Contents
Global perspectives 2 Company profiles 6 Edison dividend list 64 Stock coverage 65
Prices at 23 October 2020 Published 29 October 2020 US$/£ exchange rate: 0.7709 HUF/£ exchange rate: 0.0025 €/£ exchange rate: 0.9074 NOK/£ exchange rate: 0.0830 C$/£ exchange rate: 0.5835 CHF/£ exchange rate: 0.8439 A$/£ exchange rate: 0.5503 ZAR/£ exchange rate: 0.0466 NZ$/£ exchange rate: 0.5113 HKD/£ exchange rate: 0.0995 SEK/£ exchange rate: 0.0871 KZT/£ exchange rate: 0.0018
Welcome to the October edition of Edison Insight. We now have c 400 companies under coverage, of
which 115 are profiled in this edition. Healthcare companies are covered separately in Edison Healthcare Insight. Click here to view the latest edition. We open with a strategy piece by Alastair George, who notes that a second wave of lockdowns have
arrived in Europe. However, the measures are not as severe as earlier in the year even if they will undoubtedly have a depressing effect on Q4 GDP. ‘Hands, face, space’ has proved inadequate protection against a second wave and the necessity of circuit-breaker lockdowns represents a meaningful bump in the road to recovery. However, they are likely to have only a relatively modest impact on the GDP outlook for 2021, provided an effective vaccine becomes available early next year. The risks for markets in respect of the US presidential election appear to centre on the possibility of a contested result which we believe would be poorly received by markets. Over the medium term, a Biden administration would be likely to result in a less confrontational approach to foreign policy but also higher domestic US corporate taxes. This could mark the high tide in the very large underperformance of European equities versus the US.
This month we have added EML Payments, Quadrise Fuels International, Stern Groep and Trackwise Designs to the company profiles. Readers wishing for more detail should visit our website, where reports are freely available for download (www.edisongroup.com). All profit and earnings figures shown are normalised, excluding
amortisation of acquired intangibles, exceptional items and share-based payments. Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisors and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting.
We welcome any comments/suggestions our readers may have.
Neil Shah Director of research
Edison Insight | 29 October 2020 1
Global perspectives: Lockdown 2.0 Analyst A second wave of lockdowns has arrived in Europe. In response to rising Alastair George COVID-19 infections, further lockdowns have been announced across France, +44 (0)20 3077 5700 Germany, Italy and Spain in recent days – and markets have responded [email protected]
negatively. However, the measures are not as severe as earlier in the year even if they will undoubtedly have a depressing effect on Q4 GDP.
‘Hands, face, space’ has proved inadequate protection. The necessity of these circuit-breaker lockdowns represents a meaningful bump in the road to recovery. However, they are likely to have only a relatively modest impact on the outlook for 2021, provided an effective vaccine becomes available early next year.
The risks for markets in respect of the US presidential election appear to centre on the possibility of a contested result, which we believe would be poorly received by markets. Over the medium term, a Biden administration would be likely to result in a less confrontational approach to foreign policy but also higher domestic US corporate taxes. This may facilitate a reversal in the very large underperformance of European equities versus the US seen in recent years.
Edison Insight | 29 October 2020 2
Lockdown 2.0 is here
In response to rising COVID-19 infections, social restrictions have now been reintroduced across Europe. Markets have responded negatively as some of the more optimistic scenarios for a smooth recovery out of the original period of disruption have been effectively ruled out. While the lockdown measures are not in general as severe as earlier in the year, they will undoubtedly have a depressing effect on Q4 GDP in Europe.
These new lockdown measure have tested investors’ resolve and drawn attention back to the very short-term outlook. Equity markets have suffered meaningful volatility in response to these lockdown announcements. New social restrictions certainly represent a bump in the road relative to our earlier views but were always a risk. With vaccines expected to start becoming available in only a few months, and lockdowns targeting a relatively narrow section of the economy compared to earlier in the year, we believe the overall economic impact and market reaction will be measured. National economies are also better adapted to the restrictions, with 29% of UK adults now working from home.
France and Germany have implemented a one-month period of enhanced social restrictions during which restaurants and bars must remain closed and personal travel is highly discouraged or banned. Spain has announced a national curfew on restaurants and bars. Importantly, there has been recognition of the need to keep the economy moving as much as possible and to this end schools are expected to remain open. Outside the leisure, travel and hospitality sectors it remains business as COVID-usual for now.
While the UK has not announced any national measures in recent days, there are variety of similar regional restrictions already in place. The effect of these measures, prior to any additional government spending to offset the impact, is likely to be in the region of 1–2% of GDP given the targeted nature of the measures on social sectors and the relatively short announced duration of one month, at least compared to the lockdowns earlier in the year.
The question for investors in recent days is whether the acceleration of infections represents a structural turn for the worse in the pandemic or a bump in the road. We view it as an unwelcome, but not entirely unanticipated, bump in the road. It is unwelcome because it demonstrates that ‘hands, face, space’ combined with contact tracing has proven ineffective in keeping the effective reproduction rate below or close to 1.0. There have been shortcomings with contact tracing systems in the UK for example, but the commonality of a rising trajectory of infections across Europe suggests that it is an approach which is struggling to deliver on its earlier promise.
Exhibit 1: Implied volatility has risen in recent weeks but remains a fraction of March levels
90 80 70 60 50 40
Implied volatility % 30 20 10 0 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20
Source: Refinitiv, VIX index
Edison Insight | 29 October 2020 3
Nevertheless, this reset to social distancing plus circuit-breaker lockdowns will have been at least in part anticipated by investors. This scenario has previously been modelled by epidemiologists to spread the burden of infections through time to reduce pressure on intensive care facilities and to manage through the period prior to the availability of a vaccine. We note the growth rate of infections and mortality both initially appear to be lower than in the first round of the pandemic, although comparisons are difficult due to the rapid expansion of testing.
Investors have already repositioned portfolios to account for COVID-19 risks and while implied volatility has risen notably compared to the summer, Exhibit 1, it remains some way below the peak of early March. We would therefore be surprised to see another liquidity driven sell-off such as that in evidence earlier in the year, especially as expectations for the introduction of the first vaccines remain in place for Q121.
US election – Trump OK, Biden OK, but neither not OK A very unusual US presidential election is currently underway. A significant proportion of voters will not go to polls, but instead due to coronavirus restrictions will send their ballots in by mail. Polls currently indicate that Biden’s lead remains in place in the closing stages of the race and a Biden victory is the most likely outcome, in our view. However, there is also a significant chance of a contested election and weeks, if not months, of legal uncertainty. Time is running short for any waning of Biden’s lead into polling day and a clear Trump win at this point appears the least likely outcome.
Investors may be rightfully focused on other risks at present, with developed market GDP still so far below potential due to the fight against COVID-19. The timing of a vaccine and the interplay of monetary and fiscal support over the coming 12 months is still the dominant factor for global markets in our view. Nevertheless, the outcome of the US election will set the tone for US economic and foreign policy at a critical juncture, given the rising strategic challenge from China.
In the short term and in policy respects there is relatively little to choose between the candidates. We believe markets would take a second term for Trump in their stride, having become habituated to volatile and confrontational foreign policy, combined with a US business-friendly domestic agenda.
Furthermore, both Biden and Trump will need to tackle the outstanding issue of a fiscal stimulus package to address ongoing COVID-19 effects for 2021. Further out, should Biden become president we would expect modestly higher US corporate tax rates, which may weigh on sentiment for US equities which to date have had an exceptionally good crisis. The strong performance of the S&P 500 stands in contrast to the relatively weak performance of other developed and emerging markets.
A Democratic president may also look favourably on reducing the alleged monopoly power of the largest US technology franchises. Given the large weighting of these stocks within US indices, this would be a further negative for US markets. On the other hand, the green agenda would receive a boost as Trump’s foot-dragging climate change policies would cease to be relevant.
Biden would also in our view step back from the highly confrontational and unpredictable policies of his predecessor in respect of foreign policy. Trump’s attempts to appeal to his domestic supporters through the threat and use of trade tariffs on foreign goods – targeting not just China but also allies such as European nations and Canada – is likely to be seen as a policy failure in hindsight, delivering neither economic benefit nor polling advantages.
For these reasons, a Biden administration may have relatively little initial impact at the global market level. However, with a less business-friendly US administration investors may look towards other less highly valued markets over the medium term. For example, we believe the long era of Europe’s consistent equity underperformance of the US could finally come to a close.
Edison Insight | 29 October 2020 4
While Biden may choose to run a more conciliatory policy towards historic allies, the tensions between the US and China are likely to remain in place. The strategic questions in respect of a resurgent and clearly more assertive Chinese state span the US political divide. For example, we do not think a Biden administration would stop the splintering of technology supply chains as firms seek to diversify suppliers to include those outside China. A political test of the resolve of the new administration from China would also be a possibility during 2021.
However, we believe a Biden administration would also aim for a lower profile package of China policies. A more carefully assessed long-term strategic objective of promoting an enduring era of US influence, stability and power on the international stage may result. Investors should welcome the absence of unnecessary uncertainty in this regard.
Unfortunately, the probability of a contested result cannot be excluded given the multiplicity of ways that a close result could be challenged in the US courts. There are for example procedural challenges that can be launched in each US state, if it was believed that due process was not followed during the election. The battle lines in respect of mailed-in votes, which will account for a many times larger share of the total than in previous years, have already been drawn by Trump’s campaign with teams of lawyers standing by.
We believe Biden’s campaign is no less well legally armed, which means that a close contest will inevitably be challenged by either side which could lead to months of delay and more importantly the risk of policy paralysis at a critical time for the US economy. It is this result which we believe investors should be prepared for, even if they may be atypically indifferent to the success of either of the candidates.
Conclusion
The introduction of new social restrictions in Europe has brought into sharp relief the conflict between the short- and long-term outlook for global equity markets. The necessity of circuit-breaker lockdowns is clearly a negative for the short-term outlook but in our view should not distract equity investors from peering only a little further into 2021 when the likely availability of vaccines may change the calculus in terms of infection rates and the need for severe social restrictions.
Furthermore, following earlier disagreements governments in Europe have resolved that fiscal support will be forthcoming for economies, in addition to central banks’ monetary support for markets. We therefore view the recent market volatility as a bump in the road, rather than a precursor to a significantly deeper sell-off at this stage.
The risks for markets in respect of the US presidential election appear to centre on the possibility of a contested result, which we believe would be poorly received by markets. Over the medium term, a Biden administration would be likely to result in a less confrontational approach to foreign policy but also higher domestic US corporate taxes. This may facilitate a reversal in the very large underperformance of European equities versus the US seen in recent years.
Edison Insight | 29 October 2020 5 Sector: Technology 1Spatial (SPA) Price: 30.0p Market cap: £33m INVESTMENT SUMMARY Market AIM 1Spatial performed resiliently during H1. Sales rose y-o-y, EBITDA grew and the company generated FCF. At a company level, rising recurring revenue and a growing order book of Share price graph (p) contracted sales is improving visibility. However, the broader economic backdrop remains uncertain and could affect deal closure. In FY22, we assume 7% sales growth (fuelled by an 11% rise in solutions revenue) plus FCF (pre-lease payments) of £2.5m.
INDUSTRY OUTLOOK
The GIS industry is large and growing. P&S Market Research estimates the global GIS software, services and hardware market generates sales of US$9.0bn annually and will grow at a 10% CAGR to reach annual sales of US$17.5bn by 2023.
Company description 1Spatial’s core technology validates, rectifies and enhances customers’ geospatial data. The combination of its software and advisory services reduces the need for costly manual checking and correcting of data.
Y/E Jan Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (3.2) 36.4 (9.1) 2019 17.6 1.2 (0.5) (0.57) N/A N/A Relative* (3.9) 41.8 10.0 2020 23.4 3.2 0.8 0.58 51.7 57.8 * % Relative to local index Analyst 2021e 23.4 2.8 (0.5) (0.35) N/A 8.4 Dan Gardiner 2022e 25.1 3.6 0.3 0.22 136.4 7.1
Sector: Technology 4iG (4IG) Price: HUF558.00 Market cap: HUF52452m INVESTMENT SUMMARY Market Budapest stock exchange In its H120 results, 4iG reported net revenues of HUF20.2bn, an increase of 39% on H119. EBITDA increased 35% to HUF1.4bn. 4iG’s H120 revenue, added to an FY20 order book of Share price graph (HUF) HUF20.8bn, means management continues to hold its 20% revenue growth guidance for FY20 ahead of the seasonally stronger H220. 4iG also continues to be acquisitive. In September, 4iG announced the acquisition of INNObyte, a software development company. In its last financial year, INNObyte reported turnover of HUF3.3bn (€9.1m) with EBITDA of HUF447m (€1.2m). 4iG is set to take a 70% stake with the deal expected to complete in October.
INDUSTRY OUTLOOK
Management anticipates consolidation-driven growth of over 20% in FY20, with organic Company description growth supplemented by market share gains and accelerating market consolidation. 4iG is one of the leading IT services Management is positioning the group for growth benefiting from high-demand new and systems integrators in Hungary, working with public sector clients, large technologies including digitalisation, blockchain, deep learning, artificial intelligence, corporates and SMEs. Management is industry 4.0, cyber security and fintech. focused on becoming the market leader in Hungary by FY22 as well as targeting expansion in Central and Eastern Europe. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (HUFm) (HUFm) (HUFm) (HUF) (x) (x) % 1m 3m 12m Actual (8.5) (10.6) (32.9) 2018 14007.0 842.0 219.0 1.11 502.7 N/A Relative* (11.6) (5.5) (16.6) 2019 41129.0 4075.0 3344.0 31.87 17.5 7.4 * % Relative to local index Analyst 2020e 49083.0 4152.0 3358.0 31.84 17.5 15.3 Richard Williamson 2021e 58881.0 5631.0 4794.0 44.93 12.4 11.3
Edison Insight | 29 October 2020 6 Sector: Media 4imprint Group (FOUR) Price: 2160.0p Market cap: £607m INVESTMENT SUMMARY Market LSE 4imprint’s H120 trading was heavily affected by the commercial repercussions of the COVID-19 pandemic as it spread across the US. With uncertainty over the speed and Share price graph (p) extent of the reopening of the US economy, projections for the remainder of the year (and for FY21) are tentative, although the latest US GDP forecast from the IMF is now -4.3%, from -8.0% in its June report. Despite the difficult trading circumstances, 4imprint retains a strong, cash positive balance sheet, and has low fixed costs and capital requirements. We believe that it retains its long-term attractions in a large, fragmented market and should rebuild quickly as the economy recovers.
INDUSTRY OUTLOOK
The Advertising Specialty Institute (ASI), an industry body, estimated the value of the US Company description promotional products distribution market in 2019 at US$25.8bn. 4imprint is the largest 4imprint is the leading direct marketer distributor, yet has an estimated market share of less than 3%. The market reportedly grew of promotional products in the US, Canada, the UK and Ireland. In FY19, at around 4.5% for FY19, with a 10-year CAGR of 5.0%, but is currently estimated to 97% of revenues were generated in retrench by 35% in 2020. However, this figure includes some distributors switching to the US and Canada. supplying PPE.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 16.8 (6.9) (27.0) 2018 738.4 48.5 46.1 129.4 21.7 17.2 Relative* 15.9 (3.2) (11.7) 2019 860.8 59.1 55.6 157.2 17.8 13.6 * % Relative to local index Analyst 2020e 535.0 3.9 0.5 0.3 9339.7 1307.6 Fiona Orford-Williams 2021e 600.0 18.8 15.0 40.6 69.0 37.9
Sector: General industrials AAC Clyde Space (AAC) Price: SEK2.90 Market cap: SEK279m INVESTMENT SUMMARY Market Nasdaq FN Premier AAC Clyde Space is at the forefront of the rapidly growing and revolutionary market for small satellites. As nanosatellite build rates and deployments rise sharply over the next Share price graph (SEK) decade, increasing systems supply and platform sales should be enhanced by operational and service revenues. Management is navigating the growth phase and targeting other opportunities in New Space such as the proposed acquisitions of Hyperion and SpaceQuest. A successful SEK52m fund raise supports further investment.
INDUSTRY OUTLOOK
Of over 1,000 nanosatellites launched since 1998, AAC Clyde Space is represented on 30–40%. Over the next five years around 3,000 nanosatellites should be launched as technology development extends the applications for low earth orbit (LEO) constellations, Company description especially for communications. AAC Clyde Space has the capacity in Glasgow and Sweden Headquartered in Sweden, AAC Clyde to facilitate such expansion as well as develop its 'Satellite as a Service' offering, while Space is a world leader in nanosatellite end-to-end solutions, subsystems and increasing sales of subsystems to third-party satellite providers. platforms after merging with Clyde Space in Scotland. The company also supplies a range of technology components to other small satellite manufacturers globally. Y/E Dec Net Sales EBITDA PBT EPS P/E P/CF Price performance (SEKm) (SEKm) (SEKm) (öre) (x) (x) % 1m 3m 12m Actual 2.8 (12.4) (38.8) 2018 77.9 (28.5) (38.3) (49.63) N/A N/A Relative* 1.1 (15.5) (45.7) 2019 66.4 (27.3) (38.2) (44.46) N/A N/A * % Relative to local index Analyst 2020e 96.6 (12.2) (21.9) (22.00) N/A N/A Andy Chambers 2021e 142.7 (5.8) (15.8) (13.00) N/A N/A
Edison Insight | 29 October 2020 7 Sector: General industrials Accsys Technologies (AXS) Price: 87.0p Market cap: £143m INVESTMENT SUMMARY Market LSE The 21% revenue uplift in FY20 demonstrated the benefit of adding Accoya capacity in the prior year, driving a manufacturing gross margin of 30%. This was achieved while still being Share price graph (p) capacity constrained and planning for a fourth Anhem reactor is advancing. Tricoya sales showed good growth, further developing this market ahead of the new Hull facility coming on stream (expected in Q421). Group operating profit of €1.6m represents another development milestone, while end FY20 net debt was c €20m (IAS17), plus c €5m lease liabilities. In FY21 trading to date, management noted that April sales volumes were 43% lower y-o-y and there was some recovery in May as distribution channels and end market projects began to reopen. Long-term market prospects, including significant potential partnerships in the US and Asia, look attractive. Our estimates are under review.
INDUSTRY OUTLOOK Company description Accsys Technologies is a chemical Accsys has a technically proven process and wide international market acceptance for its technology company focused on the development and commercialisation of modified wood output. As well as successful capex execution, the sales and marketing a range of transformational challenge is to pull through demand to absorb newly available capacity and develop licence technologies based on the acetylation of solid wood and wood elements for partners. Management has previously stated long-term market potential of 1m m3 pa of use as high performance, environmentally sustainable Accoya wood and 1.6m+ m3 of Tricoya panel products. construction materials. Y/E Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (9.1) 0.0 (10.7) 2019 75.2 0.9 (6.2) (0.38) N/A N/A Relative* (9.7) 4.0 8.1 2020 90.9 7.0 (2.2) (0.08) N/A 57.5 * % Relative to local index Analyst 2021e N/A N/A N/A N/A N/A N/A Toby Thorrington 2022e N/A N/A N/A N/A N/A N/A
Sector: Mining Alkane Resources (ALK) Price: A$1.31 Market cap: A$783m INVESTMENT SUMMARY Market ASX Alkane's Q121 production of 11.5koz (at A$1,575/oz AISC) was almost exactly in line with our expectations and FY21 guidance of 45–50koz at A$1,450–1,600/oz AISC. At the same Share price graph (A$) time, exploration drilling has more than replenished reserves and resources as well as intersecting grades as high as 104g/t at Tomingley's San Antonio and Roswell extensions. Consequently, Alkane is expecting to announce upgraded resources and preliminary mine plans at both in Q4 CY20.
INDUSTRY OUTLOOK
Post the de-merger of ASM, our most recent valuation of Alkane attributes 21c/share in value to Tomingley plus net cash (A$33.1m as at end-Q121). To this should then be added 29c for its investments and at least 5c for its maiden Roswell and San Antonio resources Company description and up to a further 70c in value from contingent assets (mostly the Boda prospect in the Alkane Resources is an Australian Northern Molong Porphyry Project which is developing into a genuine Au-Cu alkalic production and development company. It previously produced 70,000oz of porphyry target), the ultimate valuation of which will depend on future exploration success. gold per year from the open-pit operations at its Tomingley gold mine, but is transitioning to underground operations and expects to produce c 47,500oz in FY21. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual (12.0) 6.0 82.8 2019 94.0 33.0 25.4 4.57 28.7 N/A Relative* (15.7) 3.4 94.4 2020 72.5 29.4 20.6 2.56 51.2 N/A * % Relative to local index Analyst 2021e 105.7 35.4 23.5 2.96 44.3 N/A Charles Gibson 2022e 126.5 42.6 27.5 3.46 37.9 N/A
Edison Insight | 29 October 2020 8 Sector: Technology Allied Minds (ALM) Price: 41.2p Market cap: £100m INVESTMENT SUMMARY Market LSE Allied Minds’ interim results showed progress at four of its seven portfolio companies – BridgeComm, Orbital Sidekick, Federated Wireless and Spin Memory – together c 95% of Share price graph (p) portfolio fair value. Despite progress, valuations have not changed since 2018/19 funding rounds. This leaves latent value. ALM reported H120 parent cash of $29.9m. Adjusting for $5.5m of investments post period end, and three months of central costs, we estimate a fully diluted NAV per share of 62.7p. At a 40p share price, the shares trade at a 36% discount to this estimate of NAV.
INDUSTRY OUTLOOK
After a difficult 2019 for patient capital, investors have been seeing real value in the widened discounts to NAV as COVID-19 fears ease. We expect investors to prefer stocks Company description that demonstrate progress and offer the potential for meaningful exits in a realistic Allied Minds is a technology timeframe. Transparency, consistency of performance, capital preservation and investor investment company with a concentrated portfolio focused on returns are the key metrics by which to judge success. early-stage spin-outs from US federal government laboratories and universities.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 23.6 10.0 11.2 2018 5.6 (77.5) 53.3 19.0 2.8 N/A Relative* 22.7 14.4 34.5 2019 2.7 (47.2) 49.5 21.0 2.5 N/A * % Relative to local index Analyst 2020e N/A N/A N/A N/A N/A N/A Richard Williamson 2021e N/A N/A N/A N/A N/A N/A
Sector: Technology Applied Graphene Materials (AGM) Price: 33.5p Market cap: £17m INVESTMENT SUMMARY Market AIM Applied Graphene Material’s FY20 results show the beneficial impact of management’s decision in October 2019 to focus on dispersion and application technology to better support Share price graph (p) product development with those customers presenting the nearest-term revenue opportunities, as well as the enlargement of the sales team to around 60 through the expansion of the distribution network. Revenues increased by 66% y-o-y during FY20 to £83k, driven by rising product sales. Adjusted EBITDA losses narrowed by £1.5m to £3.1m, reflecting the impact of the realignment programme on costs.
INDUSTRY OUTLOOK
With three new customer products launched in FY20 and three launched so far in FY21: car-care products from Infinity Wax and Halo Automotive and an aerosol anti-corrosion Company description primer from Kent Europe, progress looks set to continue. Applied Graphene Materials (AGM) develops graphene dispersions that customers use to enhance the properties of coatings, composites and functional materials. It also manufactures high-purity graphene nanoplatelets using a proprietary process based on sustainable, readily available raw materials instead of Y/E Jul Revenue EBITDA PBT EPS (fd) P/E P/CF graphite. Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (2.9) 71.8 97.1 2019 0.1 (4.6) (4.8) (7.9) N/A N/A Relative* (3.6) 78.6 138.4 2020 0.1 (3.1) (3.5) (6.1) N/A N/A * % Relative to local index Analyst 2021e N/A N/A N/A N/A N/A N/A Anne Margaret Crow 2022e N/A N/A N/A N/A N/A N/A
Edison Insight | 29 October 2020 9 Sector: Financials Appreciate Group (APP) Price: 26.5p Market cap: £49m INVESTMENT SUMMARY Market AIM Results for the year to 31 March 2020 (FY20) were in line with guidance but the current year COVID-19 impact will be significant. Positively, in a statement ahead of its September AGM Share price graph (p) the company confirmed that the improvement in trading from the April low-point had continued through August and September, ahead of the key end-calendar year trading period. The Christmas Savings order book has also continued to hold up. Total billings remain marginally ahead of the company’s mid-range scenario, with free cash standing at £23.9m as at 27 September 2020. Meanwhile strategic development aimed at delivering accelerated long-term growth from existing and new digital products continues, flexibly supported by the recently agreed £15m five-year revolving credit facility. Interim results are due on 24 November.
INDUSTRY OUTLOOK Company description Appreciate Group is a specialised The market is estimated at c £6bn by the UK Gift Card & Voucher Association, and is financial services business and is the UK’s leading provider of multi-retailer fragmented, providing significant opportunities for market share growth. redemption products. Consumers can access products directly through its market-leading Christmas Savings offering while corporate customers use these products to supply a range of incentive and reward products. Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (2.6) (12.8) (49.5) 2019 110.4 12.3 12.5 4.8 5.5 N/A Relative* (3.3) (9.4) (39.0) 2020 112.7 11.7 11.4 3.0 8.8 N/A * % Relative to local index Analyst 2021e 87.1 5.7 3.9 1.7 15.6 N/A Martyn King 2022e 100.6 8.9 7.1 3.1 8.5 N/A
Sector: General industrials ArborGen Holdings (ARB) Price: NZ$0.14 Market cap: NZ$68m INVESTMENT SUMMARY Market NZSX FY20 results included a 16% y-o-y increase in group revenue; all three regions served grew sales, most notably in Australasia (+c 50%). Gross margin also nudged up and the Share price graph (NZ$) company reported EBITDA progress on both US GAAP and NZ IFRS bases. ArborGen ended FY20 with c US$32m net debt (IAS 17 basis) with some investment in working capital in addition to the US fixed asset acquisition being the key drivers of the y-o-y increase. At the ASM at the end of August, the company reiterated its expectation for FY21 US GAAP underlying earnings to be above their FY20 equivalent and, beyond this, for significant growth in MCP seedling sales from FY22 onwards. Our estimates are under review.
INDUSTRY OUTLOOK
Prior to the COVID-19 outbreak, the economic growth outlook in each of its core countries, Company description the US, Brazil, New Zealand and Australia, was either good or improving, according to ArborGen Holdings (formerly Rubicon) OECD data. At this point, the primary end-markets served by its plantation forestry is an NZX-listed investment company. Its subsidiary ArborGen is the world’s customer base (ie construction and the pulp and paper industries) were in a positive cyclical largest integrated developer, phase. commercial manufacturer and supplier of advanced forestry seedlings with operations in the US, Brazil and Australasia. Y/E Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (2.9) (16.6) (26.1) 2019 49.1 4.6 4.7 1.1 8.4 11.3 Relative* (8.7) (21.2) (34.1) 2020 56.9 7.7 6.0 1.4 6.6 9.6 * % Relative to local index Analyst 2021e N/A N/A N/A N/A N/A N/A Toby Thorrington 2022e N/A N/A N/A N/A N/A N/A
Edison Insight | 29 October 2020 10 Sector: Financials Attica Bank (TATT) Price: €0.15 Market cap: €71m INVESTMENT SUMMARY Market Athens Stock Exchange Attica’s Q419 showed good progress with revenue sharply up and costs lower than expected. Impairment charges were higher, but underlying PBT was better than forecast. Share price graph (€) Uncertainty around COVID-19 complicates forecasting at this stage. Our new numbers have higher impairments, mostly in 2020-21. However, Attica’s strategy of strong asset expansion and focus on the energy, infrastructure and green economy remains firm - just a time shift in achieving income targets. Successful execution would allow ROE to approach 6.8% (previously 7.4%) in 2022. This falls to 4.7–5.3% after factoring in needed rights issues and would provide upside to shares, now trading at a PBV of 0.23x. Attica is currently planning a third securitisation as it strives to cut legacy NPLs to zero by 2021.
INDUSTRY OUTLOOK Company description Attica is the fifth-largest bank in Attica intends to focus on its SME business banking activity to exploit attractive margins and Greece, with assets of €3.45bn and 55 branches centred around Athens. It an existing 2% market share. Rebuilding profitability will be achieved through voluntary has a 2% market share of business retirement schemes; pricing leverage as the major Greek banks review their product banking and around 2% market share of most retail banking products. offerings; and normalisation of impairments facilitated by reduced exposure to the collateral underpinning impaired loans. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (8.3) (18.5) (64.5) 2018 128.0 N/A 4.7 (0.51) N/A N/A Relative* (6.8) (14.8) (49.4) 2019 71.6 N/A (23.6) 1.08 13.9 N/A * % Relative to local index Analyst 2020e 80.7 N/A (24.5) 0.01 1500.0 N/A Pedro Fonseca 2021e 110.9 N/A 2.7 0.93 16.1 N/A
Sector: Industrial support services Augean (AUG) Price: 191.5p Market cap: £200m INVESTMENT SUMMARY Market AIM Augean's H120 results were robust in the face of the pandemic. Adjusted revenue fell by 6% to £41.4m, as did adjusted EBITDA to £13.3m. Balance sheet strength was improved Share price graph (p) with adjusted net debt falling to £3.3m (excluding £3.9m of leases). Augean filed a claim in May with HMRC for the repayment of £11.1m landfill tax (LFT) related to engineering materials (fluff layer). Some other waste operators have successfully argued with the Upper Tax Tribunal that they should be able to reclaim LFT associated with the fluff layer. Any rebate from HMRC could provide a meaningful reward for investors. Overall COVID-19 reduced sales by c £10m and PBT by c £4m. While markets remain challenging, especially for the North Sea business, growth continues in the energy for waste segment and activity is bouncing back elsewhere. Management expects to broadly meet revised market expectations for FY20. Company description INDUSTRY OUTLOOK Augean is a UK-based specialist waste management business. The business operates via two divisions: Treatment A growing trend towards treatment, recovery and recycling in the waste hierarchy supports & Disposal and North Sea Services. Augean's specialist industry knowledge model.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 9.4 3.5 18.2 2018 79.7 18.9 11.4 9.09 21.1 11.4 Relative* 8.6 7.6 43.0 2019 107.1 28.8 19.2 20.94 9.1 N/A * % Relative to local index Analyst 2020e 93.5 29.9 19.7 15.37 12.5 6.7 Andy Chambers 2021e 100.0 32.1 21.7 17.00 11.3 6.5
Edison Insight | 29 October 2020 11 Sector: Mining Auriant Mining (AUR) Price: SEK5.60 Market cap: SEK552m INVESTMENT SUMMARY Market NASDAQ OMX First North Auriant’s Tardan plant has been remodelled to a single carbon-in-leach process. Relative to its earlier heap leach operation, metallurgical recoveries have increased by c 40pp to over Share price graph (SEK) 90%, driving an approximate doubling in production and an approximate halving in cash costs (to US$577/oz), which has resulted in a c 10x increase in EBITDA and a 545% increase in cash flows from operations in H120 cf H119. Currently, Auriant is in the process of completing a DFS on Kara-Beldyr and, combined, the two are expected to achieve management’s goal of c 3t (96.5koz) of gold output pa from FY24.
INDUSTRY OUTLOOK
In the event that Auriant raises US$20m in equity (NB This is subject to the gold price and cash-flow and could be less) at SEK6.40/share, we estimate that it is capable of generating Company description average cash flows of US$63.4m and EPS of 44.6c pa in the period FY25–33. Discounted Auriant Mining is a Swedish junior gold at 10% pa, we value the resulting (maximum potential) stream of dividends to shareholders mining company focused on Russia. It has two producing mines (Tardan and at US$1.76/share (cf US$0.83/share previously). Solcocon), one advanced exploration property (Kara-Beldyr) and one early stage exploration property (Uzhunzhul).
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (5.7) (6.4) 53.9 2018 17.4 (1.7) (10.2) (10.8) N/A 14.7 Relative* (7.3) (9.7) 36.5 2019 29.8 7.2 (2.2) (1.2) N/A 6.8 * % Relative to local index Analyst 2020e 57.4 32.9 19.0 15.3 4.1 2.3 Charles Gibson 2021e 53.9 32.9 24.6 15.6 4.1 2.4
Sector: Aerospace & defence Avon Rubber (AVON) Price: 4075.0p Market cap: £1264m INVESTMENT SUMMARY Market LSE Avon is delivering on its growth strategy focused on organically growing its core, supported by selective product development and value-enhancing M&A. The dairy disposal completed Share price graph (p) on 25 September leaving Avon Protection as the sole focus. H120 saw strong growth with encouraging order intake. The enhancing purchase of the Helmets & Armor division in Q220 extended Avon Protection's product portfolio and deepened customer engagement, as does the proposed £100m acquisition of Team Wendy helmet systems business in the US, expected to complete in Q121. FY20 results are on 18 November.
INDUSTRY OUTLOOK
Avon's long-standing, multi-level relationship with the US DoD is important to the group and the end market backdrop is supportive. The focus on higher-price sophisticated mask Company description systems is proving successful, with M50 mask system replenishment and the addition of Avon Rubber designs, develops and helmets and body armour providing further opportunities. We maintain our view that Avon manufactures personal protection products primarily in the defence and has the market position, product portfolio and strategic ambition to further accelerate its security sectors. Its major contracts growth through organic and inorganic means. are with national security organisations such as the US DOD. Over 75% of H120 sales were from the US.
Y/E Sep Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (3.4) 19.2 126.9 2018 165.5 35.3 27.2 76.6 53.2 37.2 Relative* (4.1) 23.9 174.4 2019 179.3 41.3 31.4 90.9 44.8 81.8 * % Relative to local index Analyst 2020e 233.0 50.2 35.4 93.1 43.8 25.9 Andy Chambers 2021e 288.4 65.1 49.2 129.5 31.5 21.6
Edison Insight | 29 October 2020 12 Sector: Travel & leisure bet-at-home (ACXX) Price: €34.20 Market cap: €240m INVESTMENT SUMMARY Market Xetra The H120 headline figures were ahead of consensus expectations, which was encouraging given the regulatory changes (Poland and Switzerland) and the impact of COVID-19. Share price graph (€) Comparatives become easier as the year progresses and management has acted quickly to reduce unnecessary costs, so the company’s guidance for FY20 has been reiterated. Upcoming legislation in Germany will provide clarity but will likely result in responsible gambling restrictions and potentially higher taxes.
INDUSTRY OUTLOOK
According to H2 Gambling Capital, the European online sports betting and gaming market is expected to grow 6.5% CAGR between 2018 and 2023 to c €33bn (pre COVID-19 impact). BAH operates in 'grey' markets (no formal regulation but not illegal), which are Company description characterised by strong cash flow, but also carry commensurately higher regulatory risks. Founded in 1999, bet-at-home is an online sports betting and gaming company with c 300 employees. It is licensed in Malta and headquartered in Dusseldorf, Germany. Since 2009 bet-at-home has been part of Betclic Everest, a privately owned French online gaming company. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (3.7) (9.2) (30.0) 2018 143.4 36.2 35.0 464.67 7.4 9.7 Relative* (3.7) (5.9) (29.2) 2019 143.3 35.2 33.1 425.52 8.0 8.0 * % Relative to local index Analyst 2020e 127.9 26.1 24.0 278.66 12.3 12.2 Russell Pointon 2021e 130.4 26.5 24.3 282.54 12.1 12.0
Sector: Technology Boku (BOKU) Price: 118.5p Market cap: £340m INVESTMENT SUMMARY Market AIM Restrictions relating to COVID-19 have had a mixed effect on Boku’s H120 performance, with the Payments business benefiting from increased demand for digital content, while Share price graph (p) some Identity customers saw weaker demand for their services. Despite this, Boku reported adjusted revenue growth of 9% y-o-y and, demonstrating the operational leverage of the business, adjusted EBITDA growth of 84% y-o-y. With guidance unchanged for FY20, we maintain our EBITDA forecasts.
INDUSTRY OUTLOOK
DCB is an alternative payment method that uses a consumer’s mobile bill as the means to pay for digital content or services such as games, music or apps. Growth in the underlying digital content markets as well as the increasing penetration of smartphones is expected to Company description drive growth in DCB transactions. Boku is the dominant DCB player serving the largest Boku operates a billing and identity merchants such as Apple, Sony, Facebook, Spotify and Netflix. Boku's identity verification verification platform that connects merchants with mobile network service enables merchants to sign up and transact with users while meeting regulatory operators in more than 50 countries. It requirements and avoiding fraud. has c 300 employees, with its main offices in the US, UK, Estonia, Germany and India.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 33.2 40.2 23.4 2018 35.3 6.3 4.3 1.55 99.2 N/A Relative* 32.2 45.8 49.3 2019 50.1 10.7 4.1 1.20 128.1 N/A * % Relative to local index Analyst 2020e 55.1 12.3 8.0 2.16 71.2 N/A Katherine Thompson 2021e 66.4 17.7 12.3 3.18 48.3 N/A
Edison Insight | 29 October 2020 13 Sector: Travel & leisure Borussia Dortmund (BVB) Price: €4.52 Market cap: €416m INVESTMENT SUMMARY Market FRA For the coming year, management estimates that the restrictions required to counter COVID-19 will lead to a 5% decline in revenue which, coupled with other effects, eg lower Share price graph (€) transfer activity and high operational gearing, will translate into a reported operating loss due to amortisation of intangibles. We downgraded our EBITDA forecasts significantly (EBITDA by c 69%), assuming no significant improvement in the operating environment through FY21 and FY22, providing good scope for upgrades if and when operating restrictions end.
INDUSTRY OUTLOOK
Unsustainable spend on wages and transfers is increasingly being penalised by UEFA Financial Fair Play requirements. A 'break-even requirement' obliges clubs to spend no Company description more than they generate over a rolling three-year period. Sanctions vary from a warning to a The group operates Borussia ban from UEFA competition, fines and a cap on wages and squad size. Dortmund, a leading German football cub, Bundesliga runners-up in 2018/19, DFB Super Cup winners in 2019/20 and DFB Cup winners in 2016/17. The club has qualified for the Champions League in eight of the last 10 seasons. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (20.6) (21.0) (48.1) 2019 370.3 116.0 101.5 87.95 5.1 13.8 Relative* (20.6) (18.2) (47.4) 2020 370.2 63.0 45.6 46.77 9.7 140.3 * % Relative to local index Analyst 2021e 336.2 39.5 23.0 24.97 18.1 N/A Russell Pointon 2022e 346.6 60.8 43.8 42.89 10.5 175.3
Sector: Technology Bragg Gaming Group (BRAG) Price: C$0.77 Market cap: C$62m INVESTMENT SUMMARY Market TSX-V Bragg Gaming’s core asset is Oryx Gaming, a fast-growing online B2B gaming solution provider. It has limited exposure to sports and therefore revenues should be relatively Share price graph (C$) secure in the light of fixture cancellations. Bragg’s Q120 results demonstrated strong revenue growth (44% y-o-y), adjusted EBITDA margin expansion (to 8.7%) and improved free cash flow generation. Operationally, it continues to win new customers in new geographies and enhance product functionality, which should continue to improve the customer offer, drive growth and de-risk the business. Management has reiterated FY20 guidance for revenue and EBITDA growth of at least c 32% and 349%, respectively, vs FY19.
INDUSTRY OUTLOOK
Company description According to H2 Gambling Capital (H2GC), the global online gaming market has grown at a Bragg Gaming Group (formerly c 10% CAGR over the past 10 years and amounted to c £40bn gross gaming revenues in Breaking Data Corp) is a Toronto-based B2B online gaming 2018. Driven largely by the opening of the US market, H2GC estimates online growth of 7% holding company. The core asset is CAGR to 2023 (pre COVID-19 impact). As Oryx continues to gain market share, we would Oryx Gaming, a predominantly European B2B online gaming platform. expect the business to grow significantly faster than the sector, across all its major markets, particularly from newly regulating markets such as the US and Latin America. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 97.4 54.0 250.0 2018 0.8 (0.4) (0.3) (0.86) N/A N/A Relative* 91.5 51.3 250.7 2019 26.6 1.2 (1.0) (2.04) N/A N/A * % Relative to local index Analyst 2020e 36.6 5.4 2.1 0.87 56.9 N/A Russell Pointon 2021e 40.9 6.1 3.8 2.02 24.5 N/A
Edison Insight | 29 October 2020 14 Sector: Oil & gas Brooge Energy (BROG) Price: US$9.18 Market cap: US$1006m INVESTMENT SUMMARY Market NASDAQ Brooge Energy (BROG) is an independent oil and refined oil products storage and service provider located in the Port of Fujairah, in the UAE. The company is initially developing its Share price graph (US$) terminal’s storage capacity in two phases and differentiates itself from competitors by providing fast order processing times and high accuracy blending services with low oil losses using the latest technology. Phase I has been operational since late 2017 and Phase II is expected to be completed by the end of 2020. The company is looking to develop a Phase III, which would increase its storage capacity by 3.5x. BROG recently completed the issuance of a $200m five-year senior secured bond in the Nordic bond market. The proceeds will be used to repay existing debt and to fund remaining capex ahead of the launch of Phase II. Our valuation currently stands at $11.00/share.
INDUSTRY OUTLOOK Company description Brooge Energy is an oil storage and The COVID-19 pandemic highlighted the importance of oil storage infrastructure and the service provider strategically located in the Port of Fujairah in the United Arab vital role the business plays in the logistics and trading of crude oil and refined oil products, Emirates (UAE). Current storage as oil demand slumped in H120. capacity stands at 399,324m3 and will be increased by 602,064m3 once Phase II is completed.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (8.9) (6.3) (10.4) 2018 36.0 30.0 16.0 20.1 45.7 26.2 Relative* (14.9) (12.5) (22.3) 2019 44.0 (65.0) 25.0 28.6 32.1 15.3 * % Relative to local index Analyst 2020e 45.0 38.0 17.0 15.5 59.2 43.7 Carlos Gomes 2021e 123.0 113.0 86.0 78.9 11.6 9.8
Sector: Oil & gas Canacol Energy (CNE) Price: C$3.54 Market cap: C$641m INVESTMENT SUMMARY Market TSX Although Canacol saw a c 25% reduction in Q120 sales from 201mmscfd to 152mmscfd, as a consequence of the impact of COVID-19, the company has reconfirmed its FY20 sales Share price graph (C$) guidance of 170mmscfd to 197mmscfd. Canacol is also working with its partners on a new export pipeline to Medellin that would expand export capacity to 315mmscfd, with a targeted completion date of 2024. Meanwhile, the Porro Norte 1 exploration well encountered 24ft of potential gas pay in the Cicuco limestone, a new play type on VIM-5. Four further wells are planned in 2020 with the Fresa-1 exploration well and the Pandereta-4 appraisal well due to spud next.
INDUSTRY OUTLOOK
The Colombian, Caribbean Coast gas market is expected to move into gas deficit in the Company description absence of LNG imports, incremental piped gas or the development of recent deepwater Canacol Energy is a natural gas discoveries. Canacol sells gas under long-term, fixed-price gas contracts, typically of five to exploration and production company primarily focused on Colombia. 10 years’ duration with inflation clauses to protect cash flows.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 6.3 (8.8) (18.8) 2018 204.5 138.6 7.3 (12.32) N/A 5.1 Relative* 3.1 (10.4) (18.7) 2019 219.5 162.8 64.7 19.21 13.9 4.4 * % Relative to local index Analyst 2020e 255.7 214.9 109.1 51.98 5.2 2.4 Carlos Gomes 2021e 289.6 245.3 133.0 50.67 5.3 2.4
Edison Insight | 29 October 2020 15 Sector: General industrials Carr's Group (CARR) Price: 106.0p Market cap: £98m INVESTMENT SUMMARY Market LSE Carr’s Group’s trading update for the 19 weeks ended 11 July 2020 notes that the company continues to trade in line with management expectations for FY20. The board is combining Share price graph (p) the two interim dividend payments this year into a single interim payment of 2.25p/share, equivalent to the two interim payments made in FY19. We leave our FY20 estimates unchanged but reduce our FY21 EPS estimate by 12% to reflect lower cattle prices in the US and weaker demand from the oil and gas industry, both related to the coronavirus pandemic.
INDUSTRY OUTLOOK
The UK agricultural businesses traded ahead of management expectations during the period because of marginally higher demand for feeds, feed supplements and fuels. Company description However, the closure of large meat processing plants in the US because of COVID-19 Carr's Group's Agriculture division outbreaks led to a drop in cattle prices which adversely affected supplement sales in the serves farmers in the North of England, South Wales, the Welsh region. While the engineering businesses have been able to operate throughout the Borders and Scotland, the US, pandemic, there have been some temporary interruptions to nuclear and defence projects Germany and New Zealand. The Engineering division offers remote because personnel have not been able to visit customer sites. In addition, the low oil price handling equipment and fabrications to the global nuclear and oil and gas has resulted in a reduction in investment from the oil and gas industry. industries. Y/E Aug Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 7.7 (15.2) (24.6) 2018 403.2 23.1 17.7 14.8 7.2 N/A Relative* 7.0 (11.8) (8.8) 2019 403.9 24.7 18.9 15.2 7.0 N/A * % Relative to local index Analyst 2020e 372.0 21.3 15.2 11.7 9.1 N/A Anne Margaret Crow 2021e 382.5 22.7 16.6 13.0 8.2 N/A
Sector: Financials Cenkos Securities (CNKS) Price: 50.0p Market cap: £28m INVESTMENT SUMMARY Market AIM Cenkos reported H120 revenue 21% ahead of H119 at £12.9m. Corporate finance contributed £9.2m (+48%) while Nomad, broking and research were down 6% (at £3.2m) Share price graph (p) and Execution achieved continued trading gains but was down 52% (to £0.4m). Lower admin costs (-18%) limited the overall increase in underlying costs to 2% and the result was an underlying profit of nearly £2m compared with a marginal loss in H119. Restructuring costs and a one-off, short-term incentive plan cost of £1.1m left pre-tax profit at £0.75m (£0.2m loss). The balance sheet remains strong with cash of £22.4m and a capital surplus of £15.8m over the Pillar 1 requirement. The interim dividend was held at the same level as the 2020 final of 1p compared with the H119 dividend of 2p.
INDUSTRY OUTLOOK
Company description Cenkos’s first half results demonstrated the benefits of its flexible operating model and Cenkos is a leading UK securities strength of its client relationships. While challenges related to COVID-19 are set to continue, business, which acts as nominated advisor, sponsor, broker and financial Cenkos’s focus is on growth companies and its fund-raising year-to-date has had a greater adviser to companies across all emphasis on corporates financing M&A and growth opportunities rather than for defensive sectors and stages of growth. Since inception in 2005, it has raised more purposes. This should prove more sustainable although, as always, the timing of than £20bn in equity capital for corporate clients, which stood at 97 at transactions in the encouraging pipeline reported remains uncertain. the end of June. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 6.4 4.2 5.3 2018 45.0 3.4 3.2 4.4 11.4 8.2 Relative* 5.6 8.3 27.3 2019 25.9 0.4 0.1 (0.2) N/A N/A * % Relative to local index Analyst 2020e N/A N/A N/A N/A N/A N/A Andrew Mitchell 2021e N/A N/A N/A N/A N/A N/A
Edison Insight | 29 October 2020 16 Sector: Technology CentralNic Group (CNIC) Price: 80.0p Market cap: £151m INVESTMENT SUMMARY Market AIM In September, CentralNic announced the US$36m acquisition of Codewise, a Poland-based competitor to Team Internet. The deal, which is now unconditional and will close on 31 Share price graph (p) October 2020, valued Codewise at 0.6x historical sales (US$60.3m) and 4.9x adjusted EBITDA (US$7.4m). It was funded by way of a share placing, with CentralNic raising gross proceeds of £30m, placing 40m shares (21% of the equity) at 75p per share (a 6% discount to the closing price). We estimate that the acquisition will be materially (c 18%) EPS enhancing in FY21.
INDUSTRY OUTLOOK
CentralNic supplies the tools needed for businesses to develop their online presence, providing domain names, hosting, websites, email, website security, brand protection and Company description monetisation services. It delivers services to c 40m domains, with cross-selling and CentralNic Group is a leading global upselling important drivers of future growth. Organic growth (estimated by management to domain name registry services provider, operating through three be c 6%) is supported by M&A. divisions: Reseller (number two globally); Corporate; and SME. Services include domain name reselling, hosting, website building, security certification and website monetisation. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (8.3) 0.3 92.8 2018 56.0 9.1 7.4 5.83 17.8 N/A Relative* (9.0) 4.3 133.2 2019 109.2 17.9 12.8 8.16 12.7 N/A * % Relative to local index Analyst 2020e 217.8 30.7 17.4 5.60 18.5 N/A Richard Williamson 2021e 295.3 40.3 27.7 8.74 11.9 N/A
Sector: General industrials China Water Affairs Group (855) Price: HK$5.73 Market cap: HK$9087m INVESTMENT SUMMARY Market HKSE Despite a challenging environment, CWA performed strongly in FY20, achieving growth in all key financial metrics. Revenue rose 4.7%, helped by a strong performance from the Share price graph (HK$) water business (c 90% of profits) and operating profit rose by 5.3%. Lower finance costs, a stronger than forecast associate line and a lower than expected tax rate delivered a 17.7% rise in net profits (2.8% ahead of forecast). A lower than forecast attribution to minorities and a small fall in the share count (buy-back) saw EPS rise 20%. The DPS of HK$0.30 was below our forecast (HK$0.33), but still up 7.1% y-o-y. Based on our updated forecasts CWA's share price rating appears modest despite requirements for significant environmental expenditure in the Chinese water sector presenting it with an opportunity to grow.
INDUSTRY OUTLOOK Company description China Water Affairs (CWA) is a Water supply in China remains fragmented. The central government encourages local pioneer in the privatisation of water supply assets in China. The company governments to deleverage their own balance sheets with private–public partnerships. This seeks to create growth via trend remains positive for CWA. volume/price increases.
Y/E Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (HK$m) (HK$m) (HK$m) (c) (x) (x) % 1m 3m 12m Actual (6.1) (6.4) (5.1) 2019 8302.0 3536.0 2772.0 85.1 6.7 N/A Relative* (10.5) (5.1) 1.1 2020 8694.0 3781.0 3165.0 102.1 5.6 N/A * % Relative to local index Analyst 2021e 9731.0 4278.0 3374.0 108.0 5.3 N/A Dan Gardiner 2022e 10787.0 4725.0 3810.0 122.0 4.7 N/A
Edison Insight | 29 October 2020 17 Sector: Financials Circle Property (CRC) Price: 161.5p Market cap: £46m INVESTMENT SUMMARY Market AIM FY20 results showed good growth in annualised contracted rental income (+14%), driven by leasing events, and net rental income (+12%). Operating profit before revaluation gains rose Share price graph (p) 17% and a final DPS of 2p took the total for the year to 5.3p (FY19: 6.3p). Valuation gains were positive but lower than in FY19. Subsequently reported valuations for the six months to 30 September (H121) show a marginal 1.1% reduction driven by refurbishment plans. Unaudited H121 NAV/share was 283p (FY20: 285p; FY19: 277p). Rent collection remains robust and at end-H121 the company held cash of £4.5m with immediately available borrowings of £2.7m. Asset disposals, where asset management plans are mature, are targeted along with a reduction in gearing (gross LTV 43.8% at end-H121).
INDUSTRY OUTLOOK
Company description The commercial property market is cyclical, historically exhibiting substantial swings in Circle Property is an AIM-listed valuation through cycles while income returns have been more stable, but still fluctuating property investment company that actively manages its assets, placing an according to tenant demand and rent terms. The extent and duration of impact of the global emphasis on total returns rather than pandemic on the economic outlook remains uncertain. While the supply demand balance for maximising short-term income. It targets the acquisition of well-located regional office and industrial property has hitherto remained generally firm the weakness regional office properties where it has identified a clear opportunity to add that was previously confined to the retail sector is likely to continue to broaden. value. Y/E Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 9.5 5.9 (18.0) 2019 6.5 N/A 15.2 6.6 24.5 N/A Relative* 8.7 10.1 (0.8) 2020 7.2 N/A 5.2 7.6 21.3 N/A * % Relative to local index Analyst 2021e N/A N/A N/A N/A N/A N/A Martyn King 2022e N/A N/A N/A N/A N/A N/A
Sector: Financials Civitas Social Housing (CSH) Price: 106.0p Market cap: £659m INVESTMENT SUMMARY Market LSE The strong FY20 financial performance, driven by continuing portfolio growth and CPI-linked rent increases, continued into Q121. With no impact on rent receipts from COVID-19, a Share price graph (p) Q121 DPS of 1.35p was declared in line with the target of 5.4p (1.9%) for the year while IFRS NAV per share edged ahead to 107.92p. Acquisitions continued in Q121 (£3.9m before costs) and since, including the new 65-bed purpose-built state of the art supported housing and healthcare facilities in Wales. With an extensive pipeline of potential investment opportunities, including those related to the broadened investment remit recently approved by shareholders, the company is considering further capital raising options, including up to £140m of additional debt as it moves towards its target 35% gearing.
INDUSTRY OUTLOOK
Company description The chronic shortage of SSH is forecast to increase, yet compared with the alternatives of Civitas is the leading listed UK social residential care or hospitals it is widely recognised to improve lives in a cost-effective housing REIT. Its investment objective is to provide an attractive level of manner. SSH leases are of long duration and rents are paid directly to housing association income, with the potential for capital tenants by government via local authorities. growth, from investing in a diversified portfolio of fully developed social homes, particularly specialist supported housing (SSH) for vulnerable adults. Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 0.4 (7.0) 22.4 2019 35.7 26.1 19.9 3.63 29.2 N/A Relative* (0.3) (3.3) 48.1 2020 46.2 36.4 38.0 4.63 22.9 N/A * % Relative to local index Analyst 2021e 52.2 43.0 44.9 5.50 19.3 N/A Martyn King 2022e 55.6 46.1 54.1 5.86 18.1 N/A
Edison Insight | 29 October 2020 18 Sector: Technology Claranova (CLA) Price: €6.12 Market cap: €241m INVESTMENT SUMMARY Market Euronext Paris Claranova reported strong organic revenue growth in FY20 (+20%) while the EBITDA margin reflected the immediate strategic priorities of PlanetArt and Avanquest. Claranova Share price graph (€) reported its first positive net income since FY15 and closed the year with net cash of €13.9m. The recent acquisition of CafePress is part of PlanetArt’s evolution to become a provider of personalised e-commerce and we have revised our forecasts to incorporate the deal. We note the group’s strong cash position which provides funding for future internal and external investment.
INDUSTRY OUTLOOK
PlanetArt is evolving from a digital photo printing business into a personalised e-commerce business and is focused on expanding its product offering geographically. Avanquest, the Company description consumer software business, is focused on developing and marketing software in three key Claranova consists of three product areas: PDF, photo editing and security/privacy. The IoT business's myDevices businesses focused on mobile and internet technologies: Printing & Gifting platform provides a simple and effective way for SMEs and corporates to deploy IoT (digital photo printing; personalised applications. gifts), Software and Internet of Things (IoT). Its headquarters are in Paris, and it has operations in Europe, the US and Canada. Y/E Jun Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (6.4) 11.4 (21.1) 2019 262.3 16.0 12.0 24.7 24.8 N/A Relative* (8.6) 13.6 (9.6) 2020 409.1 20.6 11.3 20.0 30.6 N/A * % Relative to local index Analyst 2021e 482.4 30.6 21.0 29.5 20.7 N/A Katherine Thompson 2022e 550.6 40.0 30.4 44.4 13.8 N/A
Sector: Aerospace & defence Cohort (CHRT) Price: 580.0p Market cap: £238m INVESTMENT SUMMARY Market AIM Cohort delivered growth in FY20, despite disruption in the seasonally busy Q4. Q121 trading appears encouraging with the order book at 31 August 2020 of £210m providing Share price graph (p) cover of 83% for FY21 consensus sales. The recent £16m of orders for Chess Dynamics support its medium to long term prospects. Current guidance is for FY21 performance to be in line with FY20 and healthy liquidity supports the growth strategy. The proposed €11.3m acquisition of ELAC remains subject to German regulatory approval for a deal that should prove financially compelling.
INDUSTRY OUTLOOK
Cohort is heavily influenced by activities in defence and security (90% of FY20 sales). These markets require highly differentiated technologies and services with high barriers to Company description entry based on customer relationships, regulation and high-level security clearances. Cohort is an AIM-listed defence and Defence is generally quite resilient in periods of significant economic disruption but the security company operating across five divisions: MASS (31% of FY20 sales), current unprecedented pandemic could see renewed budget constraints in the medium SEA (24%), MCL (11%), the term. 80%-owned Portuguese business EID (14%), and 81%-owned Chess Technologies based in the UK (19%).
Y/E Apr Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (4.0) (1.9) 8.4 2019 121.2 17.3 15.9 33.6 17.3 20.4 Relative* (4.7) 2.0 31.1 2020 131.1 20.9 17.5 37.1 15.6 18.2 * % Relative to local index Analyst 2021e 137.1 21.1 17.6 35.4 16.4 15.7 Andy Chambers 2022e 143.9 22.2 18.8 37.7 15.4 11.5
Edison Insight | 29 October 2020 19 Sector: Oil & gas Coro Energy (CORO) Price: 0.2p Market cap: £2m INVESTMENT SUMMARY Market AIM Coro Energy’s independent resource audit from Gaffney Cline and Associates in 2020 on the Mako gas field saw 2C recoverable resource estimates increase to 495bcf, c 79% Share price graph (p) higher vs the 2019 audit. Coro Energy holds 15% of the Duyung PSC containing the Mako field. Gas volumes will be upgraded to 2P reserves once the gas sales agreement is completed and a final investment decision is taken. The company has a heads of agreement already in place with a gas buyer in Singapore. In July, a sales and purchase agreement with Zenith Energy to dispose of Coro’s Italian portfolio was terminated. Coro recently announced a revised growth strategy to include opportunities in the clean energy sector. Our valuation has been suspended since James Menzies, the company’s CEO, saw his employment terminated.
INDUSTRY OUTLOOK Company description Coro Energy is an upstream oil and South-East Asia possesses some of the world’s fastest-developing economies where gas company with a focus on South-East Asia. It targets discoveries demand for gas is increasing and already exceeds supply. It is also a mature hydrocarbon that require commercialisation and province, holding 57bnboe of discovered undeveloped resources and significant yet-to-find have exploration upside, with a focus on gas assets. resources.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (18.0) (29.6) (91.2) 2017 N/A N/A N/A N/A N/A N/A Relative* (18.6) (26.8) (89.3) 2018 0.0 (3.5) (3.5) 0.0 N/A N/A * % Relative to local index Analyst 2019e N/A N/A N/A N/A N/A N/A Carlos Gomes 2020e N/A N/A N/A N/A N/A N/A
Sector: Technology CREALOGIX Group (CLXN) Price: CHF118.50 Market cap: CHF166m INVESTMENT SUMMARY Market Swiss Stock Exchange In FY20, revenues grew 1.7% to CHF103.7m, with adjusted EBITDA rising to CHF2.4m. Revenues grew 13.2% in H220 vs H120, with minimal impact from the COVID-19 pandemic. Share price graph (CHF) Recurring revenues continued to rise to 44%, with SaaS 17% of the mix, while international sales fell to 62%. The SaaS transition will be a drag in FY21 (although we expect stronger margins in H221) before a full year of benefit in FY22. Although CREALOGIX has shown its resilience, we have lowered our forecasts slightly to reflect a more uncertain global economic outlook.
INDUSTRY OUTLOOK
CREALOGIX continues to pursue its goal to become a leading global SaaS digital banking software provider. Its solutions are most often used by traditional banks to enable their Company description journey to digitalisation, through the provision of a sophisticated, modern omni-channel The CREALOGIX Group is a Swiss offering to clients. CREALOGIX has multi-award winning technology eg winning the 'Best of Fintech 100 company and is among the global market leaders in digital Show' award at FinovateEurope for the last three years in a row. banking, providing front-end digital banking technology solutions to banks, wealth managers and other financial services companies.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (CHFm) (CHFm) (CHFm) (CHFc) (x) (x) % 1m 3m 12m Actual 9.7 30.5 24.7 2019 101.9 1.9 (1.7) (93.57) N/A 327.7 Relative* 13.1 35.2 24.7 2020 103.7 2.4 (0.9) (14.79) N/A 16.9 * % Relative to local index Analyst 2021e 108.8 5.9 3.0 155.54 76.2 25.6 Richard Williamson 2022e 114.3 10.3 7.5 383.77 30.9 15.2
Edison Insight | 29 October 2020 20 Sector: Property Custodian REIT (CREI) Price: 89.0p Market cap: £374m INVESTMENT SUMMARY Market LSE The Q121 DPS of 0.95p was 27% ahead of the minimum level of 0.75p previously indicated for each of the first two quarters of FY21. It was fully covered by net cash receipts, reflecting Share price graph (p) better than expected rental collection, and was 140% covered by EPRA earnings, including accrued rents that are yet to be collected. Unrealised valuation losses weighed on NAV per share, down by 5.9p to 95.7p, and including DPS paid the Q121 NAV total return was -4.2%. Rent collection has been robust and should benefit from the continued general easing of the lockdown, albeit with remaining uncertainties. The portfolio is diversified and gearing is moderate with good liquidity, no short-term refinancing risk and borrowing headroom.
INDUSTRY OUTLOOK
Company description The commercial property market is cyclical, historically exhibiting substantial swings in CREI is a London Main Market-listed valuation through cycles while income returns have been more stable, but still fluctuating REIT focused on commercial property in the UK outside London. It is according to tenant demand and rent terms. The extent and duration of impact of the global income-focused, with a commitment to pandemic on the economic outlook remains uncertain. While the supply demand balance for pay a high but sustainable and covered dividend. regional office and industrial property has hitherto remained generally firm the weakness that was previously confined to the retail sector is likely to continue to broaden. Y/E Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (0.2) 2.1 (24.1) 2019 37.6 32.7 28.5 7.26 12.3 9.7 Relative* (0.9) 6.1 (8.2) 2020 38.1 33.4 28.7 7.00 12.7 11.8 * % Relative to local index Analyst 2021e 35.5 29.3 24.3 5.79 15.4 12.7 Martyn King 2022e 35.4 30.7 25.7 6.12 14.5 12.3
Sector: Financials DeA Capital (DEA) Price: €1.07 Market cap: €286m INVESTMENT SUMMARY Market Borsa Italiana During the past year DeA Capital has exploited its financial strength and leading Italian position in alternative asset management (AAM) to grow its AAM platform, extend its Share price graph (€) customer reach and enhance its product capability. The Quaestio transactions saw DeA directly acquire the Quaestio NPL asset management business and a c 39% stake in Quaestio Asset Management (via its holding co), becoming its single largest shareholder and cementing a product and marketing partnership between the two companies. H120 performance was robust with combined AUM of c €22.5bn up 91% y-o-y and at a similar level to end-FY19 (€22.6bn), including the €7.6bn of investment solutions managed by the Quaestio Capital Management associate. Group NAV per share was €1.63 (end-FY19: 1.64 adjusted for the June distribution of €0.12) and the holding company net financial position was €71.3m or c €0.27 per share. Q320 results are due on 10 November. Company description INDUSTRY OUTLOOK DeA Capital, a De Agostini group company, is Italy’s leading alternative asset manager of real estate, private Economic uncertainty remains high as a result of the pandemic and this may affect DeA’s equity and NPLs, with combined AUM ability to enhance portfolio values and continue to raise funds. On a longer view, the of more than €22bn at 30 June 2020. The portfolio, including co-investment increasing breadth and strength of the AAM platform and balance sheet should leave it well in funds managed, investment in the asset management platform and direct placed to benefit once recovery takes hold. investment, amounted to c €340m. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (7.6) (10.8) (18.8) 2018 102.9 N/A 47.1 4.4 24.3 N/A Relative* (8.8) (5.7) (6.1) 2019 72.7 N/A 16.1 4.7 22.8 N/A * % Relative to local index Analyst 2020e 58.6 N/A (4.5) 0.6 178.3 N/A Martyn King 2021e 69.8 N/A 9.9 2.5 42.8 N/A
Edison Insight | 29 October 2020 21 Sector: Electronics & elec eqpt discoverIE Group (DSCV) Price: 626.0p Market cap: £560m INVESTMENT SUMMARY Market LSE discoverIE reported resilient trading through H121, with a revenue decline of 6% y-o-y, noting that sales in target markets performed significantly ahead of other sectors. Order Share price graph (p) intake improved through Q2 and the book-to-bill ratio for September was above 1x. With increased confidence in its outlook and a strong balance sheet, the company intends to reinstate the dividend with interims in November and has resumed its M&A strategy with the acquisition of a high margin US sensors business.
INDUSTRY OUTLOOK
discoverIE Group is a designer, manufacturer and supplier of customised electronics to industry with operations throughout Europe and increasingly outside Europe. The company is focused on growing the percentage of higher-margin specialist product through organic Company description growth and acquisition. Its key markets (more than two-thirds of sales) are medical, discoverIE is a leading international renewables, transportation and industrial connectivity, all of which are good growth markets. designer, manufacturer and supplier of customised electronics to industry, supplying customer-specific electronic products and solutions to original equipment manufacturers.
Y/E Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (1.6) 2.6 34.3 2019 438.9 37.0 28.4 28.4 22.0 N/A Relative* (2.3) 6.7 62.5 2020 466.4 50.9 34.6 31.8 19.7 N/A * % Relative to local index Analyst 2021e 460.5 46.0 28.8 23.7 26.4 N/A Katherine Thompson 2022e 494.8 53.6 36.2 29.9 20.9 N/A
Sector: Media Ebiquity (EBQ) Price: 21.1p Market cap: £17m INVESTMENT SUMMARY Market AIM Ebiquity is set for a stronger H220, after a difficult H1 (£26.8m revenue; down 24% y-o-y) when some clients paused or cancelled their marketing activity due to COVID-19. Most of Share price graph (p) the H120 £1.4m operating loss should be recouped by the year-end. FY21 prospects are further lifted by new client wins, partly from Accenture’s withdrawal from media audit. Newly installed CEO Nick Waters (ex Dentsu) is developing his vision for Ebiquity as a data-driven media solutions provider, augmented with consultancy services. This will be expounded at a capital markets day on 10 November.
INDUSTRY OUTLOOK
One of Ebiquity’s key strengths is its independence. Its advice is not compromised by the incentive of selling other products or services. Competitors tend to be either the large global Company description consultants, such a PWC or Deloitte, which have a shallower understanding of the Ebiquity is a leading independent advertising industry and potential conflicts such as that acknowledged by Accenture, or local marketing and media consultancy, working for 70 of the world’s 100 market specialists, which may lack the global perspective and the data that supports leading brands to optimise their media Ebiquity’s advice. investments.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (9.1) (24.6) (50.9) 2018 69.4 7.8 5.2 3.7 5.7 N/A Relative* (9.7) (21.7) (40.7) 2019 68.7 9.2 5.3 3.6 5.9 3.9 * % Relative to local index Analyst 2020e 57.0 1.8 (0.5) (0.8) N/A 23.1 Fiona Orford-Williams 2021e 60.0 5.4 3.1 2.6 8.1 4.7
Edison Insight | 29 October 2020 22 Sector: Oil & gas Egdon Resources (EDR) Price: 1.7p Market cap: £6m INVESTMENT SUMMARY Market AIM Egdon Resources retains several value catalysts that encompass its conventional and unconventional assets and include exploration and appraisal. 2020 started with the positive Share price graph (p) result of Egdon's appeal against the refusal of planning consent at Wressle, which will allow it to proceed with project development; and the farm-in agreement for the P1929 and P2304 licences with Shell. Cash at 31 January 2020 was £0.78m and Egdon recently raised £500,000 in equity, before expenses, to progress near-term cash-generative projects such as Wressle, where site reconfiguration works have commenced, and general working capital. Following the recent extension of the licence term for the P1929 and P2304 licences to 31 May 2024, the Shell farm-in to these licences has also now been completed. Permission to drill a well in North Kelsey has been extended to 2021, and Egdon has aligned its interests in the North Kelsey licence with partner Union Jack Oil prior to planning Company description a joint farmout of the drill-ready exploration well. Meanwhile, settlement proceeds have Egdon Resources is an AIM-listed been received from PEDL253 JV partner, Humber Oil & Gas. onshore oil and gas exploration company. The group has conventional and unconventional assets in the UK. INDUSTRY OUTLOOK The UK government's stance towards shale varies by party. Current central government believes natural gas will play an important role in providing energy to the UK in the future. Y/E Jul Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (17.1) (12.8) (66.7) 2018 1.2 (2.2) (2.0) (0.8) N/A N/A Relative* (17.7) (9.4) (59.7) 2019 2.2 (0.6) (1.7) (0.2) N/A N/A * % Relative to local index Analyst 2020e 1.9 (0.6) (0.9) (0.8) N/A N/A Carlos Gomes 2021e 4.1 1.5 (1.5) (0.8) N/A 2.6
Sector: Technology EMIS Group (EMIS) Price: 1042.0p Market cap: £660m INVESTMENT SUMMARY Market AIM EMIS reported respectable results for H120 considering the uncertainty in the NHS and COVID-19 restrictions. As expected, it was tougher to sign new business and revenue Share price graph (p) declined 2.1% y-o-y; good cost control contained the decline in adjusted operating profit to 2.4% y-o-y. EMIS expects to meet consensus estimates for FY20 and announced an interim dividend of 16p (+3% y-o-y). We have made minor changes to forecasts. Work on the product roadmap is ongoing with the first new data analytics product due in Q4. In our view, the rapid shift to digital working during the pandemic supports and potentially accelerates the adoption of technology within healthcare in the longer term.
INDUSTRY OUTLOOK
EMIS is the leading software supplier to the UK GP market, with a greater than 50% market Company description share. It has a strong position in community pharmacies, community health, A&E and EMIS is a software supplier with two hospital pharmacies. The EMIS-X platform is being developed to promote greater divisions. EMIS Health supplies integrated care technology to the NHS, interoperability between NHS departments, in line with the NHS Long Term Strategy. including primary, community, acute and social care. EMIS Enterprise is a B2B software provider to the UK healthcare market, including medicines management, partner businesses, patient-facing services and blockchain. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (2.8) (1.7) (3.3) 2018 149.7 48.9 33.4 40.4 25.8 13.2 Relative* (3.5) 2.2 16.9 2019 159.5 55.6 41.0 53.5 19.5 13.1 * % Relative to local index Analyst 2020e 158.8 53.7 43.3 55.7 18.7 11.1 Katherine Thompson 2021e 164.1 55.3 44.0 56.4 18.5 11.9
Edison Insight | 29 October 2020 23 Sector: Technology EML Payments (EML) Price: A$3.69 Market cap: A$1334m INVESTMENT SUMMARY Market ASX EML Payments is a specialist payment solutions provider with a focus on the prepaid market. The group’s strategy is to use acquisitions supported by organic development to Share price graph (A$) establish strong positions across a diverse range of use cases and markets. EML now operates in 28 countries and has grown revenues at a five-year CAGR of 53%. While COVID-19 has slowed the pace of growth in the short term, the business is well-funded and remains profitable and cash generative. The launch of Project Accelerator is designed to keep EML at the forefront of innovation in payments technology and to support the company’s aim to be ‘the fintech’s fintech’.
INDUSTRY OUTLOOK
In terms of market size, US$1,848bn was loaded onto prepaid cards in 2019 and this is Company description forecast to grow to US$5,511bn by 2027, a CAGR of 14.6% (source: Applied Market EML Payments is a payment solutions Research). EML is keen to gain share of this fast growing market, in particular by providing company specialising in the prepaid stored value market, with mobile, innovative solutions that enable fintech disruption. physical and virtual card offerings. It manages thousands of programmes across 28 countries in Europe, North America and Australia.
Y/E Jun Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual 32.7 12.5 (8.9) 2019 97.2 29.7 25.6 7.8 47.3 31.5 Relative* 27.3 9.7 (3.1) 2020 121.0 32.5 21.6 5.5 67.1 49.2 * % Relative to local index Analyst 2021e 173.4 48.4 35.3 7.6 48.6 27.2 Katherine Thompson 2022e 218.8 70.6 53.7 11.6 31.8 21.3
Sector: Mining Endeavour Mining (EDV) Price: C$34.14 Market cap: C$5567m INVESTMENT SUMMARY Market Toronto EDV's acquisition of SEMAFO (including La Mancha's injection of US$100m into the enlarged company) has created a top 15 gold producer with output of c 995–1,095koz at an Share price graph (C$) AISC of US$865–915/oz (FY20 pro forma guidance) and the realistic possibility of achieving US$35–40m pa in synergies and being net debt free and able to pay a dividend from FY21. So far in FY20, both Q1 and Q2 adjusted EPS have been materially ahead of expectations with an even stronger performance anticipated in H2 – not least as a result of the recent restart of the Boungou mine.
INDUSTRY OUTLOOK
To date, Endeavour’s exploration programme has yielded 83% of its targeted 10–15Moz Au over five years at a cost of c US$45m pa, which is intended to maintain near-term Company description production rates at EDV's mines into the foreseeable future. Discounting three years of Following its acquisition of SEMAFO, forecast cash flows to shareholders and then applying an ex-growth multiple to terminal Endeavour joins the ranks of the major gold producers, with two mines in Côte cash flows consistent with a 10% discount rate results in an updated valuation of d’Ivoire and four in Burkina Faso plus US$43.34/share. three major development projects, all in the West African Birimian greenstone belt.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 3.6 1.9 48.4 2018 1048.6 378.9 75.8 (10.4) N/A 10.2 Relative* 0.6 0.1 48.7 2019 1362.1 618.4 220.4 57.0 45.3 6.5 * % Relative to local index Analyst 2020e 1816.0 1002.4 639.8 236.0 10.9 4.4 Charles Gibson 2021e 2034.0 1027.0 668.3 251.0 10.3 4.2
Edison Insight | 29 October 2020 24 Sector: Construction & blding mat Epwin Group (EPWN) Price: 65.9p Market cap: £94m INVESTMENT SUMMARY Market AIM Epwin’s H120 revenues were down 33% (Extrusion & Moulding slightly less, Fabrication & Distribution slightly more) and both divisions generated a small underlying EBIT loss. Firmer Share price graph (p) RMI demand (70% of group sales) has benefitted E&M relatively speaking since the post UK lockdown restart with other sectors (newbuild, social housing) slower to do so but improving steadily. Core net debt (pre IFRS 16) rose by c £5m to £21.3m, partly attributable to spend relating to the new warehouse facility (Telford II). Management noted that the company operated within existing banking covenants at the end of H1 – with no variations anticipated going forward – and retained c £60m of facilities headroom. No interim dividend was declared. So far in H2, group sales have been +2–3% LFL, led by the E&M division. Our estimates are under review.
INDUSTRY OUTLOOK Company description Epwin supplies functional Epwin is exposed to both RMI (c 70% revenue) and newbuild (c 30%) in the UK housing low-maintenance exterior building products (including windows, doors, market. RMI activity is currently stronger that other sectors which are also recovering roofline and rainwater goods) into a gradually. There is some caution associated with the potential impact of rising number of UK market segments and is a modest exporter. unemployment on consumer confidence.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (5.3) (7.2) (19.5) 2018 281.1 26.7 16.5 9.8 6.7 3.7 Relative* (6.0) (3.5) (2.7) 2019 282.1 26.4 15.0 8.5 7.8 2.8 * % Relative to local index Analyst 2020e N/A N/A N/A N/A N/A N/A Toby Thorrington 2021e N/A N/A N/A N/A N/A N/A
Sector: Technology EQS Group (EQS) Price: €22.60 Market cap: €162m INVESTMENT SUMMARY Market Scale EQS delivered a good H120 performance, boosted by companies’ needs to adapt their communications strategies to the impact of the COVID-19 pandemic. Revenue guidance for Share price graph (€) the year was tilted to the higher end of the previous range and EBITDA guidance lifted by €0.5m to $4.0–5.0m. We raised our forecast from €3.5m to €4.1m, rising to €8.5m for FY21e as the scalability of the platform helps improve margins. With the group now over the peak investment in its cloud-based COCKPIT software, free cash flow is on a clear improving trend. The share price has recovered well from the market setback in March but remains on a discount to peers. Q320 figures are scheduled for 13 November.
INDUSTRY OUTLOOK
Virtual general meetings are being used broadly across the DACH area, where voting is Company description normally at the meeting, with questions also submitted ahead of time. Against this, the EQS is a leading international provider number of IPOs (a useful source of group revenue historically) lined up for European of regulatory technology in the fields of corporate compliance and investor markets has unsurprisingly dwindled. The length and severity of the economic impact will relations. Its products enable corporate also affect the numbers of companies going out of business entirely, but this is not yet clients to fulfil complex national and international disclosure obligations, quantifiable. Gartner estimates the governance, risk and compliance segment at over minimise risks and communicate transparently with stakeholders. US$5bn, growing at a CAGR of over 13%. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 5.6 20.2 93.2 2018 36.2 0.2 0.7 6.12 369.3 N/A Relative* 5.6 24.6 95.5 2019 35.4 2.5 (0.3) (6.26) N/A N/A * % Relative to local index Analyst 2020e 37.2 4.1 0.6 10.96 206.2 N/A Fiona Orford-Williams 2021 43.5 8.5 4.7 43.05 52.5 N/A
Edison Insight | 29 October 2020 25 Sector: Technology Esker (ALESK) Price: €143.80 Market cap: €834m INVESTMENT SUMMARY Market Euronext Growth Esker reported revenue growth of 7% y-o-y for Q320 and 8% for 9M20. The volume processed through its platform returned to close to pre-COVID levels by September. As Share price graph (€) companies look to Esker’s technology to support their digital transformation projects, orders for 9M20 grew 11% y-o-y. While management guidance for FY20 is maintained on a constant currency basis, we reduce our revenue forecasts for FY20/21 by 1% to reflect the recent strengthening of the euro, resulting in small EPS reductions.
INDUSTRY OUTLOOK
Esker's DPA software operates across five areas: document delivery, accounts payable, accounts receivable, procurement and sales order processing. Competitors are different for each business process and consist of business process outsourcers and specialist DPA Company description software companies. Customers move to using DPA software to reduce paper-related costs Esker provides end-to-end document and errors in processing, to speed up the cash conversion cycle, to improve process automation solutions, offering on-premise and on-demand delivery visibility within the enterprise and to improve customer service. models. In FY19, the business generated 57% of revenues from Europe, 38% from the US and the remainder from Asia and Australia.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 3.0 3.5 74.3 2018 86.9 18.3 12.2 165.0 87.2 N/A Relative* 0.5 5.5 99.7 2019 104.2 20.1 13.6 179.0 80.3 N/A * % Relative to local index Analyst 2020e 112.9 21.7 13.6 169.0 85.1 N/A Katherine Thompson 2021e 130.6 26.2 18.0 221.0 65.1 N/A
Sector: Food & drink Evolva (EVE) Price: CHF0.22 Market cap: CHF183m INVESTMENT SUMMARY Market Swiss Stock Exchange In November 2019, commercial scale production of EverSweet commenced. Nootkatone has finally been registered for use in pest control. Evolva's overall geographical and product Share price graph (CHF) footprint continues to expand and the pipeline remains robust. The company's aim is to reach cash break-even by FY23. Due to COVID-19, Evolva witnessed a temporary softening in demand for some of its flavour and fragrance products, but H1 results demonstrated Evolva's progress in transforming itself from an R&D-driven enterprise towards a commercial company with a product-based revenue model.
INDUSTRY OUTLOOK
Food and health ingredients continue to be in the sweet spot as consumers demand healthier products with cleaner labels without compromising on taste or convenience. Company description Evolva's fermentation platform aims to deliver these benefits while reducing production Evolva is a Swiss biotech company costs. focused on the research, development and commercialisation of products based on nature. The company has leading businesses in Flavours and Fragrances, Health Ingredients and Health Protection.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (CHFm) (CHFm) (CHFm) (CHFc) (x) (x) % 1m 3m 12m Actual (7.9) (19.7) 36.8 2018 8.9 (23.4) (25.4) (3.0) N/A N/A Relative* (5.1) (16.8) 36.8 2019 11.6 (12.3) (15.6) (2.0) N/A N/A * % Relative to local index Analyst 2020e 10.0 (14.4) (15.5) (1.9) N/A N/A Sara Welford 2021e 17.3 (8.9) (10.0) (1.2) N/A N/A
Edison Insight | 29 October 2020 26 Sector: Technology Expert System (EXSY) Price: €2.09 Market cap: €106m INVESTMENT SUMMARY Market Borsa Italiana Expert System reported a 19% y-o-y decline in sales in H120, as COVID-19 restrictions made it harder to sign new business in Q220. Combined with increased investment as part Share price graph (€) of the company’s new five-year strategy (Path to Lead), this resulted in an EBITDA loss of €4.6m compared to €0.4m in H119. So far in H220, the company is making good progress in executing this plan, with funds raised to support the required investment, a rebrand to expert.ai and technology development on track to launch the new end-to-end SaaS platform in Q121.
INDUSTRY OUTLOOK
Ever-increasing amounts of data are being produced, 80% of which are estimated to be unstructured. The need to derive useful insights from this growing body of data is driving the Company description demand for cognitive computing and smarter artificial intelligence solutions, such as those Expert System has developed and offered by Expert System. ResearchAndMarkets estimates that the global text analytics patented an AI-based technology platform that extracts useful market was worth $4bn in 2018 and is forecast to grow at a CAGR of 17.3% to 2023. information from unstructured text using a unique mix of natural language understanding and machine learning algorithms and applies it to verticals such as enterprise search, customer experience management and big data Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF analytics. Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (9.5) (25.9) (27.5) 2018 30.5 4.6 (0.6) (1.4) N/A 29.0 Relative* (10.7) (21.6) (16.2) 2019 33.7 5.5 (0.5) (1.6) N/A 32.5 * % Relative to local index Analyst 2020e 31.2 (0.4) (7.7) (15.5) N/A N/A Katherine Thompson 2021e 32.5 (5.7) (13.5) (24.0) N/A N/A
Sector: Property FCR Immobilien (FC9) Price: €12.00 Market cap: €110m INVESTMENT SUMMARY Market Scale FCR invests mainly in retail property, targeting total returns from recurring rental income and capital gains. It acquires properties at attractive prices and actively manages the assets Share price graph (€) to improve income by reducing voids and increasing rent levels and capital values with minimal or no capex. It seeks to sell properties where asset management plans are mature, with capital recycled into new opportunities. High initial loan to value at property level and high loan amortisation rates are part of the strategy, with ECB’s monetary easing providing relatively cheap debt funding. FCR’s portfolio value reached c €312m at end-June 2020.
INDUSTRY OUTLOOK
The German property investment market was affected by COVID-19 as transaction volumes declined by over 47% q-o-q in Q220 followed by a modest 5.3% q-o-q rebound in Q320 Company description (-38% vs Q319), based on JLL data. FCR has sold five properties this year and expects a FCR Immobilien is a German real further three to five to be sold soon. FCR continues to focus on portfolio expansion estate investor primarily focused on small and mid-sized properties in tier (targeting the acquisition of €160m in additional properties in 2021) which it intends to fund two domestic locations. It looks for via, among others, a new share issue with gross proceeds of up to €14.1m. In FY20 special situations translating into bargain purchases. Subsequent management expects pre-tax profit to reach €11.1m (€11.9m in FY19) and a property measures are aimed at improving rental income generation. disposal volume of at least €30m. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 0.0 6.2 20.6 2018 37.3 7.6 2.8 35.1 34.2 N/A Relative* 0.0 10.0 22.1 2019 50.1 18.5 11.9 145.9 8.2 N/A * % Relative to local index Analyst 2020e 52.4 18.5 10.6 94.6 12.7 N/A Milosz Papst 2021e 72.4 24.2 14.9 123.8 9.7 N/A
Edison Insight | 29 October 2020 27 Sector: Consumer support services Games Workshop Group (GAW) Price: 10800.0p Market cap: £3530m INVESTMENT SUMMARY Market LSE Games Workshop’s (GAW) Q121 trading update was well ahead of expectations (growth in revenue of 15% and operating profit pre royalties of 60%), indicating that the previously Share price graph (p) flagged strong post-lockdown demand has continued. This was helped by a major product re-release in the period and margin was helped by channel mix. We upgraded our FY21e PBT forecast by 37% to £115.9m, reflecting higher revenue growth, c 12% versus 2% previously, and a higher operating margin pre-royalties of c 35% versus 27% previously.
INDUSTRY OUTLOOK
Games Workshop is the global leader for tabletop miniature gaming, a market it created. Tabletop miniature gaming is the fastest-growing segment of the global non-digital games market, which is expected to grow at a CAGR of 9% between 2017 and 2023 and reach a Company description value exceeding $12bn. Games Workshop is a leading international specialist designer, manufacturer and multi-channel retailer of miniatures, scenery, artwork and fiction for tabletop miniature games set in its fantasy Warhammer worlds.
Y/E May Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 12.4 25.6 142.5 2019 256.6 97.1 81.3 200.8 53.8 48.7 Relative* 11.6 30.6 193.3 2020 269.7 115.6 89.4 217.8 49.6 33.9 * % Relative to local index Analyst 2021e 302.5 143.7 115.9 282.4 38.2 32.3 Russell Pointon 2022e 322.2 154.5 125.1 304.9 35.4 27.5
Sector: Travel & leisure Gamesys Group (GYS) Price: 1188.0p Market cap: £1292m INVESTMENT SUMMARY Market LSE Gamesys Group’s Q320 trading update was ahead of expectations with pro forma revenue growth of 31% and an improved financial position. This follows growth of 35% in Q220 that Share price graph (p) was helped by home-based working, the closure of land-based gaming premises, and a lack of sports betting due to COVID-19. As in previous quarters, the company increased the active player base responsibly and benefitted from new game launches. We increased our revenue forecasts for FY20–22 by 5.7–7.0%, and EBITDA forecasts by a slightly lower 2–3% as management further invests in growing a sustainable and repeatable business, while ensuring revenue growth is done responsibly. This follows an EBITDA upgrade of 7.8% for FY20 at the time of the interim results.
INDUSTRY OUTLOOK
Company description Retail gambling and sports are currently faced with the impact of COVID-19, but we note Gamesys is a leading online gaming that Gamesys is not exposed to either sector. Gaming companies have been subject to operator, with two-thirds of revenues from the UK. The group was formed ongoing regulatory intervention in the UK, including a ban on the use of credit cards to after JPJ Group acquired Gamesys for gamble online from April 2020, and recent new guidance to protect consumers during the £490m in September 2019. COVID-19 lockdown. Gaming companies must comply with a number of social responsibility measures, including ID checking, source of funds and AML checks. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 8.0 29.0 47.0 2018 319.6 112.7 92.7 118.5 10.0 8.3 Relative* 7.2 34.1 77.8 2019 565.3 158.9 119.5 100.4 11.8 12.8 * % Relative to local index Analyst 2020e 719.3 193.3 152.3 126.0 9.4 7.7 Russell Pointon 2021e 768.9 213.8 175.8 145.3 8.2 6.8
Edison Insight | 29 October 2020 28 Sector: Technology GB Group (GBG) Price: 872.0p Market cap: £1702m INVESTMENT SUMMARY Market AIM GB Group (GBG) expects to report underlying revenue growth of 10% y-o-y for H121, with a one-off contract in the US making a material contribution to revenues. Combined with strict Share price graph (p) cost control this resulted in adjusted operating profit growth of 26% y-o-y and a £32m h-o-h reduction in net debt. With management guidance for revenue well ahead of our and consensus forecasts for FY21, we have upgraded our revenue and EPS forecasts for FY21–23. Despite COVID-19 related pressure on new business in the short-term, we view GBG as well placed to benefit from the accelerated shift in the digitalisation of business processes.
INDUSTRY OUTLOOK
Globalisation and the growth in internet trading have also resulted in the need for higher Company description compliance standards in light of the rising scope and financial impact of cybercrime. This, in GBG specialises in identity data turn, is driving the demand for more complex and comprehensive solutions for the intelligence. Its products/services enable customers to understand and verification of personal data. verify clients and employees in fraud, risk management, compliance and customer on-boarding services. With headquarters in the UK, it operates across 16 countries. Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 24.4 29.8 65.5 2019 143.5 34.1 31.3 15.4 56.6 N/A Relative* 23.5 34.9 100.1 2020 199.1 51.7 45.7 17.9 48.7 N/A * % Relative to local index Analyst 2021e 199.2 48.4 42.2 16.3 53.5 N/A Katherine Thompson 2022e 213.2 51.1 45.2 17.3 50.4 N/A
Sector: Mining Gemfields Group (GML) Price: ZAR1.26 Market cap: ZAR1476m INVESTMENT SUMMARY Market JSE Gemfields held just one auction in H1 (resulting in group revenue of US$15.0m, down 83% y-o-y). The company is unable to provide guidance as to when auctions will next be held but Share price graph (ZAR) is working to develop alternative selling mechanisms. Mining operations were suspended at Kagem in March and at MRM in April and will not resume until auctions are held. Gemfields ended June in a strong balance sheet position with cash of US$53.6m and net cash of US$9.3m. However, if meaningful gemstones sales cannot take place this year, it will need to look at options to secure further funding.
INDUSTRY OUTLOOK
Gemfields generates more than 90% of its revenues from six emerald and ruby auctions annually. Auctions rely on customers travelling from multiple countries to inspect the stones Company description and determine the value of their bids. For Gemfields to hold auctions thus requires the lifting Gemfields is a world-leading supplier of worldwide travel restrictions to allow movement of both stones and customers between of responsibly sourced coloured gemstones. It owns 75% of Montepuez countries. Ruby Mining in Mozambique, 75% of the Kagem emerald mine in Zambia, the Fabergé jewellery business and an investment in Sedibelo Platinum.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (2.3) (14.9) (20.3) 2018 206.1 58.9 (22.5) (2.6) N/A N/A Relative* (4.3) (13.7) (19.9) 2019 216.2 80.9 55.9 1.3 5.9 N/A * % Relative to local index Analyst 2020e 62.1 (10.2) (38.0) (2.7) N/A N/A Alison Turner 2021e 212.4 54.8 27.4 0.0 N/A N/A
Edison Insight | 29 October 2020 29 Sector: Food & drink Greggs (GRG) Price: 1369.0p Market cap: £1387m INVESTMENT SUMMARY Market LSE Greggs’ Q320 trading update showed a recovery in sales in line with our expectations. Q320 like-for-like revenue in company-managed stores, at 71.2% of the FY19 level, was a Share price graph (p) gradual improvement from c 70% for the first three weeks of trading (July) post re-opening after COVID-19 closures. We retained our existing forecasts, which reflect a gradual recovery in revenue through FY20 and FY21. Greggs has many opportunities to accelerate growth in the medium term: more and larger stores; the shift from a single channel to multichannel; further product innovation; and more investment in its supply chain.
INDUSTRY OUTLOOK
Greggs enjoys an expanding market. The Project Café2017UK report (Allegra World Coffee portal) valued the UK coffee shop market in 2016 at £8.9bn, +12% y-o-y, with branded Company description outlets accounting for £3.7bn. Allegra estimates it could reach £16bn by 2025. The With 2,039 shops, eight manufacturing squeezed consumer is a potential concern, although Greggs is well placed for the value and distribution centres and 23,000 employees, Greggs is the leading switch after widespread refurbishments and extended customer options as it moves to ‘food-on-the-go’ retailer. It uses vertical widen its market. integration to offer differentiated products at competitive prices.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 17.5 (9.2) (25.4) 2018 1029.3 145.7 89.8 70.3 19.5 9.1 Relative* 16.7 (5.6) (9.7) 2019 1167.9 231.9 114.2 89.7 15.3 5.6 * % Relative to local index Analyst 2020e 765.4 50.9 (77.9) (63.4) N/A 32.9 Russell Pointon 2021e 1040.1 192.4 60.8 48.0 28.5 6.7
Sector: Oil & gas Hellenic Petroleum (ELPE) Price: €4.49 Market cap: €1372m INVESTMENT SUMMARY Market Athens Stock Exchange Hellenic Petroleum (ELPE) reported adjusted EBITDA coming in at €191m in H120 in a reversal of part of the losses in stocks from the fall of prices in the first quarter. Demand fell Share price graph (€) in Q220 due to the reduction in air traffic and tourism in the wake of the COVID-19 pandemic, leading to a decline in refining margins to historically low levels. We expect this pressure will continue for the next three to six months as economies around the world slowly recover and lockdown measures begin to ease. Hellenic’s high complexity index and large storage capacity allow for flexibility in times of uncertainty and given the company’s healthy balance sheet, we expect it to weather this period. In October, Hellenic announced the completion of the acquisition of Kozani 204MW Photovoltaic projects, as part of its goal to improve its environmental footprint. Our updated valuation stands at €6.81/share.
INDUSTRY OUTLOOK Company description Hellenic Petroleum (ELPE) operates European refining will likely face continued challenges in the coming years as demand falls three refineries in Greece with a total capacity of 341kbd, and has sizeable and refinery systems elsewhere (Asia/US) hold structural advantages. To offset this, marketing (domestic and international) changing regulations should put complex, middle distillate-orientated refineries such as and petrochemicals divisions. ELPE's in a strong position.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (7.0) (22.6) (46.1) 2018 9769.0 730.0 388.0 95.2 4.7 2.7 Relative* (5.5) (19.0) (23.1) 2019 8857.0 570.0 205.0 54.8 8.2 2.8 * % Relative to local index Analyst 2020e 6554.0 379.0 54.0 25.2 17.8 6.8 Carlos Gomes 2021e 6556.0 604.0 275.0 67.4 6.7 3.2
Edison Insight | 29 October 2020 30 Sector: Oil & gas Hurricane Energy (HUR) Price: 2.5p Market cap: £51m INVESTMENT SUMMARY Market AIM Hurricane's ongoing technical review has confirmed significantly shallower oil water contacts than previously estimated and a more complex Lancaster reservoir system. Share price graph (p) Lancaster early production system 2P reserves have been reduced from 37.3mmbbls to 16mmbbls with remaining reserves of 9.4mmbbls. 2C resources are now 58mmbbls from 486mmbbls. Lincoln 2C resources have been cut to 45mmbbls from 565mmbbls. Work is continuing to assess the contribution to production of onlapping sandstones and possible remediation options in Lancaster, including water injection. Current production of 14,500bopd is expected to decline slowly without further activity: guidance from 1 September to 31 December is 12,000–14,000bopd. Hurricane has reverted to holding £16.8m of cash security in trust for decommissioning obligations after the decommissioning bond was terminated. Our valuation was suspended in August. Company description INDUSTRY OUTLOOK Hurricane Energy is an E&P focused on fractured basement exploration and development in the West of Shetland Lancaster near-term production will depend on the outcome of the ongoing technical review region. The company’s 100%-owned and Hurricane’s financial position. Lancaster oil discovery achieved first oil on target in H119.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (14.4) (52.1) (94.3) 2018 0.0 (12.6) (18.5) (2.2) N/A N/A Relative* (15.0) (50.2) (93.1) 2019 170.3 (11.7) 30.0 (2.5) N/A 0.6 * % Relative to local index Analyst 2020e N/A N/A N/A N/A N/A N/A Carlos Gomes 2021e N/A N/A N/A N/A N/A N/A
Sector: Property Impact Healthcare REIT (IHR) Price: 99.6p Market cap: £318m INVESTMENT SUMMARY Market LSE Impact’s portfolio has continued to perform well in Q320 with 100% of contracted rents due year to date received, up to and including quarterly and monthly rents payable in advance Share price graph (p) and due on 1 October 2020. The portfolio value increased 15.4% in the period including £48.4m of previously disclosed acquisitions and positive revaluation movements amounting to 1.6% of the opening portfolio value. NAV per share increased to 1.8% to 109.06p and including DPS paid the NAV total return was 3.2% (9M20: 6.5%). A Q320 DPS of 1.5725p was declared, in line with the annual target of 6.29p. With gearing low (17.8% LTV or 21.3% if all committed transactions complete), good liquidity and significant access to undrawn debt, Impact has cautiously returned to acquisitions and continues to progress a strong identified pipeline of opportunities.
INDUSTRY OUTLOOK Company description Impact Healthcare REIT invests in a Care home demand is driven by demographics and care needs with a shortage of quality diversified portfolio of UK healthcare assets, particularly residential and care homes suggesting strong investment demand in years to come. The pandemic nursing care homes, let on long leases presents a significant near-term challenge to the sector but does not change the underlying to high-quality operators. It aims to provide shareholders with attractive demographic-driven fundamentals while highlighting its critical role in supporting the NHS and sustainable returns, primarily in the form of dividends, underpinned by and the importance of long-term investment. structural growth in demand for care. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (1.9) (2.4) (9.5) 2018 17.3 N/A 12.4 6.5 15.3 N/A Relative* (2.6) 1.5 9.5 2019 24.0 N/A 17.6 6.9 14.4 N/A * % Relative to local index Analyst 2020e 30.4 N/A 22.6 7.1 14.0 N/A Martyn King 2021e 35.3 N/A 26.5 8.3 12.0 N/A
Edison Insight | 29 October 2020 31 Sector: Technology IQE (IQE) Price: 54.7p Market cap: £438m INVESTMENT SUMMARY Market AIM IQE’s revenues grew by 35% year-on-year during H120 to a record £89.9m, taking the group from a £1.9m adjusted operating loss in H119 to a £4.3m adjusted operating profit. Share price graph (p) INDUSTRY OUTLOOK
Like the latest generation iPad Pro announced in March, the new iPhone 12 Prophones will have LiDAR scanners. Apple intends to use this technology to improve AR (augmented reality) experiences. The news is positive for IQE, who we have previously inferred is involved in Apple’s vertical cavity surface emitting laser (VCSEL) supply chain, because LiDAR deployment increases the number of VCSELs per phone by around 1.5 times. The increased content is consistent with IQE’s comment that the continued growth in photonics revenues during H120 was related to content gain. In addition, the iPhone 12 handsets will Company description be Apple’s first to work on 5G networks, encouraging wider adoption of 5G more generally. IQE is the leading supplier of epitaxial Adoption of 5G is also beneficial for IQE as it drives demand for both power amplifiers in compound semiconductor wafers globally. The principal applications handsets and GaN-on-SiC devices for base-stations. include radio frequency semiconductors, devices for optical networks, vertical cavity lasers, infrared semiconductors and power electronics. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 1.2 8.5 (20.6) 2018 156.3 26.4 14.0 1.38 39.6 24.5 Relative* 0.5 12.8 (3.9) 2019 140.0 16.2 (7.0) (2.46) N/A 48.1 * % Relative to local index Analyst 2020e 165.6 28.7 3.1 0.28 195.4 18.7 Anne Margaret Crow 2021e 178.2 36.8 10.9 1.05 52.1 14.7
Sector: General industrials Jersey Electricity (JEL) Price: 498.0p Market cap: £153m INVESTMENT SUMMARY Market LSE JEL posted strong H120 results, with PBT +7.5% to £10.0m (H119 £9.3m) and operating profit +8.1% to £10.8m (H119 £10.0m). The principal driver of the increase in operating Share price graph (p) profits was the Energy business, helped by higher tariffs (+3.5% in April 2019) and volume increases +4%. EPS, of 25.95p, was +8.9% versus H119. The interim DPS was increased by 5.4% to 6.80p. With positive cash flow in H1, net debt fell to £2.9m (£5.1m in FY19). The outlook for H2 is likely to be tougher and JEL expects there to be a reduction in revenue as the result of rescheduled rental payments (property business), lower sales in the retail division and lower volumes of electricity sold. Despite the expectation of a more challenging second half, JEL remains a highly defensive company with a strong financial position. Our forecasts remain under review.
INDUSTRY OUTLOOK Company description Jersey Electricity is the monopoly Supplying secure, affordable and sustainable electricity, JEL is well positioned to withstand supplier of electricity to the island of Jersey. It also operates businesses in any changes to its regulatory regime. retail, property and business services on the island.
Y/E Sep Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 4.8 6.0 8.0 2018 105.9 27.9 15.3 39.5 12.6 5.6 Relative* 4.1 10.2 30.7 2019 110.3 27.7 14.8 38.4 13.0 5.5 * % Relative to local index Analyst 2020e 109.2 26.8 14.0 35.9 13.9 6.1 Carlos Gomes 2021e N/A N/A N/A N/A N/A N/A
Edison Insight | 29 October 2020 32 Sector: Investment companies John Laing Group (JLG) Price: 304.2p Market cap: £1500m INVESTMENT SUMMARY Market LSE John Laing (JLG) announced a 2% growth in NAV per share in Q3 from 309p to 314p. Underlying NAV growth was 4% reflecting a good performance of its PPP portfolio driven by Share price graph (p) the gain from the agreed sale of its stake in IEP. This underlying performance was partially offset by fx and movement in the pension. The value of its renewable portfolio was stable. The sale of its Australian wind farm assets represents material progress on its strategy to exit renewables; renewables now account for 22% of the portfolio value. The pipeline remains healthy with 10 short/preferred bidder positions (unchanged) and the company confirmed its guidance for modest underlying NAV growth in H2 (ie excluding fx and other external factors). The company has also confirmed the date for its capital markets day as 25 November.
INDUSTRY OUTLOOK Company description John Laing is an international Substantial boosts to infrastructure spending are expected as developed economies look to originator, active investor and manager of infrastructure projects. stimulate growth following the COVID-19 pandemic. Meeting the challenges of climate change will require a transformation of key parts of the energy system and is a key part of many countries' investment plans.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (0.4) (0.9) (17.4) 2018 397.0 331.0 296.0 63.0 4.8 N/A Relative* (1.1) 3.0 (0.1) 2019 179.0 111.0 100.0 20.4 14.9 N/A * % Relative to local index Analyst 2020e 6.0 (59.0) (72.7) (14.6) N/A N/A Dan Gardiner 2021e 106.3 40.0 29.3 5.9 51.6 N/A
Sector: Technology Kcell Joint Stock Company (KCEL) Price: US$6.25 Market cap: US$1250m INVESTMENT SUMMARY Market LSE Kcell delivered both revenue and profit growth in Q2, despite the disruption caused by COVID-19. Impressive handset sales (up 62% y-o-y) offset the impact of a consumer Share price graph (US$) spending slowdown and an exit from off-net bulk SMS. With Kazakhstan entering a new lockdown, the outlook remains uncertain. Yet Q2 clearly shows Kcell’s resilience and longer term the scope for group synergies in a consolidated market should drive healthy profit growth.
INDUSTRY OUTLOOK
Kcell’s prospects have been transformed following KT taking a 75% stake in the business. Consolidation is helping to sustain a recovery in the Kazakhstan mobile market, new management successfully introduced a strategy targeting higher margin segments and Company description Kcell’s major shareholder is now the dominant national telecom player. 2019 saw the Kcell Joint Stock Company (Kcell) is a company deliver its first growth in service revenues in five years. With little near-term risk of mobile operator in Kazakhstan and a listed subsidiary of Kazakhtelecom regulatory intervention or a resurgence in aggressive competition, the current market (KT), a state-owned incumbent with a structure appears sustainable. 70% share of the market. Consolidation is delivering dramatic improvements in the market and as a subsidiary of the dominant operator, Kcell is well positioned to benefit. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (KZTbn) (KZTbn) (KZTbn) (KZT) (x) (x) % 1m 3m 12m Actual 4.2 0.0 17.5 2018 149.7 50.9 15.6 59.0 45.4 0.1 Relative* N/A N/A N/A 2019 156.7 63.5 23.3 103.0 26.0 0.1 * % Relative to local index Analyst 2020e 155.1 64.8 26.2 98.0 27.3 0.1 Dan Gardiner 2021e 159.8 68.4 30.3 121.0 22.1 0.1
Edison Insight | 29 October 2020 33 Sector: Mining KEFI Gold and Copper (KEFI) Price: 2.2p Market cap: £41m INVESTMENT SUMMARY Market LSE Following completion of its 2020 plan, KEFI is in the process of finalising the specifics of the remaining funding sources for Tulu Kapi ahead of major mine site works later this quarter Share price graph (p) and commercial production in 2022. Community resettlement was authorised in mid-January, ahead of the start of the first phase of project development and, notwithstanding COVID-19, the Ethiopian central bank has approved the project's debt financing structure.
INDUSTRY OUTLOOK
In our last note, we calculated that KEFI was capable of generating free cash flow of c £65m pa, which we valued at 4.05p/share. However, this excludes Hawiah (34% owned), where it announced a maiden resource of 19.3Mt at a grade of 1.86% CuE in August and on which it Company description completed a preliminary economic assessment (PEA) in September showing a post-tax KEFI Gold and Copper is an NPV(8%) of US$96m (or 1.37p/share). It also excludes any beneficial interest for KEFI in exploration and development company focused on gold and copper deposits Tulu Kapi above 45% (potentially 1.35p/share) and also the value its other assets in the highly prospective (potentially 3.83-8.74p/share). Arabian-Nubian Shield – principally the Tulu Kapi project in Ethiopia, as well as Hawiah Copper and Gold and Jibal Qutman Gold in Saudi Arabia. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 2.8 36.0 206.4 2018 0.0 (4.1) (4.6) (1.0) N/A N/A Relative* 2.1 41.4 270.6 2019 0.0 (2.4) (3.5) (0.6) N/A N/A * % Relative to local index Analyst 2020e 0.0 (3.2) (3.4) (0.2) N/A N/A Charles Gibson 2021e 0.0 (1.0) (4.6) (0.1) N/A 120.8
Sector: Technology Keywords Studios (KWS) Price: 2210.0p Market cap: £1635m INVESTMENT SUMMARY Market AIM Keywords again showed its resilience in H120, delivering 8% like-for-like revenue growth, 19% adjusted EBITDA growth and 17% adjusted EPS growth despite the impact of Share price graph (p) COVID-19. Looking ahead, we see sustained industry growth, led by the console transition in Q420. Any delays to clients' scheduled releases often benefit Keywords. Keywords’ strategy, which has delivered a five-year EPS CAGR of 42%, appears sustainable, with dividend payments to be resumed in FY21. We see management once more focusing on M&A with net cash of €101m and believe the shares remain set for continued appreciation.
INDUSTRY OUTLOOK
Keywords Studios operates in the global games sector, a net beneficiary from COVID-19-related lockdowns. Although Keywords has experienced some short-term Company description business disruption (particularly Audio and QA), as lockdowns ease, it will quickly be Keywords Studios is the largest and business as usual, with potential catch-up from pent-up demand. Thereafter, we expect the most diverse supplier of outsourced services to the games industry. industry to return to its long-term growth trends (Newzoo: 8.4% CAGR 2019–22e). Through regular acquisitions, it is building its scale, geographic footprint and delivery capability to become the ‘go to’ supplier across the industry.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 0.5 13.7 88.6 2018 250.8 43.7 37.9 43.7 55.7 46.1 Relative* (0.3) 18.2 128.1 2019 326.5 57.6 40.9 47.2 51.6 34.4 * % Relative to local index Analyst 2020e 365.1 64.1 46.2 49.6 49.1 28.0 Richard Williamson 2021e 412.5 77.6 53.4 54.5 44.7 26.6
Edison Insight | 29 October 2020 34 Sector: Food & drink La Doria (LD) Price: €12.60 Market cap: €391m INVESTMENT SUMMARY Market Borsa Italiana The COVID-19 pandemic has boosted demand as consumers eat more meals at home. The ongoing industrial plan is boosting capacity in the higher-margin products and structurally Share price graph (€) reducing costs in the longer term. The past two quarters have benefitted significantly from increased home consumption, and we expect the trend to continue throughout FY20, though consumption is slowly returning to more normal levels. The first phase of the seasonal tomato campaign went well, though agricultural yields in September are expected to be lower. While negotiations are not yet complete, we expect FY21 profitability in the segment to improve, with increased pricing and a more positive industry backdrop, due to lower stocks and higher demand.
INDUSTRY OUTLOOK
Company description La Doria's strategic objectives, published as part of its three-year plan, are broadly La Doria is the leading manufacturer of unchanged: the priority is to expand the higher margin and less volatile parts of the private-label preserved vegetables and fruit for the Italian (18% FY19 business to reduce the dependence on the more unpredictable ‘red line’. revenues) and international (82%) market. It has leading market share positions across its product ranges in the UK, Italy, Germany and Australia.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 11.1 15.6 41.6 2018 687.9 52.8 33.1 88.2 14.3 8.1 Relative* 9.6 22.2 63.6 2019 717.7 56.0 32.7 64.0 19.7 10.1 * % Relative to local index Analyst 2020e 803.8 65.1 46.6 115.9 10.9 11.0 Sara Welford 2021e 779.7 65.5 45.0 111.8 11.3 6.8
Sector: Alternative energy Leclanché (LECN) Price: CHF0.55 Market cap: CHF142m INVESTMENT SUMMARY Market Swiss Stock Exchange Revenues rose by CHF3.5m year-on-year in H120 to CHF10.0m, boosted by delivery to Kongsberg Maritime of the energy storage system for the first of nine Grimaldi vessels, Share price graph (CHF) though two stationary storage projects potentially worth c CHF6m were postponed to H220. Gross margin remains negative, reflecting low plant utilisation rates. EBITDA losses narrowed by CHF3.3m to CHF16.3m. Our estimates and valuation remain under review.
INDUSTRY OUTLOOK
The order book of over CHF90m for delivery between 2020 and 2022 demonstrates demand for the group’s energy storage systems. However, while majority shareholder FEFAM has converted CHF50.9m of debt to equity and agreed to provide up to CHF34m in working capital bridge loan financing as an interim measure, management states that it Company description needs to complete a fundraise with a major industrial investor interested in taking a Leclanché is a fully vertically integrated significant stake in the group to be confident of remaining a going concern. energy storage solution provider. It delivers a wide range of energy storage solutions for homes, small offices, large industries and electricity grids as well as hybridisation for mass transport systems such as bus fleets and ferries. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (CHFm) (CHFm) (CHFm) (CHFc) (x) (x) % 1m 3m 12m Actual (2.5) (15.4) (61.0) 2018 48.7 (36.9) (47.8) (61.5) N/A N/A Relative* 0.5 (12.4) (61.0) 2019 16.3 (57.5) (71.5) (52.6) N/A N/A * % Relative to local index Analyst 2020e N/A N/A N/A N/A N/A N/A Anne Margaret Crow 2021e N/A N/A N/A N/A N/A N/A
Edison Insight | 29 October 2020 35 Sector: Mining Lepidico (LPD) Price: A$0.01 Market cap: A$41m INVESTMENT SUMMARY Market ASX Lepidico's patented technologies produce lithium hydroxide plus a range of alkali (Group 1) metal by-products from less contested minerals such as lepidolite. The Karibib mine and Share price graph (A$) concentrator in Namibia are fully permitted and permitting of the Abu Dhabi chemical conversion plant is progressing. Technically the project has been de-risked by a pilot plant that confirmed process viability and product qualities. In May, LPD announced the results of a definitive feasibility study (DFS) to produce c 4,900tpa of battery grade lithium hydroxide monohydrate (7,800tpa equivalent) over 14 years.
INDUSTRY OUTLOOK
The DFS calculated a project NPV of US$221m (US$0.043/share) at an 8% discount rate and a 31% IRR after initial capex of US$139m. Unit costs after by-product credits were Company description close to the bottom of the cost curve. According to Edison, these results imply an immediate Via its Karibib project in Namibia and valuation of Lepidico of 1.8c/share (potentially ranging up to 8.2c/share). If it then raises unique IP, Lepidico is a vertically integrated lithium development equity at this price, we value the shares at 4.15c, or 4.82c if it raises equity at 2.9c/share business that has produced both (our 'base case'). lithium carbonate and lithium hydroxide from non-traditional hard rock lithium-bearing minerals using its registered L-Max and LOH-Max processes. Y/E Jun Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual 14.3 14.3 (58.5) 2019 0.0 (4.0) (5.1) 0.0 N/A N/A Relative* 9.6 11.4 (55.8) 2020 0.0 (4.9) (10.8) 0.0 N/A N/A * % Relative to local index Analyst 2021e 0.0 (31.5) (3.7) 0.0 N/A N/A Charles Gibson 2022e N/A N/A N/A N/A N/A N/A
Sector: Financials London Stock Exchange Group (LSE) Price: 8438.0p Market cap: £29655m INVESTMENT SUMMARY Market LSE LSE's Q320 trading update showed total income on an organic, constant currency basis up 3% y-o-y to £600m. Within this, Information Services was up 4% (FTSE Russell Share price graph (p) subscriptions up and asset-based revenues down on lower prior quarter AUM/market levels), Post Trade +6% (OTC and clearing down on strong prior year period and non-OTC and treasury income up), and Capital Markets flat (primary markets strong and secondary down on lower volumes). The group reiterates that its diverse income streams mean it is well-positioned for Brexit while LCH Ltd has been recognised as a Tier 2 CCP. It has also maintained operational resilience in the face of COVID-19 effects.
INDUSTRY OUTLOOK
Looking ahead, LSE reports further good progress on the transformational acquisition of Company description Refinitiv, expected to complete Q121. To facilitate regulatory clearance of the transaction, LSE is Europe’s leading exchange LSE has reached a conditional agreement for the sale of the whole of Borsa Italiana to group in cash equities. MTS is Europe’s largest electronic government Euronext for over €4.3bn (16.7x FY19 adj EBITDA). The sale would facilitate earlier bond market, LCH and CC&G offer achievement of the group's target net debt to adj EBITDA of 1.0–2.0x. post-trade services and FTSE Russell provides benchmark indices and related data services.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (5.1) 1.1 21.7 2018 2135.0 1066.0 865.0 173.8 48.6 N/A Relative* (5.8) 5.1 47.2 2019 2314.0 1265.0 994.0 200.3 42.1 N/A * % Relative to local index Analyst 2020e N/A N/A N/A N/A N/A N/A Andrew Mitchell 2021e N/A N/A N/A N/A N/A N/A
Edison Insight | 29 October 2020 36 Sector: General retailers Lookers (LOOK) Price: 21.0p Market cap: £82m INVESTMENT SUMMARY Market LSE Lookers is the second largest UK new car retailer. The uncovering of fraud compounded trading issues even before COVID-19 disruption. FY19 and H120 results are delayed into Share price graph (p) November and the shares remain suspended until then (suspended at 21.0p on 1 July 2020). Positive underlying FY19 PBT is expected after the initial £4m non-cash fraud charge together with any additional charges. No final dividend will be paid. Following H120 COVID-related showroom closures a FY20 loss is expected, despite strong trading in Q320. The benefit of preserving cash and reducing overhead was reflected in adjusted net debt at 30 September of c £22.5m.
INDUSTRY OUTLOOK
Market dynamics favour larger motor dealership groups against smaller independent Company description groups, which still command c 60% of the franchise market. Global manufacturing Lookers is vying to be the largest UK overcapacity still points to OEM support. However, the sector is normally rated for motor vehicle retailer, with its new car operations supported by the strength recessions economic shocks like these and survived a dramatic crisis for the sector in of used and aftersales activities. It 2008/9. Lookers' problems are evident but the financial footing looks relatively sound operates 155 franchises, representing 32 marques from 100 sites around the compared to that period. UK.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 0.0 0.0 (62.7) 2017 4696.3 105.4 62.1 12.61 1.7 1.3 Relative* (0.7) 4.0 (54.9) 2018 4879.5 114.8 50.0 9.95 2.1 0.9 * % Relative to local index Analyst 2019e N/A N/A N/A N/A N/A N/A Andy Chambers 2020e N/A N/A N/A N/A N/A N/A
Sector: General retailers Marshall Motor Holdings (MMH) Price: 127.5p Market cap: £100m INVESTMENT SUMMARY Market AIM Marshall Motor Holdings has grown to rank seventh amongst UK automotive retailers. Strong brand coverage, excellent relationships with major car brands and a strong balance Share price graph (p) sheet support continued strategic development. The COVID-19-related shutdown of all showrooms led to an underlying H120 loss before tax of £8.9m that is now expected to be more than recovered following exceptionally strong trading in Q320, with a FY20 PBT of c £15m now expected benefiting from management's mitigation efforts. We expect a modest level of adjusted net debt at FY20. Regional COVID-19 restrictions may weigh on markets in Q420 and the outlook through 2021 remains uncertain.
INDUSTRY OUTLOOK
Market dynamics favour larger motor dealership groups against smaller independent Company description groups, which still command c 60% of the franchise market. The large rating discount to the Marshall Motor is the seventh largest General Retailers Index is generally a reflection of concerns about economic recession. UK motor retailer, operating 117 franchises across 24 brands. It is one Shocks like the current COVID-19 pandemic are more challenging, but may throw up of six UK dealership groups that opportunities in the future. represent each of the top five volume and premium brands and has a strong presence in eastern and southern England. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 0.0 2.0 (10.5) 2018 2186.9 52.3 24.7 26.3 4.8 2.5 Relative* (0.7) 6.0 8.2 2019 2276.1 52.0 22.1 22.9 5.6 2.3 * % Relative to local index Analyst 2020e 2105.5 49.0 14.8 14.8 8.6 1.9 Andy Chambers 2021e 2240.3 45.1 13.9 13.9 9.2 2.3
Edison Insight | 29 October 2020 37 Sector: Investment companies Mercia Asset Management (MERC) Price: 21.5p Market cap: £95m INVESTMENT SUMMARY Market AIM In October, Mercia announced a further profitable exit, the sale of Clear Review for up to £26m. Mercia held a 4% stake and will receive £1m in cash, a 2x ROI and a 72% IRR. Share price graph (p) Mercia also provided an update on its life sciences portfolio. Seven of Mercia’s top 20 holdings are in life sciences, valued at £29m (33% of total portfolio value), with another c 40 earlier-stage investments across its managed funds. The explosion of potential new treatments for COVID-19 will require new diagnostics and bio-manufacturing support, areas where Mercia is already invested.
INDUSTRY OUTLOOK
Mercia's management have set out a clear vision for the company, with the acquisition of NVM’s VCT business accelerating Mercia's transition towards becoming a regionally Company description focused specialist asset manager, managing fee-paying third-party funds and reducing its Mercia Asset Management is a reliance on its own balance sheet. After a difficult 2019, investors have been seeing real regionally focused specialist asset manager. Its stated intent is to become value in the widened discounts to NAV in the sector as COVID-19 fears abate. the leading regional provider of supportive balance sheet, venture, private equity and debt capital in transaction sizes typically below £10m.
Y/E Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 14.7 10.3 (14.7) 2019 10.7 (1.4) 3.0 1.00 21.5 N/A Relative* 13.8 14.6 3.2 2020 12.7 0.2 (15.5) (4.55) N/A N/A * % Relative to local index Analyst 2021e N/A N/A N/A N/A N/A N/A Richard Williamson 2022e N/A N/A N/A N/A N/A N/A
Sector: Consumer support services Mondo TV (MTVI) Price: €1.58 Market cap: €54m INVESTMENT SUMMARY Market Milan Stock Exchange An EGM confirmed the further funding of up to €10.5m with Atlas Special Opportunities in the form of convertible bonds. This is to fund the necessary investment and to build its Share price graph (€) in-house capabilities for 3D CGI animation, move forward with projects in association with Toon2Tango and other projects, as well as take advantage of other opportunities that may arise as a result of the pandemic. Mondo TV’s succession of distribution and licensing deals has continued into H220, covering a wide range of properties and geographies, including the commissioning of a third series of Robot Trains.
INDUSTRY OUTLOOK
Global appetite for children’s TV content remains good - if anything strengthened by the impact of COVID-19, with animation benefiting from the reduced filming of live action. Company description Additional launches of new advertising and streaming video-on-demand platforms ensure Mondo TV is a global media group that the appetite for quality content remains high. Children’s content is valued to attract focused on the production, acquisition and exploitation of animated children’s household subscriptions. Licensing and merchandising markets are likely to be more difficult television series. It owns the rights to with trade events postponed, household spending under pressure and lower advertising >1,600 TV episodes and films, which it distributes across 75 markets. budgets.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (1.6) (18.5) 23.1 2018 18.9 11.2 (30.1) (56.3) N/A 3.1 Relative* (2.9) (13.8) 42.3 2019 23.1 16.4 6.2 11.3 14.0 10.8 * % Relative to local index Analyst 2020e 28.6 20.0 8.5 14.1 11.2 3.5 Fiona Orford-Williams 2021e 32.0 23.2 9.2 14.6 10.8 3.2
Edison Insight | 29 October 2020 38 Sector: General industrials Mytilineos (MYTI) Price: €9.75 Market cap: €1393m INVESTMENT SUMMARY Market Athens Stock Exchange H120 EBITDA fell by 17.2% versus H119, to €145.1m. The power & gas business unit was a key driver to offset the impacts of COVID-19 in the results, with EBITDA increasing from Share price graph (€) €50.3m in H119 to €71.0m in H120, mainly attributed to an increased spark spread (+36.5%). FY20 is proving to be a challenging year for the industry with the company posting a slight decrease in results compared to the respective period of 2019, while the majority of the metallurgy and energy companies globally have been severely affected. Beyond FY20, the further growth of the renewable and supply businesses, additional cost reductions and the commissioning of a new CCGT plant (Q421) should provide a boost to profits.
INDUSTRY OUTLOOK
Company description Mytilineos possesses a portfolio of assets that enjoy low costs. CCGTs benefit from access Mytilineos is a leading industrial to cheap natural gas and low production costs for both alumina/aluminium allow the company with international presence in all five continents. The company is metallurgy business to be strongly cash flow generative. active in Metallurgy, Power & Gas, Sustainable Engineering Solutions and in Renewables & Storage Development, operating via a unique synergistic business model. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 10.8 29.2 (2.0) 2018 1527.0 204.0 167.0 101.0 9.7 8.6 Relative* 12.6 35.1 39.7 2019 2256.0 219.0 180.0 103.0 9.5 5.7 * % Relative to local index Analyst 2020e 1901.0 220.0 169.0 97.0 10.1 8.1 Carlos Gomes 2021e 2143.0 240.0 197.0 115.0 8.5 7.1
Sector: Technology Nanoco (NANO1) Price: 10.0p Market cap: £31m INVESTMENT SUMMARY Market LSE Nanoco is now focused on generating value from three core areas: nanomaterials for the sensor market, where it has a framework agreement with STMicroelectronics; quantum dots Share price graph (p) for TV displays where a number of development projects are underway; and pursuit of the patent infringement litigation against Samsung. Noting that net cash consumption is now c £0.3m per month, which management estimates gives a cash runway to December 2022, we have reinstated our estimates.
INDUSTRY OUTLOOK
Revenues decreased by £3.3m year-on-year during FY20 to £3.9m as the contract with the major US customer ended in December 2019. However, cost reductions meant that adjusted EBITDA losses narrowed slightly, from £3.1m (restated for IFRS 16) to £2.9m. Company description Free cash outflow totalling £5.0m was partly offset by an equity raise in July which raised Nanoco is a global leader in the £3.2m (net), leaving £5.2m net cash (excluding £0.5m convertible loan and £1.2m IFRS 16 development and manufacture of cadmium-free quantum dots and other lease liabilities) at end July 2020. nanomaterials. Its platform includes c 740 patents and specialist manufacturing lines. Focus applications are advanced electronics, displays, lighting and bio-imaging. Y/E Jul Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (26.0) (42.8) (33.6) 2019 7.1 (3.8) (5.0) (1.34) N/A N/A Relative* (26.6) (40.6) (19.6) 2020 3.9 (2.9) (4.9) (1.38) N/A N/A * % Relative to local index Analyst 2021e 1.0 (2.9) (4.4) (1.14) N/A N/A Anne Margaret Crow 2022e 2.6 (1.3) (2.6) (0.65) N/A N/A
Edison Insight | 29 October 2020 39 Sector: General industrials Norcros (NXR) Price: 173.0p Market cap: £139m INVESTMENT SUMMARY Market LSE An end H120 update pointed to a strong Q2 trading recovery after a COVID-19 affected Q1. The indicative H121 group revenue figure of c £135m (-17% l-f-l y-o-y on a constant Share price graph (p) currency (CC) basis), comprised UK c £94m (-16% l-f-l) and South Africa c £42m (-21% l-f-l CC) producing underlying EBIT of £12m (pre-IFRS 16 vs £17.1m in H120). Implicitly, virtually all of the profit was generated in Q2 and the flagged net debt reduction to £8m looks very impressive. The company’s business portfolio has demonstrated resilience and agility in being able to respond to these variable demand conditions. Our estimates remain suspended ahead of the H121 results announcement on 12 November.
INDUSTRY OUTLOOK
RMI has been a stronger sub-sector during/exiting the UK COVID-19 lockdown phase while Company description new residential new-build gathered momentum more gradually. The South African economy Norcros is a leading supplier of has faced a number of challenges; wider distribution of wealth and an emerging middle showers, enclosures and trays, tiles, taps and related fittings and class should benefit consumer spending over time. Management's new (pre-COVID-19) accessories for bathrooms, kitchens, 2023 financial targets are to attain £600m revenue with a balanced UK/overseas split and to washrooms and other commercial environments. It has operations in the sustain a ROCE of 15%+. UK and South Africa, with some export activity from both countries. Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 13.3 10.9 (24.1) 2019 331.0 42.2 30.9 29.6 5.8 3.9 Relative* 12.4 15.3 (8.2) 2020 342.0 38.8 27.1 26.1 6.6 4.0 * % Relative to local index Analyst 2021e N/A N/A N/A N/A N/A N/A Toby Thorrington 2022e N/A N/A N/A N/A N/A N/A
Sector: Financials Numis Corporation (NUM) Price: 296.0p Market cap: £311m INVESTMENT SUMMARY Market LSE Numis’s trading update for the year to end September indicated that the strength in capital markets activity reported in July carried on through the final quarter of the year. After the Share price graph (p) Q320 update we estimated full-year group revenue of £135m, but, following a particularly strong September, the group expects revenue to be above £150m (FY19: £111.6m). Profits are expected to be materially higher than FY19 (£12.4m). Following the update we increased our fully diluted EPS estimate to 24.7p (17.5p previously).
INDUSTRY OUTLOOK
Numis indicated that its pipeline, including private transactions, was growing at an encouraging pace and that it was more diverse than initially following the onset of COVID-19. This should provide a positive start to FY21. Looking further ahead, the Company description incidence of capital markets transactions remains uncertain but the performance in H220 Numis Corporation is one of the UK's tends to confirm the strength of the franchise and validate the investment the firm has made leading independent investment banking groups, offering a full range of in resources to underpin client service and growth. research, execution, equity capital markets, corporate broking and advisory services. It employs c 280 staff in offices in London and New York. Y/E Sep Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 0.7 (3.0) 22.8 2018 136.0 30.9 31.6 23.0 12.9 7.5 Relative* 0.0 0.9 48.6 2019 111.6 15.3 12.4 8.1 36.5 N/A * % Relative to local index Analyst 2020e 150.8 39.6 34.8 24.7 12.0 6.6 Andrew Mitchell 2021e N/A N/A N/A N/A N/A N/A
Edison Insight | 29 October 2020 40 Sector: Investment companies Ocean Wilsons Holdings (OCN) Price: 627.5p Market cap: £222m INVESTMENT SUMMARY Market LSE Ocean Wilsons Holdings (OCN) reported FY19 earnings of $46.9m (our forecast $37.9m), up 252% y-o-y, driven by strong investment returns from its investment portfolio. Wilsons Share price graph (p) Sons’ (WSON) EBITDA fell by 5% y-o-y and was in line with expectations. Although FY19 was not an easy year due to a sluggish Brazilian economy, competition and a slow Brazilian oil and gas sector, WSON still delivered a ROE of 6%. The firming up of prices in the under-pressure towage business was a key positive. The current 45% discount to a look-through valuation is above its long-term average in the mid-20s.
INDUSTRY OUTLOOK
The current oil price slump means a postponement of the recovery of Brazil’s deepwater pre-salt industry to 2021. This will affect businesses such as the offshore support Company description companies as well as towage. The coronavirus crisis initially hurt China and Asian shipping, Ocean Wilsons Holdings is an but the impact broadened as it became a pandemic. We have suspended our FY20 and investment company based in Bermuda. It has a controlling FY21 forecasts until we get more clarity on the impact of COVID-19. OCN cut its final shareholding in Wilson Sons, a quoted dividend (paid in June 2020) from $0.70 to $0.30. maritime services company in Brazil, and holds a portfolio of international investments.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (2.7) (9.7) (23.0) 2018 460.2 156.0 60.2 37.6 21.6 1.8 Relative* (3.4) (6.1) (6.9) 2019 406.1 147.9 82.5 132.6 6.1 1.8 * % Relative to local index Analyst 2020e N/A N/A N/A N/A N/A N/A Pedro Fonseca 2021e N/A N/A N/A N/A N/A N/A
Sector: Travel & leisure OPAP (OPAP) Price: €8.10 Market cap: €2766m INVESTMENT SUMMARY Market Athens Stock Exchange OPAP’s Q220 results were heavily affected by the COVID-19 closures, with a revenue (GGR) decline of 53.2%. As expected, costs were well managed so that EBITDA profitability Share price graph (€) was restored by the end of the period and free cash flow generation improved on a relative basis. Post lockdown, the overall recovery was described as ‘encouraging’, but management reiterated a cautious outlook for the rest of the year given the macroeconomic uncertainties and re-emergence of COVID-19 in parts of the country. We made small changes to our assumptions, resulting in similar EBITDA for FY20 to before and a modest downgrade of 3% in FY21. Our DCF continues to suggest a value of at least €9.5/share.
INDUSTRY OUTLOOK
The Hellenic Gaming Commission estimates that the total legal Greek gaming market Company description amounted to €2.2bn GGR in 2019, of which OPAP games comprised €1.36bn GGR. OPAP was founded in 1958 as the OPAP's other activities (lottery games and horse racing betting) took its total Greek GGR to Greek national lottery and it is the exclusive licensed operator of all €1.54bn. Revenue from land-based casinos comprised an estimated €247m and total legal numerical lotteries, sports betting and online amounted to €437m for the overall market. Regulation of the online gaming market is horse racing. OPAP listed in 2001 and was fully privatised in 2013. Sazka currently underway. Group has a 41.7% stake and significant board representation. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 5.0 (4.5) (16.1) 2018 1547.0 353.6 235.0 51.90 15.6 N/A Relative* 6.7 (0.1) 19.6 2019 1619.9 411.2 278.0 64.92 12.5 N/A * % Relative to local index Analyst 2020e 1351.1 302.2 141.0 30.84 26.3 N/A Russell Pointon 2021e 1729.2 426.5 256.5 53.73 15.1 N/A
Edison Insight | 29 October 2020 41 Sector: Technology Osirium Technologies (OSI) Price: 22.5p Market cap: £4m INVESTMENT SUMMARY Market AIM After a strong order intake in Q1, potential customers delayed placing orders in Q2, resulting in a 25% bookings decline in H120. Revenue increased 36% y-o-y and tight cost Share price graph (p) control reduced the EBITDA loss over the same period. We have revised our forecasts to reflect lower bookings in FY20 and FY21; the impact at the EBITDA level is mitigated by tight cost control. Bookings intake has since picked up, with five new customers signed in Q3 and so far in Q4, a five-year contract with a UK retailer and a multi-product contract for both privileged account management (PAM) and privileged end point management (PEM) with a UK health services provider.
INDUSTRY OUTLOOK
The market for PAM software is currently worth US$2.2bn and is forecast to grow to Company description US$5.4bn by 2025 (source: KuppingerCole), with demand driven by regulation, the shift to UK-based Osirium Technologies the cloud and adoption spreading to smaller organisations. The complexity of established designs and supplies subscription-based cybersecurity solutions means fewer mid-market businesses use PAM software than enterprises, so this software. Its PAM platform includes is a market ripe for development. privileged access, task, session and behaviour management. It recently launched a secure process automation solution (PPA) and a PEM solution. Y/E Oct / Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 9.8 9.8 (40.0) 2018 1.0 (1.8) (2.7) (18.14) N/A N/A Relative* 9.0 14.1 (27.4) 2019 1.2 (2.2) (3.5) (19.45) N/A N/A * % Relative to local index Analyst 2020e 1.4 (1.9) (3.7) (15.97) N/A N/A Katherine Thompson 2021e 1.7 (1.8) (3.8) (16.54) N/A N/A
Sector: Financials OTC Markets Group (OTCM) Price: US$31.05 Market cap: US$361m INVESTMENT SUMMARY Market OTC QX OTCM Q220 results, announced in August, showed gross revenue growth of 9%, ahead of our expectation. This largely reflected continued high levels of transactions for the OTC Link Share price graph (US$) business which reported revenue up 26% versus Q219 as equity market volatility remained high. Market Data Licensing revenue increased by 13% while Corporate Services revenue was down 2% as a result of lower numbers of OTCQB corporate clients. Operating costs were up 5% leaving PBT up by 8%. The tax rate was unexpectedly low at 12% as there was a reversal of earlier provisions. This meant diluted EPS (of $0.36) increased by 20% . A maintained $0.15 quarterly dividend was announced. Following the results we raised our EPS estimates by 9% and 2% for FY20 and FY21 respectively.
INDUSTRY OUTLOOK
Company description So far COVID-19 has not had a material impact on OTCM’s revenues but the group remains OTC Markets Group operates the wary of the potential for its macroeconomic effects to impact results in future. Positively, OTCQX, OTCQB and Pink financial markets for over 10,000 US and global corporate client signings are showing tentative signs of improved momentum, while trading securities. OTC Link LLC, a member of may benefit longer term from the increased number of ECN subscribers. Over 80% of FINRA, operates OTC Link ATS and OTC Link ECN, both SEC-registered revenues are of a subscription-based nature. On a longer view, the group keeps its focus on Alternative Trading Systems. Over 80% of revenues are of a delivering better informed and more efficient markets. subscription-based recurring nature. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 4.5 5.0 (7.7) 2018 59.3 20.7 19.8 140.8 22.1 14.7 Relative* (2.3) (1.9) (20.0) 2019 62.8 19.4 18.0 128.4 24.2 15.8 * % Relative to local index Analyst 2020e 66.9 20.2 18.6 134.2 23.1 18.3 Andrew Mitchell 2021e 67.2 20.0 18.4 128.2 24.2 16.0
Edison Insight | 29 October 2020 42 Sector: Property Palace Capital (PCA) Price: 190.8p Market cap: £88m INVESTMENT SUMMARY Market LSE FY20 adjusted PBT of £8.0m met expectations but COVID-19 contributed to end-year negative unrealised valuation movements and EPRA NAV per share fell to 364p. With Share price graph (p) robust rent collection to date, DPS payments have been reinstated at 2.5p per quarter, the minimum that management expects during FY21. While market conditions are challenging, PCA benefits from refurbished properties that are available to let and continued progress at Hudson Quarter where 36 of 127 apartments have been pre-sold ahead of the expected March 2021 completion. Cash reserves as at 30 September 2020 were £14.3m with a further £5.0m available from the revolving credit facility, and will benefit from ongoing non-core disposals at a premium to book value. Interim results are due 17 November
INDUSTRY OUTLOOK
Company description The commercial property market is cyclical, historically exhibiting substantial swings in Palace Capital is a UK property valuation through cycles while income returns have been more stable, but still fluctuating investment company. It is not sector-specific and looks for according to tenant demand and rent terms. The extent and duration of impact of the global opportunities where it can enhance pandemic on the economic outlook remains uncertain. While the supply demand balance for long-term income and capital value through asset management and regional office and industrial property has hitherto remained generally firm the weakness strategic capital development in locations outside London. that was previously confined to the retail sector is likely to continue to broaden. Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 3.1 (1.6) (33.5) 2019 18.8 12.4 8.9 17.3 11.0 N/A Relative* 2.4 2.4 (19.6) 2020 21.1 14.6 8.0 17.5 10.9 N/A * % Relative to local index Analyst 2021e 16.8 9.9 6.6 14.4 13.3 N/A Martyn King 2022e N/A N/A N/A N/A N/A N/A
Sector: Mining Pan African Resources (PAF) Price: 20.7p Market cap: £399m INVESTMENT SUMMARY Market AIM Pan African's (PAF) production of 179.6koz gold in FY20 was 2.1% higher than Edison’s prior forecast and earnings were similarly within 5% of our forecast – albeit costs were Share price graph (p) US$9.9m (5.9%) lower such that its underlying performance was materially better than our expectations. At the same time, net debt declined by 52.6%, from US$130.7m to US$62.0m in H220 alone, which allowed PAF to increase its dividend more than five-fold such that it is now among the top 14 yielding precious metals companies, globally.
INDUSTRY OUTLOOK
With the 8 Shaft pillar project having achieved steady state in May, near-term development opportunities for PAF include Egoli (ZAR2.01bn NPV and 50.1% IRR), which has now been sanctioned, the Prince Consort shaft pillar, the Fairview sub-vertical shaft (adding 7–10koz Company description to production pa) and the Royal Sheba project (c 30koz pa). In our most recent note, we Pan African Resources has three valued PAF at US$0.4048/share (£0.3131/share) plus the value of c 19.2m underground major producing precious metals assets in South Africa: Barberton Witwatersrand oz (which we estimate at 0.22–5.24c/share). (target output 95koz Au pa), Barberton Tailings Retreatment Project (20koz) and Elikhulu (55koz), now incorporating Evander Tailings Retreatment Project (10koz). Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (6.3) (12.3) 83.2 2019 218.8 65.5 37.1 1.64 16.4 8.7 Relative* (7.0) (8.8) 121.6 2020 274.1 115.2 80.8 3.78 7.1 7.1 * % Relative to local index Analyst 2021e 307.9 153.6 129.5 6.42 4.2 4.1 Charles Gibson 2022e 316.0 164.5 142.4 6.43 4.2 3.2
Edison Insight | 29 October 2020 43 Sector: General industrials paragon (PGN) Price: €9.77 Market cap: €44m INVESTMENT SUMMARY Market Xetra The market disruptions developed rapidly due to COVID-19 and management focused on mitigating its impact. paragon's sale process for its 58% stake in Voltabox should conclude Share price graph (€) by the year end. In Q320 paragon Automotive sales rose 10%, and year to date sales are €83.8m with an EBITDA margin of 9%. The reported H120 EBIT loss was €5.6m with a sequential decline in Q220 that was contained by management's COVID-19 mitigation measures. Management has indicated sales for Automotive for FY20 should be c €120m with a 12% EBITDA margin. Full Q320 results will be reported ahead of plan on 30 October.
INDUSTRY OUTLOOK
We believe paragon's identification of, and investment in, solutions to address megatrends in global automotive and electromobility markets is understood by the capital markets. It is Company description growing substantially faster than its markets due to innovative products that are driving paragon designs and supplies changes in customer perceptions, creating new growth engines for the group. These should automotive electronics and solutions, selling directly to OEMs, including reassert themselves when the COVID-19 pandemic wanes. sensors, interior, digital assistance and body kinematics. Production facilities are in Germany, the US and China. It retains 58% of Voltabox, which supplies battery power systems. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 9.7 (5.1) (23.2) 2018 187.4 30.3 14.8 144.58 6.8 N/A Relative* 9.6 (1.7) (22.3) 2019 192.2 17.2 (8.5) (115.00) N/A N/A * % Relative to local index Analyst 2020e N/A N/A N/A N/A N/A N/A Andy Chambers 2021e N/A N/A N/A N/A N/A N/A
Sector: Financials Picton Property Income (PCTN) Price: 60.4p Market cap: £331m INVESTMENT SUMMARY Market LSE Rent collection for the March and June quarters has continued to increase and the September collection is robust and in line with the previous two quarters at the same stage. Share price graph (p) Reflecting this, leasing progress, and the distribution requirements of the REIT regime (Q121 DPS was 118% covered by EPRA earnings), the board has increased Q221 DPS by 12% to 0.7p or an annualized 2.8p. H121 results are due 12 November. During Q221 the refurbished Rugby distribution unit has since been fully let, adding £0.6m to annualised rent (4% ahead of ERV), while the agreed sale of a high street retail asset for c £4.0m, ahead of the Q121 valuation, and reconfiguration/reclassification of Stanford Building will see the overweight stance in the industrial and office sectors further increase.
INDUSTRY OUTLOOK
Company description The commercial property market is cyclical, historically exhibiting substantial swings in Picton Property Income is an internally valuation through cycles while income returns have been more stable, but still fluctuating managed UK REIT that invests in a diversified portfolio of commercial according to tenant demand and rent terms. The extent and duration of impact of the global property across the UK. It is total pandemic on the economic outlook remains uncertain. While the supply demand balance for return driven with a strong income focus and aims to generate attractive regional office and industrial property has hitherto remained generally firm the weakness returns through proactive management of the portfolio. that was previously confined to the retail sector is likely to continue to broaden. Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (10.0) (11.4) (34.7) 2019 38.3 32.5 31.4 4.25 14.2 9.4 Relative* (10.6) (7.9) (21.0) 2020 33.6 28.1 22.4 3.66 16.5 15.4 * % Relative to local index Analyst 2021e 30.5 25.4 (15.2) 3.22 18.8 14.3 Martyn King 2022e 33.4 27.8 19.9 3.65 16.5 12.6
Edison Insight | 29 October 2020 44 Sector: General industrials PIERER Mobility (PMAG) Price: €54.10 Market cap: €1219m INVESTMENT SUMMARY Market Swiss Stock Exchange PIERER Mobility is a leading manufacturer of powered two wheelers (PTWs) focused on premium markets through the KTM, HUSQVARNA and GASGAS motorcycle brands. It has Share price graph (€) added e-bikes as a new organic growth stream as urban e-mobility markets continue to develop. H120 saw strenthening demand for PTWs as lockdowns ended which continued in Q320. Having returned to full production in May, PIERER requires higher H220 production. Management increased FY20 revenue guidance by 3% to more than €1.45bn with an EBIT margin of 4–6%, and we increased our estimates modestly.
INDUSTRY OUTLOOK
PIERER Mobility’s historic target PTW market has been for motorcycles greater than 120cc that retail for over €2,500. The segment represents 6m units or around 11% of the global Company description PTW market. PIERER had a market share of around 9.5% of this market in 2019 with a PIERER Mobility (previously KTM record 280.9k registrations, up 10% on 2018; 66.2k were through the Indian jv partner, Industries) is a leading manufacturer of powered two wheelers, focusing on Bajaj. The market for e-bikes and scooters has grown strongly in Europe, supported by premium motorcycles and two-wheeled structural long-term trends especially cleaner transport solutions. electric vehicles. With its well-known brands – KTM, HUSQVARNA and GASGAS – it is the largest sports motorcycle manufacturer in Europe. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (1.5) (0.6) 1.5 2018 1462.0 211.0 112.0 182.3 29.7 N/A Relative* 1.6 3.0 1.5 2019 1520.0 241.0 118.0 241.8 22.4 N/A * % Relative to local index Analyst 2020e 1458.0 202.0 61.0 102.2 52.9 N/A Andy Chambers 2021e 1736.0 285.0 126.0 230.4 23.5 7.6
Sector: Technology Piteco (PITE) Price: €7.92 Market cap: €152m INVESTMENT SUMMARY Market Borsa Italiana Piteco SpA once again generated good revenue and EBITDA growth in H1, of 11% and 24%, respectively. FY20 had an excellent start, although the COVID-19 pandemic Share price graph (€) subsequently slowed down progress. While Piteco’s products can help steer financial and treasury decision-making at times of crisis, at the height of lockdown, the acquisition of new clients slowed. During H1 Piteco acquired EveryMake for an initial €0.55m in cash, which has been integrated into the Piteco SpA business. A new product in the data matching space is planned for launch in H2, and there will also be a major release of Piteco SpA’s existing software. Piteco continues to trade at a discount to its international software peers.
INDUSTRY OUTLOOK
Piteco is the leading player in the Italian treasury management systems (TMS) market. TMS Company description are software solutions used by corporate treasuries and finance departments to manage Piteco is Italy’s leading company in transactions and support decision-making. The software and ICT solutions market in Italy is designing, developing and implementing software for treasury, valued at €6.3bn (Assinform 2016). A small slice of this (Piteco suggests c 5%) represents finance and financial planning the treasury and financial planning software market. IDC forecasts the worldwide treasury management. and risk management applications market to grow by 4.9% to reach $2.7bn in 2022.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 3.7 20.0 33.1 2018 20.2 8.3 6.1 31.49 25.2 N/A Relative* 2.3 26.9 53.8 2019 24.0 10.2 6.7 33.47 23.7 N/A * % Relative to local index Analyst 2020e 25.9 11.0 8.6 40.39 19.6 N/A Sara Welford 2021e 28.3 12.2 9.9 45.61 17.4 N/A
Edison Insight | 29 October 2020 45 Sector: General industrials Polypipe (PLP) Price: 483.5p Market cap: £1102m INVESTMENT SUMMARY Market LSE After a flat Q1 y-o-y, Polypipe’s H120 revenue was down c 22% for the period as a whole (-25% like-for-like) and the associated c £50m reduction fed through into c £29m lower Share price graph (p) EBIT, illustrating significant operational gearing in the business. Commercial & Infrastructure was relatively more resilient in revenue terms (-14%) compared to Residential Systems (-28%) substantially reflecting the timing of returning/restoring non-residential site activity versus a slower process in residential newbuild. All main factories were operational at the period end. End H120 net debt of c £71m benefitted from the May equity funding (£120m gross, £116.4m net) and, otherwise, we believe that the underlying cash outflow from the end of March was very modest. No interim dividend was declared. Thus far in H2, y-o-y revenue trends (July -6%, August -3%) confirm a pick up from the -19% exit rate level in June. Our estimates are under review. Company description INDUSTRY OUTLOOK Polypipe is a leading supplier of largely plastic building products and systems. Operations in the UK (c 90% of The Construction Products Association’s Spring outlook update was unsurprisingly more revenue) address a broad range of bearish than previously and included a number of different scenarios all of which involved sectors including residential, commercial and civil building demand sharp contractions in total construction activity in 2020 and material rebounds in 2021. and a number of subsectors within them. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 8.7 12.6 3.8 2018 433.2 90.6 67.1 28.1 17.2 10.7 Relative* 7.9 17.0 25.5 2019 447.6 99.1 70.6 29.1 16.6 10.8 * % Relative to local index Analyst 2020e N/A N/A N/A N/A N/A N/A Toby Thorrington 2021e N/A N/A N/A N/A N/A N/A
Sector: Property Primary Health Properties (PHP) Price: 147.4p Market cap: £1939m INVESTMENT SUMMARY Market LSE Portfolio and rent growth, a full period contribution from MedicX, and operational and financial efficiencies drove a strong H120. Adjusted EPRA earnings increased 29% y-o-y Share price graph (p) and adjusted EPRA EPS of 3.0p was up 7.1%. With continuing strong rent collection, fully covered aggregate DPS of 2.95p (+5.4%) was paid in H120 and a Q320 DPS of 1.475p declared. Adjusted EPRA NAV per share increased by 1.1% to 109.1p and including DPS paid the H120 total return was 3.8%. Including the proceeds of the £140m (gross) equity placing in early July the pro forma H120 undrawn loan facilities and cash on deposit (£201m) totalled £403.6m, providing significant resources to pursue a strong pipeline of acquisition and asset management opportunities.
INDUSTRY OUTLOOK
Company description The sector enjoys strong income visibility, with long leases and upwards-only rents, 90% Primary Health Properties is a backed directly or indirectly by government bodies, with little exposure to the economic long-term investor in primary healthcare property in the UK and the cycle, or fluctuations in occupancy. Healthcare planning, with broad political support, Republic of Ireland. Assets are mainly already suggests strong underlying demand for modern healthcare properties in both the long-let to GPs and the NHS or the HSE, organisations backed by the UK UK and the Republic of Ireland while the pandemic highlights existing pressures and may and Irish governments, respectively. well lead to increased healthcare spending over the longer term. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 0.0 (2.0) 4.1 2018 76.4 66.5 36.8 5.2 28.3 15.2 Relative* (0.7) 1.9 25.9 2019 115.7 103.4 59.7 5.4 27.3 17.1 * % Relative to local index Analyst 2020e 131.7 118.6 73.2 5.7 25.9 15.7 Martyn King 2021e 138.6 124.8 77.5 5.8 25.4 15.7
Edison Insight | 29 October 2020 46 Sector: Financials ProCredit (PCZ) Price: €5.40 Market cap: €318m INVESTMENT SUMMARY Market FRA ProCredit (PCB) has extensive experience in supporting SMEs in emerging economies (coupled with a strong ESG profile), with a focus on Southeastern (SEE) and Eastern Share price graph (€) Europe (EE) and banking operations in Ecuador. It has recently streamlined its business, involving a digital direct bank strategy for private clients and a reduced branch network and headcount. While lately PCB’s return on equity has been below peers, we underline its relative stability throughout the cycle and believe that its mid-term ROE and CIR targets of 10% and below 60%, respectively, are achievable (close to our FY24 forecasts).
INDUSTRY OUTLOOK
While the SEE and EE region has benefited from secular GDP growth of 3–5% pa in the last five years, COVID-19 is expected to trigger a recession in 2020, as IMF forecasts a decline Company description of 5.8% in Emerging and Developing Europe, with a rebound of c 4.3% forecast in 2021. ProCredit Holding is a Germany-based PCB’s in-depth, impact-oriented relationships with SME borrowers (94% of loan book at group operating regional banks across Southeastern and Eastern Europe, as end-Q220), prudent credit risk management and solid capital base (CET-1 ratio of 14.1% at well as in Ecuador. The banks focus end-Q220) should help reduce the impact of macro headwinds. Longer term, PCB’s on Small and mid-size enterprises (SMEs) and private middle-income and business should be assisted by the low banking sector penetration in the region (with a loan high earners. At end-June 2020, the group’s total assets stood at €6.8bn. book to GDP of 40–45% on average vs over 70% in Western Europe). Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (1.8) (12.9) (26.0) 2018 245.4 N/A 77.5 90.0 6.0 N/A Relative* (1.8) (9.8) (25.1) 2019 252.6 N/A 76.9 89.0 6.1 N/A * % Relative to local index Analyst 2020e 205.8 N/A 38.5 53.5 10.1 N/A Milosz Papst 2021e 222.1 N/A 50.0 67.5 8.0 N/A
Sector: General industrials Quadrise Fuels International (QFI) Price: 2.4p Market cap: £25m INVESTMENT SUMMARY Market AIM Quadrise’s strategy of broadening and deepening the range of project opportunities through a network of partners in major global markets proved effective in FY20, despite the Share price graph (p) disruptions caused by COVID-19. It recently completed a pilot trial in Morocco with another in the US scheduled for completion by the end of December. These trials are to demonstrate MSAR technology ahead of potential progression to commercial implementation. It is also in discussions about projects in Ecuador, Mexico and Saudi Arabia and with two major shipping companies.
INDUSTRY OUTLOOK
Preparations for Phase 2 of the Morocco trial are already underway. Management is confident that this activity will potentially lead to the first commercial supply of MSAR in Company description calendar H221. We note that management estimates it has sufficient cash to continue its Quadrise Fuels International is the business activities to mid-calendar Q221. A further tranche of up to £2.0m convertible loan innovator, supplier and global licensor of disruptive residual oil technology from Bergen may be available during FY21 if certain precedent conditions are met. that produces a synthetic, enhanced heavy fuel oil called MSAR. The technology enables refiners to produce MSAR for use as a low-cost substitute for heavy fuel oil. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (21.0) 25.3 (40.6) 2019 0.0 (2.8) (3.0) (0.32) N/A N/A Relative* (21.6) 30.3 (28.1) 2020 0.0 (3.1) (3.4) (0.32) N/A N/A * % Relative to local index Analyst 2021e N/A N/A N/A N/A N/A N/A Anne Margaret Crow 2022e N/A N/A N/A N/A N/A N/A
Edison Insight | 29 October 2020 47 Sector: Aerospace & defence RADA Electronic Industries (RADA) Price: US$6.41 Market cap: US$279m INVESTMENT SUMMARY Market NASDAQ As the threats from drones, unmanned aircrafts and Anti-Tank Guided Missiles (ATGMs) proliferate, so does the need to defend against them. RADA was the first mover in mini Share price graph (US$) tactical radars that form part of defense systems tracking and neutralizing incoming threats. With combat experience, a successful track record and a presence in the US, RADA is well placed to transition from supplying the US and other militaries under urgent operational need programs, to longer-term and more sizeable production programs. RADA’s PEG ratio of 0.88x is at a 44% discount to peers despite significantly higher growth expectations. In our view a PEG of 1.2x or $10 per share would better reflect the 32.1% CAGR in EPS from 2020–24e.
INDUSTRY OUTLOOK
Company description While defense spending could be pressured due to a less hawkish incoming US RADA Electronic Industries develops, administration and COVID-19-related factors, RADA’s markets are deemed priorities and as manufactures, markets and sells defence electronics to various armed such are likely to remain broadly unaffected. RADA’s year to date orders of $59m forces and companies worldwide. It announced on 14 September underpins our confidence in 2020 forecasts and longer term, offers land-based tactical radars for defence forces, critical infrastructure the US Army announcement on 2 October that General Dynamics has won a $1.3bn protection solutions and military avionics systems. IM-SHORAD contract represents a multi-year opportunity for RADA as a sub-contractor. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 7.7 5.4 17.6 2018 28.0 1.8 1.1 1.08 593.5 N/A Relative* 0.6 (1.6) 2.0 2019 44.3 0.3 (1.1) (1.08) N/A N/A * % Relative to local index Analyst 2020e 71.6 7.4 5.4 5.40 118.7 N/A Will Manuel 2021e 107.4 13.4 11.2 11.16 57.4 33.6
Sector: Property Raven Property Group (RAV) Price: 25.5p Market cap: £149m INVESTMENT SUMMARY Market LSE The H120 underlying performance was very robust against the backdrop of a challenging operating environment, although headline figures were affected by FX movements. Share price graph (p) Occupancy increased to 93% from 90% at end FY19 and more than 99% of rents were collected. Rouble property valuations were stable despite the continuing decline in Russian interest rates, and with the key interest rate at 4.25%, prime yields of 11–12% look increasingly attractive. In sterling terms, underlying PBT before FX movements reduced and IFRS net earnings swung to a loss, with NAV per share at 58p (FY19: 76p). The company will now proceed with the final FY19 distribution of 2.25p by way of a tender offer on the basis of one in 16 shares at 36p a share. The re-designation of convertible preferred shares into new ordinary and preference shares became effective 30 September.
INDUSTRY OUTLOOK Company description Raven Property Group (formerly Although the pandemic has negatively impacted the Russian economy it has accelerated Raven Russia) invests mainly in Class A warehouses in Russia. It also owns structural distribution shifts. Agents indicate a continuing healthy positive demand-supply three office buildings in St Petersburg, balance in the warehouse sector, with speculative development being deferred. a third-party logistics company in Russia and a residential development company in the UK.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (17.3) (22.6) (37.1) 2018 118.3 N/A 26.2 3.1 8.2 N/A Relative* (17.9) (19.5) (23.9) 2019 126.5 N/A 53.7 7.7 3.3 N/A * % Relative to local index Analyst 2020e 113.3 N/A (10.7) (4.0) N/A N/A Martyn King 2021e 106.4 N/A 24.9 2.7 9.4 N/A
Edison Insight | 29 October 2020 48 Sector: Financials Record (REC) Price: 38.9p Market cap: £77m INVESTMENT SUMMARY Market LSE In September Record announced that it had, subject to contract, won an $8bn AUME dynamic hedging mandate. This important win was confirmed in the Q221 trading update Share price graph (p) and the mandate started at the beginning of Q321 (October) with AUME likely to build over several quarters. Ahead of this, in Q221 AUME in dollar terms grew by 4% to $65.9bn, mainly reflecting exchange rate movements, scaling related to volatility targeting and movements in markets (total +$2.4bn). Net client flows were positive at $0.2bn. We increased our estimates (EPS +13% FY21, +57% FY22) to reflect the changes in AUME while allowing for some average management fee dilution because of the scale of the new dynamic hedging mandate and the move of some passive hedging mandates to a (lower) management fee with the potential for performance fees. Our estimates exclude any performance fees until crystallised. Company description INDUSTRY OUTLOOK Record is a specialist independent currency manager that provides a number of products and services, The group continues to work on developing new products in support of its focus on growth including passive and dynamic and to increase the diversity of its offering. Progress has been made on an Impact/ESG hedging, and a range of currency for return strategies, including funds and bond product in particular. Record is also deploying technology to enhance its ability to customised segregated accounts. deliver new and existing products cost effectively. Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (7.4) 8.8 5.0 2019 25.0 8.2 8.0 3.25 12.0 11.0 Relative* (8.1) 13.1 27.0 2020 25.6 8.5 7.7 3.26 11.9 11.7 * % Relative to local index Analyst 2021e 24.9 7.3 6.5 2.68 14.5 11.8 Andrew Mitchell 2022e 28.7 9.6 8.9 3.65 10.7 10.5
Sector: Property Regional REIT (RGL) Price: 64.6p Market cap: £279m INVESTMENT SUMMARY Market LSE H120 financial performance was robust with EPRA earnings of £11.0m (H119: 14.2m) or 2.6p per share. EPRA NAV per share was 102.6p (FY19: 112.7p) including the impact of a Share price graph (p) 4.3% like-for-like decrease in portfolio value. A strong H120 rent collection performance has subsequently continued to improve. A Q220 DPS of 1.5p was previously declared and the board targets quarterly DPS of at least this level for the remainder of the year, fully covered by EPRA earnings. The LTV of 39.7% is in line with previous guidance and the 40% target, with no near-term debt maturities and good liquidity. The recent £32.7m disposal of an industrial park (at 3.9% above valuation) and £10.2m acquisition of two office properties at a 10.1% yield locks in a positive yield arbitrage and provides additional financial flexibility.
INDUSTRY OUTLOOK
Company description The commercial property market is cyclical, historically exhibiting substantial swings in Regional REIT owns a highly valuation through cycles while income returns have been more stable, but still fluctuating diversified commercial property portfolio of predominantly offices and according to tenant demand and rent terms. The extent and duration of impact of the global light industrial units located in the pandemic on the economic outlook remains uncertain. While the supply demand balance for regional centres of the UK. It is actively managed and targets a total regional office and industrial property has hitherto remained generally firm the weakness shareholder return of at least 10% with a strong focus on income. that was previously confined to the retail sector is likely to continue to broaden. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (2.9) (3.9) (38.9) 2018 55.0 37.4 68.6 7.5 8.6 9.5 Relative* (3.6) (0.1) (26.2) 2019 55.0 44.1 26.3 7.8 8.3 20.8 * % Relative to local index Analyst 2020e 53.3 41.8 (25.3) 6.5 9.9 9.7 Martyn King 2021e 53.3 42.4 28.8 6.7 9.6 8.8
Edison Insight | 29 October 2020 49 Sector: Oil & gas Renergen (RENJ) Price: ZAR12.96 Market cap: ZAR1522m INVESTMENT SUMMARY Market JSE Renergen secured final funding for Phase 1 of its Virginia Gas Project in H219. The project is now firmly in the development phase, major equipment orders have been placed and first Share price graph (ZAR) liquid production of both LNG and helium is expected to start around July 2021 – with the latter a first for sub-Saharan Africa. A horizontal well targeting large fractures in an untested sandstone group at Virginia established a region of high helium concentration of 12% (compared with 2–3% in previous wells). An inclined well was spudded on 3 August 2020 to target 2–3% concentrations while proving the inclined well concept. Drilling issues have resulted in the well being abandoned (at no cost to Renergen), but an existing vertical well will now be utilised to intersect the gas-bearing fault using a more accurate and faster rotary drilling rig. An independent estimate from Sproule from 1 July 2020 estimates that the Virginia Project holds 2U (P50) prospective helium resources of 106bcf. Global helium Company description demand is c 6 bcf/pa. Our forecasts are under review. Renergen is an emerging producer of helium and liquefied natural gas INDUSTRY OUTLOOK (LNG), with existing production and sales of compressed natural gas. Renergen is targeting the heavy-duty LNG truck market which is a rapidly evolving market globally. Meanwhile helium prices are likely to remain buoyant following the shutdown of the US strategic reserve in 2018. Y/E Feb Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (ZARm) (ZARm) (ZARm) (c) (x) (x) % 1m 3m 12m Actual 5.6 (11.8) 47.3 2018 2.9 (26.9) (27.1) (0.3) N/A N/A Relative* 3.5 (10.6) 47.9 2019 3.0 (43.2) (46.9) (0.5) N/A N/A * % Relative to local index Analyst 2020e N/A N/A N/A N/A N/A N/A Carlos Gomes 2021e N/A N/A N/A N/A N/A N/A
Sector: General industrials Renewi (RWI) Price: 21.9p Market cap: £175m INVESTMENT SUMMARY Market LSE The impact of COVID-19 on Renewi’s markets in H121 has been less than anticipated by management earlier in the year. In Commercial, both the Netherlands and Belgium Share price graph (p) improved the rate of volume recovery y-o-y in Q2 versus Q1. ATM is still in the foothills of recovery, but interest is developing in thermally treated soil offtake, downstream graded building materials and inbound contaminated soil for treatment. Period-end core net debt position was €407m (€457m at the end of March); adjusting for temporary tax deferral timing effects, underlying cash flow has been broadly neutral, we believe. We nudged up our current year estimates (PBT up by €4m in a low base year) ahead of the H121 results which are scheduled for 10 November.
INDUSTRY OUTLOOK
Company description The Dutch waste market, accounting for the largest single business within Renewi, was Renewi is a waste-to-product company growing as the economy recovered from cyclical lows ahead of the coronavirus outbreak. with operations primarily in the Netherlands, Belgium and the UK. Its activities span the collection, processing and resale of industrial, hazardous and municipal waste.
Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 10.5 (16.0) (31.4) 2019 1780.7 179.7 63.1 6.0 4.0 2.2 Relative* 9.7 (12.6) (17.0) 2020 1775.4 167.1 54.3 5.4 4.5 1.1 * % Relative to local index Analyst 2021e 1560.4 125.5 10.6 0.9 26.8 1.1 Toby Thorrington 2022e 1691.3 159.1 42.2 3.9 6.2 1.4
Edison Insight | 29 October 2020 50 Sector: Technology Riber (ALRIB) Price: €1.48 Market cap: €31m INVESTMENT SUMMARY Market Euronext Paris Riber’s H120 results show the impact of a delay in completing a production MBE system because of previously flagged issues in obtaining key components during the pandemic. Share price graph (€) While management expects FY20 revenues of €30m, based on the existing order book, we have reduced our FY20 gross margin estimate, which cuts our FY20 PBT estimate from €0.3m to break-even. Noting the delays in closing orders, we model fewer deliveries of MBE systems during FY21, which reduces our FY21 PBT estimate by €0.8m to €2.0m.
INDUSTRY OUTLOOK
H120 revenues declined by €2.3m year-on-year to €11.6m because the delivery of a production system slipped into Q320. In addition, evaporator sales were minimal as expected. Yield improvements resulting from management interventions were offset by new Company description working practices to prevent the spread of infection. Operating losses widened by €0.5m to Riber designs and produces molecular €1.0m. beam epitaxy (MBE) systems and evaporator sources and cells for the semiconductor industry. This equipment is essential for the manufacturing of compound semiconductor materials that are used in numerous high-growth applications. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (11.1) (2.6) 13.6 2018 31.3 3.3 2.0 6.59 22.5 N/A Relative* (13.3) (0.7) 30.2 2019 33.5 2.5 1.8 6.16 24.0 N/A * % Relative to local index Analyst 2020e 29.6 1.5 0.0 0.09 1644.4 N/A Anne Margaret Crow 2021e 32.1 3.2 2.0 6.82 21.7 N/A
Sector: Financials S&U (SUS) Price: 1685.0p Market cap: £204m INVESTMENT SUMMARY Market LSE S&U reported H121 results in early October with revenue 3% lower y-o-y at £42.8m, partly reflecting an increase in impaired receivables. COVID-19 linked effects also drove Share price graph (p) forward-looking loan-loss provisions of £21.7m, an increase of £13.8m, leaving pre-tax profit at £6.3m versus £17.1m in H120. Diluted EPS were 41.9p (116.1p) and in the interest of prudence and sustainability, the interim dividend was reduced to 22p (34p). At Advantage car finance, the period of lockdown meant new loan volumes were down 35% in H1. Aspen property bridging deals fell sharply as the residential market froze for a period, the average loan book reduced by 8% y-o-y and revenue fell from £2.1m in H119 to £1.6m in H120.
INDUSTRY OUTLOOK
Even though S&U's first half results were substantially affected by the pandemic the Company description company has remained profitable and there are clear signs of improvement including S&U’s Advantage motor finance increased transaction rates at both Advantage and Aspen. While profitability over our business lends on a simple HP basis to lower- and middle-income groups forecast period looks set to be relatively subdued, the benefits of tighter credit criteria, who may have impaired credit records increased new business and work to enhance aspects of Advantage’s activities should restricting access to mainstream products. It has over c 63,500 become more apparent in FY23 and FY24. customers. The Aspen property bridging business has been developing since its launch in 2017. Y/E Jan Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (0.3) 6.3 (19.4) 2019 83.0 39.5 34.6 232.0 7.3 19.4 Relative* (1.0) 10.5 (2.5) 2020 89.9 40.4 35.1 239.4 7.0 41.2 * % Relative to local index Analyst 2021e 82.0 23.1 18.6 124.3 13.6 7.7 Andrew Mitchell 2022e 80.5 29.3 24.8 165.7 10.2 47.2
Edison Insight | 29 October 2020 51 Sector: Oil & gas SDX Energy (SDX) Price: 16.5p Market cap: £34m INVESTMENT SUMMARY Market AIM, TSX-V SDX Energy announced that despite the challenging environment the oil and gas industry is facing, production averaged 6,5000boed in the first nine months of 2020. With c 90% of the Share price graph (p) company’s cash flow resulting from fixed-price gas contracts management is confident it can meet its 2020 expectations. In Morocco, testing of the LMS-2 well is expected in Q4 with a view to de-risking 10.9bcf of prospective resources. In Egypt, the Sobhi discovery is estimated to hold c 24bcf and a potential further 233bcf across six prospects (all management estimates). We currently value SDX at a core NAV of 38.6p/share.
INDUSTRY OUTLOOK
SDX remains open to adding to its portfolio and sees Egypt as a natural market for consolidation, given the large number of small players. Its acquisition of Circle Oil's Company description Egyptian and Moroccan assets in early 2017 show that it is able to negotiate and complete SDX Energy is a North African E&P transactions efficiently. listed in Toronto and London. It has oil and gas production in Egypt and gas production in Morocco.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 13.8 (13.2) (25.0) 2018 53.7 35.5 7.1 3.8 5.6 1.0 Relative* 13.0 (9.7) (9.3) 2019 53.2 34.4 (12.3) (1.5) N/A 0.7 * % Relative to local index Analyst 2020e 37.9 26.2 7.2 3.9 5.5 0.7 Carlos Gomes 2021e 44.0 32.2 16.1 7.6 2.8 0.7
Sector: Financials Secure Trust Bank (STB) Price: 741.0p Market cap: £138m INVESTMENT SUMMARY Market LSE STB's trading update disclosed that Q3 was stronger than expected and FY20 earnings are likely to be well ahead of consensus forecasts. Loan repayment holidays in Motor and Retail Share price graph (p) Finance were down remarkably and credit quality is not deteriorating. Loan demand is strengthening after the lockdown. STB remains cautious due to COVID-19 and Brexit uncertainty and is still not providing formal guidance. We are upping our earnings forecasts and fair value from 1,704p to 1,756p. In our view, the valuation remains depressed vs fundamentals with banking stocks still out of favour. STB trades on an FY20e P/BV of 0.53x, yet it has a strong track record of value creating returns, a good capital base and liquidity.
INDUSTRY OUTLOOK
STB’s relatively short loan book duration allows it to de-risk quicker and protect capital and Company description maintain liquidity. But impairments will inevitably rise and loan book shrinkage also Secure Trust Bank is a adversely affects results. The bank is focused now on managing the risks and supporting well-established specialist bank addressing niche markets within clients. Management believes merger and acquisition opportunities may exist as the consumer and commercial banking. It economy emerges from the crisis. Operationally, the bank can increase lending fairly quickly is launching a non-standard mortgage business. Former parent Arbuthnot as the economy improves. The key challenge will be assessing the new lending conditions Banking Group’s shareholding is now less than 20%. and risk parameters in the recovery phase. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 11.6 15.8 (47.6) 2018 151.6 N/A 36.7 161.0 4.6 N/A Relative* 10.8 20.4 (36.7) 2019 165.5 N/A 41.1 177.3 4.2 N/A * % Relative to local index Analyst 2020e 167.0 N/A 13.0 54.3 13.6 N/A Pedro Fonseca 2021e 172.9 N/A 31.6 134.7 5.5 N/A
Edison Insight | 29 October 2020 52 Sector: Engineering Severfield (SFR) Price: 57.8p Market cap: £178m INVESTMENT SUMMARY Market LSE Severfield’s AGM update noted that UK activity levels returned to pre-COVID-19 lockdown levels during Q2. Moreover, the UK and Europe order book is showing stability at £270m; Share price graph (p) this indicates that new business has picked up during the period and it appears to have been more UK-centric – and spread rather than any single major win – though European orders on hand are still significant. The Indian JV has operated under more restrictive lockdown conditions than in the UK and is yet to return to pre-lockdown levels. The order book position has reduced from £110m (1 June) to £94m (1 September). The payment of an unchanged 1.8p final dividend for FY20 (as announced on 30 July) was approved and management stated that it is cautiously optimistic regarding the FY21 outlook.
INDUSTRY OUTLOOK
Company description The primary strategic aim is to maintain Severfield’s position as the leading UK structural Severfield is a leading UK structural steelwork supplier. The Indian JV targets similar sectors to those served in the UK; steelwork fabricator operating across a broad range of market sectors. An management has valued the Indian construction market at c £100bn pa, with a very low Indian facility undertakes structural penetration of steel structures currently and the JV has recently expanded capacity. steelwork projects for the local market and is currently being expanded.
Y/E Dec / Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (0.9) (3.7) (24.2) 2019 274.9 29.0 25.1 6.80 8.5 9.7 Relative* (1.6) 0.2 (8.3) 2020 327.4 33.2 29.1 7.89 7.3 6.3 * % Relative to local index Analyst 2021e N/A N/A N/A N/A N/A N/A Toby Thorrington 2022e N/A N/A N/A N/A N/A N/A
Sector: General industrials Stern Groep (STRN) Price: €12.40 Market cap: €73m INVESTMENT SUMMARY Market AMS Downturns tend to be opportunities to invest in car dealerships, especially those that are likely to emerge stronger. Stern is well positioned to weather the current storm with its Share price graph (€) significantly restructured organisation. Its valuation is undemanding at 9.8x 2021e P/E and there is additional optionality in light of a potential merger with the much larger Swedish automotive group Hedin.
INDUSTRY OUTLOOK
While Stern has to deal with market-wide structural changes such as the transition from combustion engines to hybrid/EVs, a higher proportion of less profitable lease clients and shared car concepts, all of which are having a profound impact on the market, COVID-19 has presented another big challenge to car dealerships. Flexibility is what is required in this Company description environment, and fortunately Stern has already started optimising its dealer network by Stern Groep is one of the largest reducing geographical overlap and moving out of unattractive car brands, while eyeing new automotive groups in the Netherlands. With 75 locations and revenues of network additions like the recently announced ambition to expand in Renault and executing almost €1bn it is the second largest car stringent cost controls. retailer group in the Netherlands. The company has over 1,850 employees.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (1.6) 33.6 (10.8) 2018 988.7 6.1 (5.8) (73.0) N/A 1.4 Relative* (3.1) 39.0 (7.3) 2019 989.3 47.4 (1.4) 29.0 42.8 19.6 * % Relative to local index Analyst 2020e 815.5 14.4 3.0 131.0 9.5 2.0 Edwin De Jong 2021e 922.8 17.8 7.8 123.0 10.1 N/A
Edison Insight | 29 October 2020 53 Sector: General retailers Studio Retail Group (STU) Price: 239.0p Market cap: £207m INVESTMENT SUMMARY Market LSE Studio's sales performance in H120 was impressive. Product grew by 39% y-o-y due to growth in new customers and spend per customer, and Financial Services grew by 5%. Share price graph (p) Management indicated that PBT from continuing operations (excluding Education) for FY21 will be ahead of its own internal expectations, there is no external management guidance). It looks well placed, with tight stock management, against a very competitive high street. The Phase 2 review of the proposed sale of Education will likely delay the process to 2021; the CMA recently announced Provisional Findings that the proposed disposal may reduce competition.
INDUSTRY OUTLOOK
The investment case is primarily centred on Studio, the main customer-facing business, Company description which is making excellent progress in its digital transition. Against a challenging Studio Retail Group is a multi-channel macroeconomic backdrop, Studio is outperforming much of the retail market through its retailer operating across the business-to-consumer and unique digital-first value proposition, combined with the backing of flexible, and increasingly business-to-business market places. It tailored, responsible consumer credit solutions. is a market-leading online value retailer and educational resource supplier in the UK.
Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 6.0 9.6 23.2 2019 506.8 45.1 25.6 23.2 10.3 9.2 Relative* 5.2 14.0 49.0 2020 434.9 35.0 11.0 12.0 19.9 12.5 * % Relative to local index Analyst 2021e N/A N/A N/A N/A N/A N/A Russell Pointon 2022e N/A N/A N/A N/A N/A N/A
Sector: General industrials Sureserve Group (SUR) Price: 48.5p Market cap: £77m INVESTMENT SUMMARY Market AIM October's trading update confirmed the work management has undertaken to transform Sureserve into a smaller, more predictable business has paid off. The performance through Share price graph (p) the challenges of COVID-19 has demonstrated the resilience of the business. We trimmed our 2020 revenue estimate from £210m to £201m, but the improving margins result in PBT being nudged up from £9.1m to £9.3m. The gradual re-rating of the shares this year suggests investors are starting to buy in to the turnaround and the improving market position.
INDUSTRY OUTLOOK
Growing corporate and government awareness around safety and energy efficiency creates an attractive backdrop to Sureserve’s compliance and energy services business, where Company description strong regulatory drivers have the potential to deliver substantial medium-term EBITA Sureserve Group is engaged in the growth. The management team appointed in July 2016 to reverse the decline in provision of Compliance and Energy Services through two divisions, performance is taking bold decisions. focused on customers in the outsourced public and regulated services sectors in the UK. It is the market leader in social housing gas compliance. Y/E Sep Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (4.0) 11.5 79.6 2018 190.8 9.2 6.6 3.4 14.3 N/A Relative* (4.7) 15.9 117.3 2019 212.1 10.5 8.3 4.5 10.8 13.9 * % Relative to local index Analyst 2020e 200.7 15.2 9.3 4.7 10.3 3.2 Neil Shah 2021e 219.8 15.2 10.0 5.1 9.5 13.6
Edison Insight | 29 October 2020 54 Sector: Property Target Healthcare REIT (THRL) Price: 107.0p Market cap: £490m INVESTMENT SUMMARY Market LSE Target’s portfolio of high-quality, purpose-built care homes continues to generate positive return, driven by RPI-linked rental uplifts. Continuing DPS payments (Q420: 1.67p) drove Share price graph (p) the 1.5% Q420 NAV total return (FY20: 7.0%). Rent collection remains robust, after allowance for a limited number of agreed advance monthly rental payments, and FY20 rent cover of mature homes remained unchanged at 1.6x. With the number of COVID-19 cases reported by tenants greatly reduced, falls in occupancy are being substantially matched by new enquiry levels. Against this improved backdrop new investment activity cautiously resumed in July with the acquisition of a high quality new-build home in Oxfordshire for £15m (including costs), funded from existing cash resources. Immediately following the transaction, LTV was 20.6% with uncommitted capital of £26m remaining.
INDUSTRY OUTLOOK Company description Target Healthcare REIT invests in Care home demand is driven by demographics and care needs with a shortage of quality modern, purpose-built residential care homes in the UK let on long leases to care homes suggesting a strong investment demand in years to come. The pandemic has high-quality care providers. It selects presented a significant near-term challenge to the sector but does not change the assets according to local demographics and intends to pay underlying demographic-driven fundamentals while highlighting its critical role in supporting increasing dividends underpinned by structural growth in demand for care. the NHS and the importance of long-term investment. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 0.0 1.1 (7.3) 2019 34.3 N/A 20.1 5.45 19.6 21.7 Relative* (0.7) 5.1 12.2 2020 44.3 N/A 23.2 5.27 20.3 21.9 * % Relative to local index Analyst 2021e N/A N/A N/A N/A N/A N/A Martyn King 2022e N/A N/A N/A N/A N/A N/A
Sector: Technology Technicolor (TCH) Price: €1.20 Market cap: €263m INVESTMENT SUMMARY Market Euronext Paris With its complex financial restructuring complete, Technicolor can now move forward secure in the knowledge of a supportive equity- and debt-holder base. With US Chapter 15 Share price graph (€) proceedings now closed, S&P has lifted its ratings to CCC+ with stable outlook (B for the new debt) and Moody's to Caa2 (Caa1 for new debt), which should help improve commercial terms of trade. The rights issue was taken up by 18.1% of equity holders, at €2.98, above the prevailing market price, with previous debt holders swapping their debt for equity. Technicolor’s focus is now on rebuilding profitability by leveraging leading market positions across its three operations. Q3 numbers are due on 5 November.
INDUSTRY OUTLOOK
COVID-19 has highlighted the importance of reliable domestic broadband and high-quality Company description wi-fi as homes increasingly act as devolved workplaces alongside greater content Technicolor is a worldwide technology consumption. This is unlikely to change as the global economy reopens. In Production leader operating in the media and entertainment industry. Its activities are Services, the group is utilising government furlough schemes where it can to preserve its organised in three business segments, skill base for the live content industry, which is slowly re-emerging. Animation demand is still Production Services, DVD Services and Connected Home. strong. Fresh, high-quality content will be crucial to reinforce the attractiveness of those platforms to subscribers and advertisers. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (30.7) (53.9) (94.0) 2018 3988.0 266.0 7.0 (306.94) N/A N/A Relative* (32.4) (52.9) (93.1) 2019 3800.0 325.0 (73.0) (492.18) N/A N/A * % Relative to local index Analyst 2020e 3100.0 169.0 (144.0) (121.70) N/A N/A Fiona Orford-Williams 2021e 3460.0 338.0 33.0 5.52 21.7 N/A
Edison Insight | 29 October 2020 55 Sector: Media The MISSION Group (TMG) Price: 60.5p Market cap: £55m INVESTMENT SUMMARY Market AIM The MISSION’s H120 results were as indicated at the trading update, with headline pre-tax loss of £2.2m. H220 looks stronger, with new clients and new business and the continuing Share price graph (p) benefit of a broad agency portfolio across verticals. It is adding central resource to service group agencies efficiently, setting up a digital production studio and using recently acquired Innovationbubble for behavioural consultancy. Careful cash management reduced net debt to £0.9m at end June, with annualised cost savings of £0.7m targeted. Our PBT and EPS forecasts were unchanged, leaving the shares trading below peers.
INDUSTRY OUTLOOK
The latest IPA Bellwether report for Q320 shows some improvement in sentiment over the previous quarter (the worst in its 20-year history), with respondents more optimistic on their Company description own prospects than for those of the industry. It estimates that UK advertising spend will The MISSION Group is a collective of retrench by 23.3% this year and rebound by 11.3% in FY21. However, the impact varies integrated and specialist creative agencies, employing 1,150 people in widely by advertising medium, sector and client. For some agencies and clients, the spur to the UK, Europe, Asia and the US. creativity has boosted the impact of campaigns in a less crowded market.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 5.2 4.3 (28.4) 2018 77.6 11.3 9.2 8.5 7.1 4.3 Relative* 4.5 8.4 (13.4) 2019 81.0 12.2 10.2 9.0 6.7 4.9 * % Relative to local index Analyst 2020e 62.7 2.0 0.6 0.7 86.4 16.1 Fiona Orford-Williams 2021e 76.1 10.5 9.1 7.7 7.9 6.1
Sector: General industrials Thrace Plastics (PLAT) Price: €2.70 Market cap: €118m INVESTMENT SUMMARY Market Athens Stock Exchange FY20 has started well for Thrace; a strong margin and cash inflow performance were the financial highlights of the first half and the company is investing in growth areas. The Share price graph (€) COVID-19 outbreak had no discernible effect on Q1 trading. Good prior year momentum in Packaging continued and accelerated in Q2, while fast-growing COVID-19 related demand for personal protective equipment (PPE) and Thrace materials was a pivotal development for Technical Fabrics. H120 adjusted EBIT almost doubled to €18.4m and, in conjunction with some discrete cash inflow items, drove core net debt down to c €40m (plus €7m lease liabilities) at the period end. An FY19 dividend payment was approved at the AGM.
INDUSTRY OUTLOOK
Thrace manufactures a wide range of products that are used in a variety of sectors, ranging Company description from construction/infrastructure to horticulture and food packaging primarily in Europe. Thrace Plastics is an established Management’s high-level financial objective is to pursue profitable growth using two primary international producer of Technical Fabrics (FY19: 72% of net revenues) levers: increased capacity and value capture. and Packaging (28%). Each division uses a number of manufacturing processes and produces a wide range of products from polymer materials, serving a diverse range of end-markets. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 12.7 47.5 25.0 2018 322.7 29.0 11.5 21.0 12.9 5.1 Relative* 14.6 54.3 78.2 2019 327.8 30.6 10.2 12.8 21.1 4.5 * % Relative to local index Analyst 2020e N/A N/A N/A N/A N/A N/A Toby Thorrington 2021e N/A N/A N/A N/A N/A N/A
Edison Insight | 29 October 2020 56 Sector: Media Tinexta (TNXT) Price: €19.12 Market cap: €903m INVESTMENT SUMMARY Market Borsa Italiana STAR In October 2020, Tinexta announced acquisitions that will lead to the creation of a fourth business unit, Cybersecurity. We estimate it could accelerate organic revenue growth from Share price graph (€) 4-5% to 8%+ from FY21, but do not change our forecasts until the acquisitions complete, mostly in FY21. Q220 results were much better than consensus expectations, as all business units produced improved organic growth trends versus Q120. Our FY20 revenue forecast of €266.6m and EBITDA of €76.7m places our forecasts 6.6% above management’s guidance for revenue of above €250m and EBITDA of €72m.
INDUSTRY OUTLOOK
Tinexta is exposed to favourable growth trends including the transition to a digital world and the requirement for enhanced online security. Starting from a purely domestic Italian focus, Company description the company is exploiting these trends internationally. In particular, given recent regulatory Tinexta has three business divisions: changes, in Digital Trust the group is leveraging its Italian expertise to expand on an Digital Trust – solutions to improve digital security; Credit Information & EU-wide basis with a unified legal base across the region. At the same time, Tinexta is likely Management – information services to to make acquisitions in Italy and Europe that will further expand its addressable markets help manage corporate credit; and Innovation & Marketing Services – and seek cross-selling opportunities between the business units. consulting services to help clients develop and/or grow their businesses. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 10.5 31.5 47.5 2018 238.7 66.0 52.3 77.36 24.7 20.5 Relative* 9.0 39.1 70.5 2019 258.7 71.3 55.0 79.71 24.0 16.3 * % Relative to local index Analyst 2020e 266.6 76.7 53.3 80.48 23.8 16.5 Russell Pointon 2021e 277.5 80.5 56.6 85.58 22.3 15.5
Sector: Financials Town Centre Securities (TOWN) Price: 87.0p Market cap: £46m INVESTMENT SUMMARY Market LSE Financial and strategic progress in FY20 was punctuated by COVID-19, with a negative impact of c £3.6m (of which £2.0m at CitiPark due to temporary closures), reducing adjusted Share price graph (p) EPRA earnings to £2.6m (FY19: £6.4m) and EPS to 4.9p. Rent collection has been robust and has continued to improve since end-FY20, but the pandemic has forced TCS’s first ever cut in annual DPS; a final DPS of 1.75p has been declared taking the total for the year to 5.0p (FY19: 11.75p). Revaluation losses (6.9% like for like) drove a 17.4% reduction in EPRA NAV per share (to 292p) and an increase in LTV to 53.2%. Subsequent property disposals amounting to £41.2m improve the pro forma LTV to 47.2% and further reduce retail and leisure exposure (to below 41% compared with 47% at year-end).
INDUSTRY OUTLOOK
Company description The commercial property market is cyclical, historically exhibiting substantial swings in Town Centre Securities is a UK REIT valuation through cycles while income returns have been more stable, but still fluctuating focused primarily on Leeds, Manchester, Scotland and (mainly according to tenant demand and rent terms. The extent and duration of impact of the global suburban) London. It also has a car pandemic on the economic outlook remains uncertain. While the supply demand balance for parking operation (CitiPark). The investment portfolio is intensively regional office and industrial property has hitherto remained generally firm the weakness managed for income and capital growth. that was previously confined to the retail sector is likely to continue to broaden. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (1.1) (13.2) (55.6) 2019 19.6 N/A 6.4 12.0 7.3 4.2 Relative* (1.9) (9.8) (46.3) 2020 16.1 N/A 2.1 4.9 17.8 3.2 * % Relative to local index Analyst 2021e N/A N/A N/A N/A N/A N/A Martyn King 2022e N/A N/A N/A N/A N/A N/A
Edison Insight | 29 October 2020 57 Sector: Technology Trackwise Designs (TWD) Price: 308.0p Market cap: £68m INVESTMENT SUMMARY Market AIM Trackwise has developed a proprietary, proven technology, IHT, for manufacturing extremely long, flexible circuits that can replace conventional wiring harnesses. This Share price graph (p) disruptive technology is applicable to many industries including electric vehicles (EVs), medical devices and aerospace. Trackwise has already manufactured prototypes for customers in each of these sectors and received its first series production order from an EV manufacturer this September. Since IHT is an adaptation of the proven technology Trackwise uses for making advanced printed circuits, IHT has the transformative potential of a new technology but with much less risk.
INDUSTRY OUTLOOK
In September Trackwise signed a three-year product manufacture and supply agreement Company description with a UK electric vehicle OEM. The agreement is potentially worth up to £38m in total, Trackwise Designs is a UK subject to pricing revisions, and will generate up to £5.0m in revenues in FY21. This will be manufacturer of specialist products using printed circuit technology. These the first full series production of flexible circuits incorporating Trackwise’s Improved Harness include a lightweight replacement for Technology (IHT). The agreement represents a step change in sales as total revenues for conventional wiring harnesses known as IHT and RF antennae. 64% of FY19 H120 were £2.4m, of which IHT was only £0.3m. revenues related to exports.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 82.3 242.2 392.8 2018 3.5 0.6 0.3 2.14 143.9 N/A Relative* 80.9 255.8 496.1 2019 2.9 0.6 0.2 1.13 272.6 64.7 * % Relative to local index Analyst 2020e 7.1 0.7 (0.3) 0.36 855.6 N/A Anne Margaret Crow 2021e 14.3 2.7 1.3 6.25 49.3 85.1
Sector: Food & drink Treatt (TET) Price: 600.0p Market cap: £358m INVESTMENT SUMMARY Market LSE Treatt has transformed itself from a commodity-based ingredients trading house into a supplier of value-added ingredients and ingredient solutions. The business has Share price graph (p) demonstrated its resilience with a strong year despite the COVID-19 pandemic. The sharp fall in citrus prices caused FY20 revenue to decline by 3% at constant currency. However, profit performance was strong as there was good growth in the other parts of the business, with health & wellness and fruit & vegetables posting double-digit revenue growth, and with the higher-margin parts of the business continuing to outperform. The UK relocation project continues, with a move to the new site expected in spring 2021, and the outlook for FY21 is cautiously optimistic.
INDUSTRY OUTLOOK
Company description Treatt is migrating its business from that of a pure supplier to the food and beverage Treatt provides innovative ingredient industries to being a valued partner in the development of new ingredients. Citrus, tea, fruit solutions from its manufacturing bases in Europe, North America and Africa, and vegetable flavours and sugar reduction are core areas of focus, with the latter principally for the flavours and undergoing a structural growth trend. fragrance industries and multinational consumer goods companies, particularly in the beverage sector.
Y/E Sep Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 4.2 14.9 41.2 2018 112.2 16.6 13.8 20.3 29.6 95.2 Relative* 3.4 19.5 70.8 2019 112.7 15.8 14.0 19.2 31.3 17.3 * % Relative to local index Analyst 2020e 109.3 16.8 14.7 18.9 31.7 22.1 Sara Welford 2021e 114.8 20.8 15.8 20.3 29.6 19.6
Edison Insight | 29 October 2020 58 Sector: Financials Tungsten Corporation (TUNG) Price: 31.7p Market cap: £40m INVESTMENT SUMMARY Market LSE Tungsten’s FY20 results announced in September showed revenue, EBITDA and cash flow in line with expectations. The group is making progress in implementing its strategy. New Share price graph (p) products are gaining traction, a reshaped sales team is building a promising pipeline and partnerships are in place or under discussion to provide complementary services, broaden the reach of the network and create new channels to market. COVID-19 means there is some uncertainty over transaction-related revenues but may also act as a prompt for potential customers to digitise their invoice handling.
INDUSTRY OUTLOOK
Transaction-related revenues account for c 30% of the group total but the diversity of the customer mix and presence of over 50% of subscription and software maintenance Company description revenues is supportive. Three new large international customers were won in Q121, a Tungsten Corporation operates a partnership with a large US bank was secured and the trade finance partnership with Orbian transaction platform with services including e-invoicing, e-billing and signed an agreement with a UK retailer to access their supplier base. Longer term the purchase order handling. Spending benefits of adopting e-invoicing provide an underlying driver of growth while the fact that on analysis, invoice data capture and, through a partnership, supply chain average Tungsten only processes 30% of its customers’ invoices points to significant scope finance are also offered, providing additional benefits to customers. for increased penetration both for existing and potential customers. Y/E Apr Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 1.4 (22.2) (23.6) 2019 36.0 0.6 (5.3) (3.1) N/A N/A Relative* 0.7 (19.1) (7.6) 2020 36.8 3.7 (26.0) (20.6) N/A 8.7 * % Relative to local index Analyst 2021e N/A N/A N/A N/A N/A N/A Andrew Mitchell 2022e N/A N/A N/A N/A N/A N/A
Sector: Technology TXT e-solutions (TXT) Price: €7.85 Market cap: €102m INVESTMENT SUMMARY Market Borsa Italiana STAR TXT e-solutions has expanded its Italian IT services business with the acquisition of HSPI for €11.6m in cash and equity. HSPI has three offices in Italy and with 100 consultants, Share price graph (€) provides IT consulting services to large public and private Italian companies, with a focus on IT governance. The deal adds public sector, energy and utilities to TXT’s existing fintech and industrial verticals and broadens the services offered to management consulting. On a pro forma basis, we estimate the deal adds c 18% to FY20 revenue and c 22% to FY20 EBITDA.
INDUSTRY OUTLOOK
TXT is a beneficiary of the trend to outsource elements of IT and engineering, which gives the customer greater flexibility on cost and better access to specialist skills. Its main focus is Company description on the aerospace and aviation market, where the rapid pace of innovation, combined with TXT e-solutions provides IT, consulting increasing regulation, drives growth in R&D. It also serves the Italian banking market, where and R&D services to aerospace, aviation, automotive, banking and the emergence of fintech companies is driving innovation and regulation is increasing the finance customers. need for software quality assurance.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 4.4 0.6 (5.6) 2018 40.0 4.1 1.5 10.2 77.0 45.0 Relative* 3.0 6.4 9.0 2019 59.1 7.0 7.6 45.6 17.2 N/A * % Relative to local index Analyst 2020e 66.8 7.8 5.9 33.8 23.2 17.7 Katherine Thompson 2021e 73.0 8.5 6.8 39.1 20.1 12.9
Edison Insight | 29 October 2020 59 Sector: Construction & blding mat Tyman (TYMN) Price: 279.0p Market cap: £549m INVESTMENT SUMMARY Market LSE After COVID-19 affected Q2/H1 trading, Q3 trading was ‘significantly’ better than previous management expectations, with a 3% uplift in like-for-like (l-f-l) revenues over this period. Share price graph (p) This comprised two flat months at group level and ended with good progress across all three geographic reporting divisions in September, resulting in a +9% l-f-l group revenue increase in that month. An updated net debt figure was not provided but the multiple to EBITDA has improved from 1.8x at the end of June to 1.4x at the end of Q3 (on a trailing 12-month basis). We have factored in dividends resuming next year, although management is to consider a modest FY20 final payout depending on prospects at the turn of the year.
INDUSTRY OUTLOOK
Prior to the COVID-19 outbreak, leading North American and European markets were Company description expected to grow modestly and the new-build sector has generally been firmer than RMI Tyman’s product portfolio substantially spend which has been more patchy. addresses the residential RMI and building markets with increasing commercial sector exposure following acquisitions. It manufactures and sources window and door hardware and seals, reporting in three divisions.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 29.8 61.3 33.5 2018 591.5 98.5 72.7 27.5 10.1 6.3 Relative* 28.8 67.7 61.5 2019 613.7 100.8 71.0 27.4 10.2 4.9 * % Relative to local index Analyst 2020e 561.3 91.2 62.5 23.9 11.7 5.7 Toby Thorrington 2021e 587.4 96.3 68.1 26.1 10.7 6.7
Sector: Oil & gas Vermilion Energy (VET) Price: C$3.88 Market cap: C$614m INVESTMENT SUMMARY Market TSX Following the departure of Anthony Marino as president and CEO of Vermilion (VET), the newly established executive committee announced its intent to maintain a strong balance Share price graph (C$) sheet with low financial leverage, manage the total payout ratio at less than 100% and protect equity. The committee’s near-term priorities include continuing to navigate the company through the COVID-19 pandemic with a primary focus on HSE (health, safety and environment) and business continuity; continuing to find additional operational efficiencies and cost reductions; pay down debt, target a debt-to-cash flow ratio of less than 1.5x; review projects to determine appropriate pace of development and capex allocation; strengthen the leadership role in ESG; and review the shareholders' return policy and determine the appropriate time to reinstate the dividend and/or share buyback. Our updated valuation stands at C$9.6/share. Company description INDUSTRY OUTLOOK Vermilion Energy is an international E&P with assets in Europe, North America and Australia. Management Vermilion’s operations are in OECD countries and predominantly onshore; political, expects FY20 production to average operational and subsurface risk is well spread. Vermilion benefits from realisations based on 94–98kboed. Commodity price exposure is spread across global oil a number of regional commodity prices including Brent, WTI crude and Henry Hub, TTF, and gas benchmarks including Brent, WTI, Henry Hub, TTF and NBP. NBP and AECO gas. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (C$m) (C$m) (C$m) (c) (x) (x) % 1m 3m 12m Actual 12.8 (39.2) (81.0) 2018 1526.0 1037.0 355.0 226.0 1.7 0.7 Relative* 9.4 (40.3) (80.9) 2019 1747.0 976.0 220.0 20.0 19.4 0.7 * % Relative to local index Analyst 2020e 1094.0 569.0 (28.0) 214.0 1.8 1.2 Carlos Gomes 2021e 1222.0 713.0 172.0 101.0 3.8 0.9
Edison Insight | 29 October 2020 60 Sector: Pcare & household prd Walker Greenbank (WGB) Price: 62.5p Market cap: £44m INVESTMENT SUMMARY Market AIM Reported H120 revenue declined by almost 31% y-o-y; Brands product sales were c 28% lower while third party Manufacturing sales were c 33% down and international sales overall Share price graph (p) fell by less than their UK equivalents. Significant opex reductions partly mitigated reduced gross margin and the company still managed to report a modest profit for the period. Walker Greenbank’s liquidity position improved at the end of H1 with end July net cash of £4.5m – an uplift of £3.2m from January. By the end of the period, group sales had recovered to flat y-o-y in the month of July which broadly continued into Q3. The company is to be renamed the Sanderson Design Group as part of a wider strategic improvement programme which is underway.
INDUSTRY OUTLOOK
Company description The UK interior furnishings industry has experienced uncertainty for many years. Many Walker Greenbank is a luxury interior brands have failed to grow, while manufacture for the volume segment has largely moved furnishings group combining specialist design skills with high-quality upstream overseas. Success continues to be delivered by businesses able to differentiate themselves manufacturing facilities. Leading from competition by consistently offering innovative and high-quality design and products. brands include Harlequin, Sanderson, Morris & Co, Scion, Anthology, Zoffany and Clarke & Clarke.
Y/E Jan Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 11.6 28.9 (23.3) 2019 113.3 12.9 9.0 10.1 6.2 3.5 Relative* 10.8 34.0 (7.2) 2020 111.5 11.0 6.6 7.9 7.9 4.6 * % Relative to local index Analyst 2021e N/A N/A N/A N/A N/A N/A Toby Thorrington 2022e N/A N/A N/A N/A N/A N/A
Sector: Technology WANdisco (WAND) Price: 478.0p Market cap: £251m INVESTMENT SUMMARY Market AIM The pace of WANdisco’s progress has accelerated in recent months. At the end of October it announced that its LiveData product, already fully integrated with the Azure platform, is Share price graph (p) now being jointly marketed by Microsoft. We expect this to drive an acceleration in commercial activity and indeed the company has confirmed that the uptick in sales it predicted at the time of the interims is on track. The company has also recently launched LiveData Migrator with AWS and secured a $0.45m contract with a telco provider on this platform. Aside from also contributing to the growth in sales, progress with AWS suggests that WANdisco’s technology is becoming the established route to migrate large, active datasets to the cloud.
INDUSTRY OUTLOOK
Company description WANdisco has set out its ambition to generate annual revenue of at least $100m in the next WANdisco’s proprietary replication three to five years from a combination of 1) data migration; 2) hybrid cloud; and 3) technology enables its customers to solve critical data management multi-cloud. Ahead of a shift to recurring revenue visibility is limited but our updated analysis challenges created by the shift to cloud suggests that the Microsoft relationship alone could generate more than $80m in annual computing. It has established partner relationships with leading players in revenues by 2023 and highlighted that the data migration element alone could present a the cloud ecosystem including Amazon and Microsoft. $1.4bn opportunity in total. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (2.1) (6.3) 22.6 2018 17.0 (9.4) (16.3) (37.5) N/A N/A Relative* (2.8) (2.6) 48.2 2019 16.2 (11.7) (18.4) (38.8) N/A N/A * % Relative to local index Analyst 2020e 13.0 (19.2) (26.3) (55.1) N/A N/A Dan Gardiner 2021e 37.0 (0.4) (7.4) (15.0) N/A N/A
Edison Insight | 29 October 2020 61 Sector: Mining Wheaton Precious Metals (WPM) Price: C$63.76 Market cap: C$28625m INVESTMENT SUMMARY Market TSX Sales of gold equivalent ounces have remained at record levels at WPM in H120, while the six of its partners' mines that were on furlough (c 36% of WPM's gold equivalent output) Share price graph (C$) have now returned to production. Going forward, WPM is actively pursuing a London listing before year-end, while its streaming agreement with Caldas over Marmato proves that it is still able to effectively conclude new business in a coronavirus context.
INDUSTRY OUTLOOK
Under normal circumstances, we believe that WPM could easily justify a valuation of US$52.44, or C$69.03, per share. In the current environment however, we believe that a valuation of US$74.65, or C$98.27 in FY21 is more appropriate. Relatively speaking, it remains cheaper than the average of its peers on all but one of six common valuation Company description measures. This follows the settlement reached between WPM and the CRA in December Wheaton Precious Metals is the 2018 whereby income from WPM’s international subsidiaries will remain exempt from pre-eminent ostensibly precious metals streaming company, with 29 Canadian tax. Q3 results are scheduled for 9 November. high-quality precious metals streaming and early deposit agreements relating to assets in Mexico, Peru, Canada, Brazil, Chile, Argentina, Sweden, Greece, Portugal and the US. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 0.9 (6.4) 85.4 2018 794.0 496.6 203.1 48.0 100.5 41.3 Relative* (2.1) (8.0) 85.7 2019 861.3 548.3 242.7 56.0 86.2 39.3 * % Relative to local index Analyst 2020e 1127.3 793.9 526.9 115.0 42.0 25.3 Charles Gibson 2021e 1487.0 1118.2 799.3 178.0 27.1 19.3
Sector: Technology XP Power (XPP) Price: 4380.0p Market cap: £860m INVESTMENT SUMMARY Market LSE XP Power’s Q3 trading update confirmed that production volumes grew rapidly in its Asian facilities, allowing the company to satisfy some of the orders placed in H120. As expected, Share price graph (p) bookings returned to a more normal level in Q3 (+1% y-o-y/-23% q-o-q) to close the quarter with a backlog of £125.7m. XP reported 28% y-o-y growth in revenues for Q3, prompting upgrades to our FY20/21 revenue and EPS forecasts. The company also announced that CEO Duncan Penny will retire at the end of the year, to be replaced by current CFO Gavin Griggs from 1 January 2021.
INDUSTRY OUTLOOK
XP supplies four end-markets: healthcare, industrial electronics, semiconductors and technology, across Europe, North America and Asia. The industrial electronics segment is Company description relatively fragmented, but the company sees demand across various applications. The XP Power is a developer and designer healthcare business continues to gain market share, with corporate approvals from the of power control solutions with production facilities in China, Vietnam major suppliers in place. The semiconductor segment is the most cyclical, tracking the and the US, and design, service and capex requirements of semiconductor manufacturers. sales teams across Europe, the US and Asia.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 0.5 17.7 69.8 2018 195.1 49.2 41.2 172.8 25.3 31.3 Relative* (0.3) 22.4 105.3 2019 199.9 45.4 33.2 145.5 30.1 18.2 * % Relative to local index Analyst 2020e 230.7 54.0 40.6 162.9 26.9 24.8 Katherine Thompson 2021e 233.8 57.0 43.2 173.2 25.3 17.7
Edison Insight | 29 October 2020 62 Sector: Media YouGov (YOU) Price: 1042.5p Market cap: £1123m INVESTMENT SUMMARY Market AIM Full year results were in line with the July trading update, a little ahead of our published estimates, with revenues up 12% and adjusted operating profit up 18%. Data Products Share price graph (p) (one-third of group revenue) performed particularly well, with underlying revenues up 21% and operating margin up 70bp to 35.0%. A strong balance sheet (net cash of £35.3m) supports stepped-up investment in both technology and in panel, underpinning the ambitious targets set out for the three remaining years of management’s five-year plan. The valuation remains at the high end of the range of peers.
INDUSTRY OUTLOOK
The pandemic has offered some additional opportunities, both in COVID-19 and health-related work for governments and commercial entities, and in the competitive Company description landscape, where others have been operating with legacy business models less suited to YouGov is a global research data and the circumstances. Advertising-related spend remains under pressure, but news media and analytics group, with over 11m online panellists across 42 countries. It offers governments globally are closely monitoring the effects of lockdowns. The US presidential a complementary data-led suite of election campaigns should provide further opportunities for increased visibility, driving products and services including YouGov BrandIndex, YouGov Profiles, commercial opportunities. YouGov Omnibus, YouGov Direct and custom research. Y/E Jul Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 28.7 31.1 92.3 2019 136.5 31.7 20.4 13.8 75.5 28.8 Relative* 27.8 36.3 132.6 2020 152.4 39.2 24.7 15.7 66.4 29.0 * % Relative to local index Analyst 2021e 163.0 41.3 28.5 17.4 59.9 27.2 Fiona Orford-Williams 2022e 175.0 47.7 34.2 21.2 49.2 23.5
Edison Insight | 29 October 2020 63
Edison dividend list
Company name FY0 period end Currency DPS FY0 DPS FY1 DPS FY2 4imprint Group 2019/12 USD 84.0 0.0 20.0 Appreciate Group 2020/03 GBP 0.0 1.0 1.5 Avon Rubber 2019/09 GBP 20.8 27.1 35.2 bet-at-home 2019/12 EUR 200.0 240.0 288.0 Cenkos Securities 2019/12 GBP 3.0 China Water Affairs Group 2020/03 HKD 30.0 32.0 36.0 Circle Property 2020/03 GBP 5.3 Cohort 2020/04 GBP 10.1 11.1 12.2 DeA Capital 2019/12 EUR 12.0 12.0 12.0 discoverIE Group 2020/03 GBP 3.0 10.4 10.7 Ebiquity 2019/12 GBP 0.0 0.0 0.5 Epwin Group 2019/12 GBP 1.8 Esker 2019/12 EUR 33.0 35.0 40.0 FCR Immobilien 2019/12 EUR 29.9 33.1 43.4 Games Workshop Group 2020/05 GBP 145.0 200.0 220.0 Gamesys Group 2019/12 GBP 0.0 36.0 37.8 GB Group 2020/03 GBP 0.0 6.0 3.3 Greggs 2019/12 GBP 46.9 0.0 15.0 Hellenic Petroleum 2019/12 EUR 50.0 50.0 50.0 Kcell Joint Stock Company Corp 2019/12 KZT 30.0 45.0 126.0 La Doria 2019/12 EUR 18.0 18.0 19.0 Lookers 2018/12 GBP 4.1 Marshall Motor Holdings 2019/12 GBP 2.9 0.0 6.0 Norcros 2020/03 GBP 3.1 Numis Corporation 2019/09 GBP 12.0 12.0 Ocean Wilsons Holdings 2019/12 USD 70.0 OTC Markets Group 2019/12 USD 125.0 125.0 125.0 Pan African Resources 2020/06 USD 0.8 1.4 1.2 PIERER Mobility 2019/12 EUR 0.0 30.0 30.0 Polypipe 2019/12 GBP 4.0 Primary Health Properties 2019/12 GBP 5.6 5.9 6.1 Record 2020/03 GBP 2.3 2.3 2.3 Regional REIT 2019/12 GBP 8.3 6.4 6.5 Renewi 2020/03 EUR 0.5 0.0 0.0 S&U 2020/01 GBP 120.0 62.0 83.0 Secure Trust Bank 2019/12 GBP 87.2 0.0 0.0 Severfield 2020/03 GBP 1.1 Sureserve Group 2019/09 GBP 0.5 0.5 0.8 Target Healthcare REIT 2020/06 GBP 6.7 The MISSION Group 2019/12 GBP 0.8 0.0 1.8 Thrace Plastics 2019/12 EUR 4.0 Treatt 2019/09 GBP 5.5 5.8 6.2 Tyman 2019/12 GBP 3.9 0.0 10.0 Walker Greenbank 2020/01 GBP 0.5 Wheaton Precious Metals 2019/12 USD 36.0 43.0 70.0 YouGov 2020/07 GBP 5.0 5.5 6.5
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Company Sector Most recent note Date published
1Spatial Software & comp services Update 30/09/20 4iG IT services Update 02/09/20 4imprint Group Media Outlook 11/09/20 AAC Clyde Space Aerospace & defence Update 16/10/20 Aberdeen Asian Income Fund Investment companies Investment company review 12/03/20 Aberdeen Diversified Inc & Growth Trust Investment companies Investment company review 17/03/20 Aberdeen Latin American Income Fund Investment companies Investment company review 21/10/20 Aberdeen New Thai Investment Trust Investment companies Investment company review 13/05/20 Aberdeen Standard Equity Income Trust Investment companies Investment company review 07/02/19 Accsys Technologies General industrials Update 14/10/19 Acorn Income Fund Investment companies Investment company review 24/01/20 Alkane Resources Metals & mining Update 03/09/20 Allied Minds Investment companies Update 19/10/20 Appreciate Group Financial services Outlook 03/09/20 ArborGen Basic materials Update 16/04/20 Atlantis Japan Growth Fund Investment companies Investment company review 17/07/20 Attica Bank Banks Update 18/06/20 Augean Industrial support services Update 29/10/20 Auriant Mining Metals & mining Update 03/09/20 Avon Rubber Aerospace & defence Update 10/09/20 Baillie Gifford China Growth Trust Investment companies Initiation 15/10/20 Baker Steel Resources Trust Investment companies Investment company review 10/08/20 BB Biotech Investment companies Investment company review 16/04/20 bet-at-home Travel & leisure Update 04/08/20 BioPharma Credit Investment companies Investment company review 17/02/20 Biotech Growth Trust (The) Investment companies Investment company review 10/08/20 BlackRock Greater Europe Inv. Trust Investment companies Investment company review 04/05/20 BlackRock Latin American Inv. Trust Investment companies Investment company review 12/10/20 Boku Software & comp services Update 16/09/20 Borussia Dortmund Travel & leisure Outlook 14/10/20 Bragg Gaming Group Technology Update 06/07/20 Brooge Energy Oil & gas Initiation 17/08/20 Brunner Investment Trust (The) Investment companies Investment company review 28/07/20 Canacol Energy Oil & gas Flash 17/08/20 Canadian General Investments Investment companies Investment company review 06/05/20 Carbios Alternative energy Update 27/03/20 Carclo Technology Flash 21/01/20 Carr’s Group Food & drink Update 15/07/20 Cenkos Securities Financial services Outlook 21/10/20 CentralNic Group Software & comp services Update 14/09/20 China Water Affairs Group Utilities Outlook 23/07/20 Circle Property Real estate Outlook 12/11/19 Civitas Social Housing Real estate Update 20/05/20 Claranova Software & comp services Outlook 14/10/20 Codere Travel & leisure Update 18/11/19 Cohort Aerospace & Defence Update 28/07/20 Coro Energy Oil & gas Flash 03/04/20 CREALOGIX Group Software & comp services Outlook 22/09/20 Custodian REIT Property Update 25/08/20 CVC Credit Partners European Opps Investment companies Investment company review 04/09/20 DeA Capital Investment companies Outlook 02/10/20 Deutsche Beteiligungs Investment companies Investment company review 20/08/20 discoverIE Group Electronics & electrical equipment Update 16/10/20 Diverse Income Trust (The) Investment companies Investment company review 21/05/20 Ebiquity Media Update 28/09/20 Egdon Resources Oil & gas Flash 31/03/20
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Company Sector Most recent note Date published
EJF Investments Investment companies Flash 27/04/20 EMIS Group Software & comp services Update 10/09/20 EML Payments Software & comp services Initiation 22/10/20 Endeavour Mining Metals & mining Update 21/08/20 Epwin Group Industrials Update 07/08/20 EQS Group Media Update 17/08/20 Esker Technology Update 14/10/20 European Assets Trust Investment companies Investment company review 28/08/20 European Investment Trust (The) Investment companies Investment company review 19/06/19 Evolva Food & beverages Update 28/08/20 Expert System Technology Update 01/10/20 FCR Immobilien Real estate Update 18/08/20 Fidelity Asian Values Investment trusts Investment company review 21/07/20 Fidelity China Special Situations Investment companies Investment company review 21/07/20 Fidelity European Values Investment companies Investment company review 19/05/20 Fidelity Japan Trust Investment companies Investment company review 26/08/20 Fidelity Special Values Investment companies Investment company review 14/10/20 FinLab Investment companies Initiation 27/08/19 Finsbury Growth & Income Trust Investment companies Investment company review 09/06/20 Games Workshop Group Consumer goods Update 11/09/20 Gamesys Group Travel & leisure Update 20/10/20 GB Group Technology Update 22/10/20 GCP Student Living Real estate investment trusts Outlook 05/10/20 Gemfields Group Metals & mining Update 03/08/20 Genesis Emerging Markets Fund Investment companies Investment company review 01/04/20 Greggs Food & drink Update 30/09/20 Gresham House Strategic Investment companies Investment company review 08/10/20 Hansa Investment Company Investment companies Investment company review 12/07/19 HarbourVest Global Private Equity Investment companies Investment company review 29/09/20 HBM Healthcare Investments Investment companies Investment company review 25/03/20 Hellenic Petroleum Oil & gas Update 22/09/20 Henderson Far East Income Investment companies Investment company review 13/01/20 Henderson International Income Trust Investment trusts Investment company review 09/09/20 Henderson Opportunities Trust Investment trusts Initiation 07/02/20 HgCapital Trust Investment companies Investment company review 14/09/20 Hurricane Energy Oil & gas Update 18/08/20 ICG-Longbow SSUP Investment companies Investment company review 08/01/20 Impact Healthcare REIT Real estate Update 13/07/20 Invesco Asia Trust Investment companies Investment company review 02/09/20 IQE Tech hardware & equipment Update 08/09/20 Jersey Electricity Industrials Outlook 14/03/19 John Laing Group Investment companies Flash 19/10/20 JPMorgan Global Growth & Income Investment companies Investment company review 17/09/20 Jupiter UK Growth Investment Trust Investment trusts Investment company review 13/05/19 Kcell Joint Stock Company Telecoms Update 05/08/20 KEFI Gold and Copper Mining Outlook 30/09/20 Keywords Studios Software & comp services Update 21/09/20 La Doria Food & drink Update 17/09/20 Leclanché Alternative energy Update 02/10/20 Lepidico Metals & mining Update 20/07/20 Lookers General retailers Update 24/08/20 Lowland Investment Company Investment companies Investment company review 24/07/20 Marble Point Loan Financing Investment companies Flash 15/04/20 Marshall Motor Holdings Automotive retailers Update 13/10/20 Martin Currie Global Portfolio Trust Investment companies Investment company review 29/06/20 Media and Games Invest Software & comp services Flash 01/10/20
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Company Sector Most recent note Date published
Medserv Industrial support services Update 10/12/19 Merchants Trust (The) Investment companies Investment company review 26/05/20 Mercia Asset Management Investment companies Update 14/10/20 Mirriad Advertising Media Update 11/09/20 Monarch Gold Metals & mining Initiation 22/10/20 Mondo TV Media Update 17/09/20 Murray Income Trust Investment companies Investment company review 07/05/20 Murray International Trust Investment companies Investment company review 16/04/20 Mytilineos General industrials Update 23/10/20 Nanoco Group Tech hardware & equipment Update 16/10/20 NB Private Equity Partners Investment companies Initiation 14/10/20 Norcros Construction & materials Update 19/10/20 Numis Corporation Financial services Update 01/10/20 Ocean Wilsons Holdings Investment companies Outlook 11/09/19 OPAP Travel & leisure Update 16/09/20 Osirium Technologies Software & comp services Update 06/10/20 OTC Markets Group Financial services Update 19/08/20 Palace Capital Real estate Update 16/07/20 Pan African Resources Metals & mining Update 14/10/20 paragon General industrials Update 27/11/19 Picton Property Income Property Update 04/08/20 PIERER Mobility Automobiles & parts Update 01/10/20 Piteco Software & comp services Update 29/09/20 Polypipe Construction & materials Update 17/07/20 PowerHouse Energy Group Alternative energy Flash 15/07/20 Primary Health Properties Property Update 11/08/20 Princess Private Equity Holding Investment companies Investment company review 11/03/20 ProCredit Banks Update 21/08/20 Quadrise Fuels International Alternative energy Flash 26/10/20 RADA Electronic Industries Industrials Initiation 20/08/20 Raven Property Group Property Outlook 10/09/20 Record Financials Update 21/10/20 Regional REIT Real estate Update 30/09/20 Renergen Oil & gas Update 30/01/20 Renewi Industrial support services Update 01/10/20 Riber Tech hardware & equipment Update 06/10/20 Rock Tech Lithium Metals & mining Update 12/06/20 S&U Financials Update 07/10/20 S Immo Real estate Update 01/09/20 SDX Energy Oil & gas Update 16/10/20 Secure Trust Bank Financials Update 28/10/20 Securities Trust of Scotland Investment companies Investment company review 18/02/20 Severfield Construction & materials Update 04/09/20 Silver One Resources Metals & mining Initiation 28/08/20 Standard Life Private Equity Trust Investment companies Investment company review 08/09/20 Standard Life UK Smaller Cos Trust Investment companies Investment company review 01/05/20 Stern Groep Automotive retail Initiation 13/10/20 Studio Retail Group Retail Flash 30/09/20 Supermarket Income REIT Property Update 24/02/20 Sureserve Group Industrial support services Update 07/10/20 Target Healthcare REIT Property Update 14/08/20 Technicolor Media Update 30/09/20 Templeton Emerging Markets Inv Trust Investment companies Investment company review 18/06/20 Tetragon Financial Group Investment companies Investment company review 01/06/20 The Bankers Investment Trust Investment trusts Investment company review 31/07/20 The Law Debenture Corporation Investment trusts Investment company review 05/08/20
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Company Sector Most recent note Date published
The MISSION Group Media Update 23/09/20 The Scottish Investment Trust Investment trusts Investment company review 23/04/20 Thin Film Electronics Technology Flash 31/05/19 Thrace Plastics General industrials Initiation 14/06/19 Tinexta Professional services Update 19/10/20 Town Centre Securities Real estate Update 27/01/20 Trackwise Designs Tech hardware & equipment Initiation 24/09/20 TR European Growth Trust Investment trusts Investment company review 18/05/20 Treatt Basic industries Update 09/10/20 Tungsten Corporation e-invoicer & invoice financier Update 20/07/20 TXT e-solutions Technology Flash 22/10/20 Tyman Construction & materials Update 16/10/20 Utilico Emerging Markets Trust Investment companies Investment company review 23/09/20 Vermilion Energy Oil & gas Outlook 14/09/20 Vietnam Enterprise Investments Investment companies Investment company review 29/04/20 VietNam Holding Investment companies Investment company review 16/03/20 VinaCapital Vietnam Opportunity Fund Investment companies Investment company review 19/12/19 Walker Greenbank General industrials Update 12/08/20 WANdisco Technology Flash 29/10/20 Wheaton Precious Metals Metals & mining Update 12/10/20 Witan Investment Trust Investment companies Investment company review 06/10/20 Worldwide Healthcare Trust Investment companies Investment company review 30/07/20 XP Power Electronic & electrical equipment Update 12/10/20 YouGov Media Update 08/10/20
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