build in EBITDA and a move into pre-tax profit in FY2019.
09 Nov 18
Oxford BioMedica - Diversified strategy showing its strength
Strong operational momentum at Oxford BioMedica (OXB), as evidenced by its interim maiden operating profit of £9.4m (vs a loss of £2.2m in H117), highlights the strength in the company’s diversified business model. We continue to expect ongoing growth in the top line, driven in the near term by the commercial ramp-up of Kymriah (Novartis), the progression of Bioverativ’s haemophilia products to the clinic and the rapid advancement of its partnered products with Orchard and Axovant. We note that Immune Design’s CMB305 clinical programme has been halted, but forecast that the operational and financial impact on OXB will be minimal. OXB has transitioned three new preclinical assets into its pipeline: OXB-204 (Ophthalmology-LCA10), OXB-208 (Ophthalmology- RP1) and OXB-103 (amyotrophic lateral sclerosis). Additionally, OXB has announced the expansion of its lentiviral manufacturing capacity with a fourth facility. We value OXB at £632m vs £614m previously.
Companies: Oxford Biomedica
01 Nov 18
Share & share alike
Global equity markets in October reverted to a pattern that seen in the past – sharp falls and increased volatility. The usual reasons of Brexit uncertainty, the impact of global trade tariffs and heightened geo-political worries and a raft of disappointing Q3 results in the US & UK punctured some of the market optimism. Both countries’ markets have now surrendered their progress year to date. The UK Budget helped things to stabilise here but continuing volatility seems likely. In Share News & View we comment upon Bloomsbury, Braemar*, Location Sciences*, Nektan*, PCF*, Tricorn* and Warpaint*.
Companies: AOR APC BONH BMS CTG CRPR DMTR ESC EUSP FDM FA/ LSAI NKTN PCF SNX TCN W7L
26 Jun 18
Delivering on strategic and financial targets
BMK delivered a 9% reported increase in sales in H1’18 despite FX headwinds (up 17% at constant exchange rates) to £75.7m, together with a 91% increase in adjusted EBITDA. This was driven by strong performance in Genetics and Advanced Nutrition and a higher margin product mix in these divisions. The results were accompanied by a confident message that the growth strategy is delivering, with FY18 forecasts on track.
21 Mar 18
Modest forecast changes; remain at Hold
Anpario’s full year results highlighted a period of strong growth with momentum reportedly continuing into 2018. The group remains focused on building strong commercial relationships with end users and we expect the initiatives to help the group deliver our 11% sales growth estimate in 2018. We make modest adjustments to our forecasts this morning and increase our Target Price by 2p to 434p. We remain at Hold.
12 Sep 18
Share & share alike
Here we go again – the company reporting season is gathering pace. The MPC is likely to leave rates unchanged although expectations still remain for an increase next year. The UK economy expanded at a faster pace in July helped by the weather and better retail sales. General sentiment continues to be impacted by tariff concerns, combined with Brexit uncertainty. As Table 1 shows, all major indices have fallen over the last month. In Share News & Views, we comment on AorTech*, Bonhill*, DeepMatter*, EU Supply* James Fisher, Haynes, Hunting , Location Sciences*, Marshall Motor and Synectics*.
Companies: AOR APC BMS CRPR DMTR ESC EUSP FDM FA/ GETB LSAI PCF SNX TCN W7L
09 Nov 18
Circassia Pharmaceuticals - Joining the dots
Circassia’s recent interims demonstrated 55% y-o-y revenue growth to £28.4m and a 75% R&D expense reduction (to £6.9m from £27.2m in H117) while growing the commercial infrastructure that now includes China. Investors should see a path to profitability, but we note recent licensing opportunities in the respiratory therapeutic area could accelerate this.
Companies: Circassia Pharmaceuticals
08 Oct 18
FY 2018 results – 12% upgrades to FY 2019
Full-year adjusted EPS was 11% above our expectations, driven by higher revenues across the majority of its product range. A 55p special dividend was proposed, resulting in full-year dividend growth of 27% to 116p. Strong underlying revenue growth (c.28%), which excludes c.£0.8m of backdated royalties and the loss of a c.£1.0m royalty stream, bodes well for future growth. This was despite a weak start for troponin sales in Europe, which we expect to benefit from Siemens’ US launch in July. We have increased FY 2019 forecasts by 11% and introduced forecasts for FY 2020 that imply c.12% EPS growth. We reintroduce a target price of 3,440p, which implies a 3.2% FY 2019 free cash flow yield, underpinned by 51% free cash flow/capital employed and 64% ROCE.
02 Oct 18
Cenkos: Inspiration Healthcare Group Plc - Delivering growth
Inspiration Healthcare has announced its interim results for the 6 months to 31 July 2018. Revenues for the period were £7.4m, up 3% YoY, while EBITDA grew by 9% as the company controlled its cash-based overheads. Despite regulatory delays impacting the launch of its own developed products we believe Inspiration Healthcare has delivered a strong H1/19, clearly demonstrating the resilience and adaptability of the company's sales operation; this is a fundamental attribute of the group. We maintain our Buy recommendation.
Companies: Inspiration Healthcare Group
02 Oct 18
Two acquisitions create European platform
Whilst Clinigen is paying a full price to establish a European platform, the fit is very good. It should make the Clinical Trial Services division more robust and provide a platform to drive the Unlicensed and Commercial Medicines offerings into Europe. Revenue synergies across the group could be material over time. We push through modest EPS upgrades (1%/3%) and increase our TP to 1213p (from 1157p). We remain attracted to the growth opportunity (as highlighted in our Pharma Services sector note in March) and cash generative nature of the model. Buy.
Companies: Clinigen Group
04 Oct 18
THE MONTHLY October 2018
We are in the midst of the Conference season for political parties and trade unions in Britain. We all have a lot on our minds, with generational constitutional issues to the fore, but these have come to the fore after many years of concerns building up about citizens’ ‘place in the world’.
Companies: OPM AGY ARBB AVCT DISH BNO BUR CMH CLIG DNL DPP GTLY GDR HAYD KOOV MCL MUR NSF OXB PHP RE/ REDX SCE SIXH TRX TON VAL VTA W7L
06 Nov 18
Entering the premium nursing homes market
Q3 revenue came in at €865m (+8.5% yoy), slightly above consensus expectations (€860m, +7.9% yoy). Orpea has announced the acquisition of German Axion Group and the JV (75% owned by Orpea) to build up its presence in the German upscale nursing homes segment. Orpea confirmed its FY top-line guidance (over €3.4bn, total growth of +8.3%) and upgraded its EBITDA margin from “higher or equal to its 2017 level” to “higher than in 2017”.
15 Oct 18
Bioventix (BVXP) ShareSoc presentation October 2018
04 Oct 18
Avacta Plc 'making significant progress towards commercialising Affimer platform'
19 Oct 16
Bioventix (BVXP) Full Year results June 2016 interview
26 Sep 18
Allergy Therapeutics Preliminary Results
15 Feb 17
LIDCO - Trading update
25 Sep 18
Bitesize briefing - Nuevolution
16 Jul 18
MaxCyte (MXCT) presentation at ShareSoc July 2018
29 Aug 18
Polarean Imaging plc - First patient in Phase III FDA Clinical Trial
07 Mar 18
31 Jul 18
Avacta Group's Bach BioSciences deal 'an exciting step' - Capital Network analyst
19 Feb 18
LiDCO - Trading Update
12 Jul 18
Collagen Solutions (COS) Results presentation July 2018
07 Jul 15
Omega Diagnostics - Final results
09 Jul 18
Genus PLC - Capital Markets day 2018
14 Jun 18
ValiRx - VAL401 Update
Smith & Nephew
A progressive quarter but mixed guidance
Smith and Nephew recently announced its Q3 trading update. Revenue was in line with expectations, coming in at $1,169m, up 3% on an underlying basis. Growth was largely driven by sports medicine joint repair, other surgical businesses and advanced wound devices. On the other hand, arthroscopic enabling technologies and advanced wound bioactives weighed on growth. The big (positive) surprises, though, were the knee segment and the US region. Our recommendation remains unchanged in spite of marginal changes in our estimates.
13 Nov 18
Evolva - Everything EverSweet
Evolva’s Q3 trading statement is mixed, but overall we believe it contains more positive than negative news. The announcement that Cargill and DSM are to form a new joint venture to produce fermentation-based stevia under the EverSweet brand is not a threat to Evolva’s position and indeed could potentially accelerate growth of the market that is still in its infancy. We note that revenue guidance is somewhat less bullish than at the H1 results and we therefore trim our forecasts slightly. We also update our forecasts for FX and overall our fair value remains unchanged at CHF0.58
13 Nov 18
PDL BioPharma - Q318 results
PDL reported Q318 revenues of $67.9m, up 8.2% compared to Q317 and up 45.8% sequentially, with that growth mainly due to an increase in the fair value of the Assertio (formerly Depomed) royalty rights. Noden Product revenue of $17.8m was up 17.9% compared to Q317 but was down 31.2% sequentially, mainly due to the bulk purchasing by distribution partner Orphan Pacific for the Japanese market launch in Q218. Importantly, PDL recently announced a $100m stock repurchase program which at current prices would buy back approximately 25% of the common shares outstanding.
13 Nov 18
Tissue Regenix Group
Arthrex collaboration extended into Europe
Tissue Regenix has signed an additional agreement with Arthrex for pan-European distribution of its BioRinse portfolio, which follows a US agreement signed in March 2018. This provides Tissue Regenix with a significant partner in two key geographies. Arthrex, a global leader in the field of sports medicine, specialises in the marketing of innovative products. Efforts will initially focus on the UK, before gradually launching in other European countries as approvals are gained. The extension of the collaboration should generate material sales growth in the coming years; but, to be conservative, we are maintaining our valuation at £245m (20.9p a share).
13 Nov 18
POLX ADL EVRH FEN CHRT OMIP CRU TRX SAR AFHP
Small Cap Feast
Kropz, an emerging plant nutrient producer with an advanced stage phosphate mining project in South Africa, a phosphate project in the Republic of Congo and exploration assets in Ghana, is looking to join AIM. Offer TBC, expected late Nov Titon holdings—international manufacturer and supplier of ventilation systems and window and door hardware. No capital raise. Due 10 Dec. Mkt cap c.£22m. Greenfields Petroleum (TSX-V:GNF) production focused company with operated assets in Azerbaijan seeking AIM dual listing including $60m private placement. Mkt cap $12.6m CAD Finncap—proposed acquisition of M&A adviser Cavendish Corporate Finance and AIM admission. Offer TBA Crossword Cybersecurity PLC* (NEX:CCS)—the technology commercialisation company focusing exclusively on the cyber security sector is investigating the possibility of AIM admission. The Company is proposing to raise up to £2.25 million before the end of December, conditional on Admission.
13 Nov 18
Paion - Near-term filings in the US and Japan on track
Paion is approaching several important milestones, with partners on track to file for approval of remimazolam in the US, Japan and Russia in the next few months. Its Phase III study of remimazolam in general anaesthesia (GA) in Europe is progressing well and is on track to complete recruitment in 2019, while partner R-Pharm recently completed a successful Phase III in GA in Russia. The filings will be an important step towards establishing Paion as a leader in acute and critical care. We have made minor revisions to the timing of R&D expenditure in line with revised guidance and rolled forward our DCF model, which lifts our valuation to €291m or €4.56/share.
12 Nov 18
Steady quarter but no assurance from the labs
UCB’s 9M 18 (trading update) performance came in line with our as well as consensus estimates, although variations were seen at the drug level. Revenue grew by 6% ytd at CER to €3.4bn, on the back of the continued strength in the core portfolio (+12% at CER) — Cimzia (+9%), Vimpat (+19%), Keppra (+5%), Briviact (+81%) and Neupro (+2%). FX had a negative impact of 3% on the group sales. NB all sales numbers are at calculated CER unless specified otherwise (the company does not report quarterly CER numbers). Cimzia’s underperformance during the quarter (11% growth in H1 slowed down to 9% for 9M) was offset by a positive surprise by Keppra (+5% vs +2% for H1), attributable to a strong uptake in China. Neupro, too was seen as relatively healthier during the quarter with 2% growth for 9M vs flat in H1. Management maintained it FY18 guidance – revenue of €4.5-4.6bn, recurring EBITDA of €1.3-1.4m and core EPS of €4.3-4.7.
12 Nov 18
TMMG NQMI AFHP JAN NTBR TRT MXCT EML ALM
Small Cap Feast
Titon holdings—international manufacturer and supplier of ventilation systems and window and door hardware. No capital raise. Due 10 Dec. Mkt cap c.£22m. Greenfields Petroleum (TSX-V:GNF) production focused company with operated assets in Azerbaijan seeking AIM dual listing including $60m private placement. Mkt cap $12.6m CAD Finncap—proposed acquisition of M&A adviser Cavendish Corporate Finance and AIM admission. Offer TBA Crossword Cybersecurity PLC* (NEX:CCS)—the technology commercialisation company focusing exclusively on the cyber security sector is investigating the possibility of AIM admission. The Company is proposing to raise up to £2.25 million before the end of December, conditional on Admission. The Panoply parent company of a digitally native technology services group founded in 2016 with the aim of identifying and acquiring best-of-breed specialist information technology and innovation consulting businesses across Europe, is looking to join AIM. Offer TBC, expected late November 2018.
12 Nov 18
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