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The Slide Rule
12 Jan 17
What is The Slide Rule? The Slide Rule has been designed to dramatically simplify the identification of the best companies in the UK small/mid-cap sector by making a quantitative assessment of the relative potential of each company. At its core, The Slide Rule aims to identify those companies that create genuine shareholder value through strong returns on capital and solid growth, but also present a value opportunity with the potential tailwind of earnings momentum. Companies are assessed within a Quality, Value, Growth and Momentum (QVGM) framework.
New Screen – Consistent Growth + “11 with legs”
17 Dec 15
To represent the theme of “Consistent Growth”, we introduce our second basket of small-cap stocks selected by a screening process. This will sit alongside our first (deep value) basket introduced and described in our note dated 26th May 2015 (Our first screen – 10 deep value stocks to consider). The screening criteria address both the extent AND the quality of growth in EPS and sales, which we consider add a worthwhile additional element to stock selection. The process results in a basket of 25 stocks, the performance of which we will track over time, allowing comparison of investment styles, but also highlighting interesting companies. We have taken a closer look at 11 stocks “11 with legs” (see list on the right) in this screen.
16 Jan 17
We take a look at the rankings of the various countries in Africa that have a significant exposure to mining. We take the Transparency International corruption rankings as our starting point and modify these for exceptional geology and for current UK government travel warnings. Ghana, Botswana and Namibia come out as our top three, with Eritrea, Kenya and Zimbabwe at the bottom of our rankings.
19 Dec 16
600 GROUP | ACCSYS TECHNOLOGIES | AGGREGATED MICRO POWER HLDGS PLC | ALUMASC GROUP | ANGLO-EASTERN PLANTATIONS | AVINGTRANS PLC | CAPITAL DRILLING LTD | CARCLO | FENNER PLC | FLOWTECH FLUIDPOWER PLC | GLOBAL INVACOM GROUP LTD | GOOCH & HOUSEGO PLC | HARDIDE PLC | HAYWARD TYLER GROUP PLC | IOFINA PLC | M.P.EVANS GROUP | R.E.A. HLDGS PLC | REDT ENERGY PLC | RENOLD | ROBINSON | SOMERO ENTERPRISE INC | SURFACE TRANSFORMS PLC | TRANSENSE TECHNOLOGIES PLC | TRIFAST | ZAMBEEF PRODUCTS
Videos and Podcasts
Armadale Capital - Update on the development and expansion of the Mpokoto Gold Project
25 Nov 15
Armadale Capital - Full assay results confirm exceptional high-grade graphite deposit
23 Nov 16
Investing in Africa – graphite in Tanzania
17 Feb 17
Armadale Capital offers exposure to an investment company specialising in mining opportunities in Africa. The current focus is on a business that is exploring and developing the Mahenge Liandu graphite project in southern Tanzania. Exploration at Mahenge Liandu is at a relatively early stage though 21 RC drill holes have been completed and a “first pass” inferred resource of 40.9Mt grading 9.41% Total Graphitic Content (‘TGC’) has been defined. Initial metallurgical test-work on a single 10 Kg sample showed encouraging recoveries with some 28.1% within the Jumbo and Super Jumbo flake sizes with a purity of 98.5% TGC. A further 32.9% was within the Large category with a high 99.1% TGC.
Weak top-line results, but derivatives boost profits; dividend policy under review
16 Feb 17
Drax has published its FY16 results which are weak at the top-line level with revenues reaching £2.95bn (-4.7% yoy) and EBITDA reaching £140m, which is 2% below market expectations and represents -17.2% yoy mainly due to the removal of the renewable subsidies in the UK and lower power prices. However, a strong performance in the trading business and £177m of unrealised gains from derivative contracts have boosted the reported net income profit of the company to £194m, representing a 246% yoy increase. On an adjusted level, the profit of the group was £21m representing a 54.3% yoy contraction and an EPS of 5p, which is broadly in line with expectations, but below ours. Net debt decreased by 50.2% yoy to £93m, ahead of forecasts, due to a strong cash flow performance (+29% yoy from operating activities) and an increase in cash reserves due to a £86m positive free cash flow. The group has proposed a dividend payment of 2.5p per share (-56% yoy), which is at the consensus level and represents a 50% payout ratio. It expects a 2017 EBITDA in line with market expectations at £229m. The company has decided to put the current dividend policy under review (50% payout ratio). No information is expected before H1 17 after consulting the shareholders.
FY16 ahead of expectations. Weak guidance and lower dividend payments expected
14 Feb 17
The company published its FY16 results which missed expectations on the revenue side with a 5.1% yoy decrease, but EBITDA reached the upper range of the revised expectations at €16.4bn (-6.7% yoy). The positive effect came from other activities, which includes services, trading, and renewables as together these showed a 22% increase in EBITDA. Operating income contracted by 3.4% due to higher provisions on the nuclear side from a 30bp reduction in the discount rate to 4.2%, generating an increase in provisions of €1,342m and €680m in financial expenses. However, adjusted net income, including hybrid payment, is ahead of expectations as it reached €3.5bn, which represents a 15% yoy contraction but is still 3.5% better than expected, representing an EPS of €1.77/share, 14% ahead of expectations. Reported net debt remained stable at €37.4bn, which is a positive, although operating cash flows decreased by 12.6% yoy to €11.1bn. Free cash flow continues to be on the negative side, but has decreased to €-1.6bn despite the scrip dividend payment. In 2016, the company will pay €2.1bn in dividends (scrip), or €1.06/share. This is above expectations and corresponds to a 60% payout ratio. For the coming years, EDF has reduced dividend payments with a payout ratio maintained for 2017 at 55-65%, but decreased to 50% in 2018, and 45-50% thereafter. In terms of guidance, this is weak as the group expects EBITDA to be in the €13.7-14.3bn range in 2017, and at €15.2bn in 2018, which is in line with our expectations, but below market forecasts. The neutral free cash flow by 2018 does not include the dividend payment, which implies a slight downward revision from previous guidance.
Waste targets to be met and water in line
10 Feb 17
Pennon’s full-year trading update confirmed it is performing in line with market and management expectations. South West Water (SWW) is on track to deliver an 11.7% return on regulated equity (RORE) and management maintains its current-year guidance for a £100m contribution from Viridor’s energy recovery facilities (ERFs). Management highlights outperformance in the water business as driven by efficiencies, while company-wide revenue growth is provided by the Viridor waste business. It is this combination that enables the sector-leading dividend policy of growing the payout by 4% above inflation.
Low water levels and generation margins impact the group’s results
02 Feb 17
The group has published its FY results with revenues better than expected, reaching €3.63bn with a 5% yoy increase. The improvement mainly came from City Solutions and the performance in Russia. However, on the earnings side, the generation business bites as the divisional performance pushes the group’s results below expectations with an EBITDA decrease greater than expected at -7.9% yoy. Despite a lower effective tax rate (20%) and lower financial expenses (EPS was also behind consensus, reaching €0.56 which is 11% below expectations. Cash flow from operating activities was highly impacted as it decreased by 50.5% yoy to €607m, driven by lower earnings, higher taxes paid, lower FX gains, and a €131m increase in working capital. Due to this and the many acquisitions, net debt decreased more than expected as it had already burnt up its excess cash position. Despite the results, the dividend proposed is above expectations at €1.1/share. Concerning the outlook, the group still expects 0.5% growth in electricity demand and an operating profit in Russia of RUB18.2bn should be reached over the 2017-18 period.
01 Feb 17
"The FOMC’s Monetary Policy Statement, which is due at 19:00hrs GMT, will likely be today’s principal talking point. Not that any change in the discount rate is anticipated, but traders will be listening acutely for any suggestion as to when the first of 2017’s three anticipated hikes might kick-off. This will be particularly sensitive for the US$, which yesterday slid to its lowest level against the international basket since Trump’s election was seen to drive the currency to a 14-year high in November. While there may be some truth in the idea that month-end rebalancing by forex traders somewhat weighed on the Dollar, suggestions from President Trump that Japan and China are devaluing their currencies to boost international trade, while a US trade advisor tells the FT that Germany benefits from a ‘grossly undervalued’ Euro, hints that there are some early signs of panic in the White House. Yet the reality of Trump’s rallying call ‘America First’ is founded on inward looking, reflationary and protectionist policies, which are destined primarily to power the US$ ever upward, and something that even Donald might find he can do very little to stop. The damage inflicted on the Mexican Peso after its government drew swords with the President was a clear warning to all US trading partners, but most particularly China, of troubles ahead. Reflecting on this, the Dow Jones remained yesterday’s main casualty, with the other principal US indices closing with just fractional movements. Catching up following the Lunar New Year break, the Hang Seng fell quite sharply, reflecting also news that China’s Manufacturing PMI fell for the second straight month in January. Elsewhere in Asia, the Nikkei recovered from an early setback to close slightly in the positive, while the ASX gained as commodity plays and financials marginally firmed. Other than the Nationwide Housing Prices index, there is little UK macro data due today, although January Markit Manufacturing PMI figures cover most EU territories, including Great Britain. At 10:00hrs GMT, the European commission is also due to release its Economic Growth Forecasts, while later a large batch of US statistics, including ISM Manufacturing, Construction Spending and Vehicle Sales for January, precede this evening’s Fed decision. UK corporates due to release earnings or trading updates include AG Barr (BAG.L), Low & Bonar (LWB.L) and TalkTalk (TALK.L). With the US$ now trading off yesterday’s lows, London equities are expected to recoup some of yesterday’s losses, with the FTSE-100 seen rising some 30 points during opening business. Investors will also be keeping a weary eye out for reports from the Commons this morning, with as many as 100 MPs reportedly planning to vote against a law to trigger Article 50. " - Barry Gibb, Research Analyst
01 Feb 17
Yü Group is an independent supplier of gas and electricity entirely focused on supplying SME businesses. It has a highly scalable business model, good revenue visibility and strong cash conversion. Revenue growth has accelerated dramatically following the exit from the Controlled Market Entry (CME) rules. We anticipate rapid growth in earnings as the Group leverages the benefits of economies of scale and takes market share in a huge market where regulators are encouraging disruptive competition from smaller operators.
A $1.2bn contract awarded in Saudi Arabia
30 Jan 17
Engie, through a consortium with the Saudi Electric Company (SEC) and Saudi Aramco, has won a contract to build a 1.5GW cogeneration power plant using CCGT technology in Saudi Arabia For a total investment of $1.2bn, this would take the achieved cost of the project to $1.25m/MW, which is extremely competitive. Engie would hold a 40% stake in the project, with SEC holding 30% and Saudi Aramco the remaining 30%, which implies that Engie would have a $480m investment envelope in the project. The construction contract is attached to two 20-year contracts, whereby SEC would buy the electricity and Saudi Aramco would buy the steam and hot water produced, reducing the exposure of the project to wholesale price movements, although the achieved price for the contracts have not been disclosed. The power plant is expected to be commissioned in 2019, with the operation and maintenance of the power plant being transferred to SEC in 2018.