EDISON INSIGHT Strategic perspective | Company profiles
April 2021
Published by Edison Investment Research
Contents
Global perspectives 2 Company profiles 7 Edison dividend list 67 Stock coverage 68
Prices at 23 April 2021 Published 29 April 2021 US$/£ exchange rate: 0.7234 NOK/£ exchange rate: 0.0857 €/£ exchange rate: 0.8622 CHF/£ exchange rate: 0.7811 C$/£ exchange rate: 0.5770 ZAR/£ exchange rate: 0.0499 A$/£ exchange rate: 0.5554 HUF/£ exchange rate: 0.0024 NZ$/£ exchange rate: 0.5132 KZT/£ exchange rate: 0017 SEK/£ exchange rate: 0.0847 JPY/£ exchange rate: 0.0066
Welcome to the April edition of Edison Insight. We now have c 400 companies under coverage, of
which 119 are profiled in this edition. Healthcare companies are covered separately in Edison Healthcare Insight. Click here to view the latest edition. This month we open with a strategy piece by Alastair George, who believes that where vaccination
programmes have been implemented swiftly, COVID-19 cases have been falling sharply. In only a few months, other regions in Europe will have caught up with the UK and cases should start to drop even as lockdowns are eased. Equity market volatility has fallen as the evolution of the pandemic becomes clearer. With increased certainty, the full effects of the fiscal and monetary stimulus measures are now
on offer. The benefits are likely to be felt most strongly in the real, physical economy which coincides with where we believe the value in financial markets currently lies. 2021 and 2022 are likely to deliver well above trend GDP growth in developed markets, provided COVID-19 remains contained. Furthermore, consensus earnings forecasts indicate significant growth in corporate profits lies ahead. With monetary policy likely to remain accommodative until later in 2022, the fundamental outlook for the value segment of the market remains strong. He remains neutral on global equities in aggregate but favours the value segment of the market. Valuations for the fastest growing segment of the market remain significantly in excess of their long-term averages, which suggests future returns may
disappoint. In contrast, while valuations for the value segment of the market are no longer at bargain levels they continue to be supported by an extended period of fiscal and monetary stimulus, GDP and profits recovery.
This month we have added Aspire Global, Doctor Care Anywhere Group, Kendrion, LXi REIT, Monarch Mining Corporation, Schaltbau Holding and VivoPower International 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. Edison is authorised and regulated by the Financial Conduct Authority. Edison is a registered investment adviser regulated by the state of New York. We welcome any comments/suggestions our readers may have.
Neil Shah Director of research
Edison Insight | 29 April 2021 1
Global perspectives: Maintaining course Analyst The roll-out of the COVID-19 vaccination programmes continues in Alastair George developed markets. Where vaccination programmes have been implemented +44 (0)20 3077 5700 swiftly, COVID-19 cases have been falling sharply. In only a few months, other [email protected]
regions in Europe will have caught up with the UK and cases should start to drop even as lockdowns are eased. In the absence of an ‘escape’ variant, COVID-19 should have a much lower impact on developed markets by the end the year, even if it appears likely to persist as a healthcare issue for rather longer.
Equity market volatility has fallen as the evolution of the pandemic becomes clearer. With increased certainty, the full effects of the fiscal and monetary stimulus measures are now on offer. The benefits are likely to be felt most strongly in the real, physical economy which coincides with where we believe the value in financial markets currently lies.
2021 and 2022 are likely to deliver well above trend GDP growth in developed markets, provided COVID-19 remains contained. Furthermore, consensus earnings forecasts indicate significant growth in corporate profits lies ahead. With monetary policy likely to remain accommodative until later in 2022, the fundamental outlook for the value segment of the market remains strong.
We remain neutral on global equities in aggregate but favour the value segment of the market. Valuations for the fastest growing segment of the market remain significantly in excess of their long-term averages, which suggests future returns may disappoint. In contrast, while valuations for the value segment of the market are no longer at bargain levels they continue to be supported by an extended period of fiscal and monetary stimulus, GDP and profits recovery.
Edison Insight | 29 April 2021 2
Maintaining course and focusing on value
We believe investors positioned for the COVID recovery should maintain course and remain focused on the value segment of the equity market. The encouraging decline in COVID-19 cases and easing of lockdown restrictions where vaccination programmes have been pushed aggressively demonstrates that it is now possible to look towards a post-pandemic world. We would also highlight that in many developed markets while the initial vaccination roll-out stuttered, progress is now much faster, with many nations expected to reach 50% vaccination rate within the next 100 days, Exhibit 1. If the experience of Israel and the UK is a guide this should be associated with a significant decline in infections and hospitalisations.
Exhibit 1: Days to 50% vaccination 120 100 80 60 40
Days to 50% vaccination 50% to Days 20 0
Source: Our world in data, government statistics, Edison calculations based on current vaccination rates This is of course provided that new COVID variants do not evade the protection afforded by vaccination, and at least before shots can be adjusted to combat them. We also acknowledge that emerging markets will unfortunately take longer to reach the vaccination threshold required to see a progressive decline in cases.
The market recovery since the lows of 2020 has been impressive. From a valuation perspective, at first sight this presents investors with something of a dilemma. Cash returns, long-term bond yields and equity expected returns all low compared to history. The US S&P 500 is now trading on a 10- year trailing P/E of over 32x which has in the past been followed by annualised returns over the next 10 years of less than 1%. This is even lower than the current yield on US 10-year government bonds of 1.65%.
However, a significant proportion of this P/E multiple expansion has been driven by the growth segment of the market. There continues to be a significant valuation premium for the world’s fastest growing companies, Exhibit 2. The fastest growing 20% of global companies are still trading at a 100% premium to their longer-run price/book average while the fastest growing 10% of companies are trading at a 150% premium, Exhibit 2.
Edison Insight | 29 April 2021 3
Exhibit 2: Global growth companies remain on a ‘valuation excursion’
200% 150% 100% 50% 0%
-50%Price/book -100% Premium to historic average average historic to Premium 2007 2009 2011 2013 2015 2017 2019
Slowest quartile Second quartile Third quartile Fastest quartile Fastest growing decile
Source: Refinitiv, Edison calculations The outperformance of growth indices and their ensuing popularity over the past decade has not been uniform but is comprised of several distinct phases. For much of the period, value and growth indices delivered very similar returns, up to 2015. In the subsequent four years global growth stocks reportedly outperformed by c 30%, a meaningful percentage but also one which appeared warranted by the consolidation of many digital industries into the hands of just a few key players.
It is the COVID-19 era that appears more speculative to us, as growth continued to outperform value by a further 40% in 2020. This was a result of short- and long-term interest rates falling at the same time as one-off boost to growth stock earnings. Lockdowns clearly favoured the digital economy over forcibly shuttered real activities. The peak in growth performance coincides almost perfectly with the successful trial results of the first COVID-19 vaccine in November last year, from which point value has started to outperform.
Fundamentals continue to favour value over growth stocks We believe that economic fundamentals are likely to remain supportive for the value sectors of the equity market compared to growth over the remainder of 2021. There has been a quite enormous fiscal response to COVID-19 in developed markets which is likely to continue to support economic activity for the next two years, Exhibit 3.
Exhibit 3: Estimated size of fiscal response to COVID-19
40 35 30 25 20 15
% GDP 10 5 0 ITA FIN AEs JPN NZL BEL NLD CZE FRA ESP AUS USA DNK CHE DEU CAN SGP KOR GBR NOR SWE
Additional spending and forgone revenue Equity, loans, and guarantees
Source: International Monetary Fund Notably, in the United States the total stimulus amounts to close to 25% of GDP compared to a stimulus of less than 5% of GDP in response to the financial crisis of 2008. Unlike then, the absence of moral hazard concerns has contributed to the absence of opposition among lawmakers for similarly expansive fiscal programmes across developed markets.
In addition to the fiscal support for the economy, monetary policy has been highly accommodative and will remain so for some time, based on central banks’ stated determination for low rates to stay
Edison Insight | 29 April 2021 4
in place until the recovery is well underway. The reintroduction of QE has been timely and forceful with a balance sheet expansion of $2.8trn and €3.6trn in the United States and eurozone respectively. We do not expect talk of tapering US QE until the end of 2021 and the first US interest rate increase only becomes likely by the end of 2022.
While there may be some fears in the market of an uptick in inflation, we believe both investors and US policymakers will look through this data due to its noisy nature until the base effects of the initial COVID-19 wave fall out of year-on-year comparisons. The US Fed has considerable room for manoeuvre given its new policy of average inflation targeting in any case. In the eurozone, the European Central Bank (ECB) is likely to keep rates lower for even longer, as the COVID-19 recovery is likely to be several quarters later than in the United States and the UK, due to a slower pace of vaccinations.
The combined effect of fiscal and monetary stimulus with vaccination programmes is an extended period of rapid growth in GDP. IMF forecasts suggest that developing market GDP growth will be approximately double the long-run average over the coming 12 months before declining back towards trend levels by the end of 2022, Exhibit 4. We view the combination of high GDP growth and a sharp rebound in profitability as a favourable backdrop for a much broader range of sectors than the narrow list that dominated 2020’s market performance.
Exhibit 4: IMF GDP growth forecasts 2021–22
12% 10% 8% 6% 4% Growth % 2% 0% Q221 Q321 Q421 Q122 Q222 Q322 Q422
Forecast GDP Y/Y GDP growth
Source: International Monetary Fund Further support for consumer spending comes from the very high level of personal savings recorded across the United States, UK and eurozone during the pandemic. Personal savings as a percentage of GDP doubled during 2020 in each of these regions. We expect this phenomenon carried both a precautionary and forced element as the economy was shut down during lockdown. Provided the pump-priming by fiscal and monetary policy is effective, as the private sector becomes more comfortable with releasing savings built up during the pandemic, this may offer scope for a secondary phase of growth.
Given these circumstances of stimulus and the promise of broad vaccination programmes we are not surprised to observe that Refinitiv I/B/E/S consensus earnings estimates have continued to trend higher since the start of the year and currently point to 40% profits growth for 2021 in Europe (including UK) and 30% growth in the United States. As lockdowns are progressively released, further upgrades should be expected, supporting the case for the value segments of the market.
Edison Insight | 29 April 2021 5
Exhibit 5: 2021 Consensus estimates remain on an upward trend
140.0
130.0
120.0
110.0
Index level Index 100.0
90.0
80.0 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21
UK US Europe ex UK Emerging
Source: Refinitiv, Edison calculations. Note: Index rebased to 100.
Fed remains on hold in April, as expected There was no change, as expected, to policy settings in the FOMC statement of 28 April. Nevertheless, the new reference to the progress of vaccinations and deletion of the word ‘considerable’ in respect of risks to the economic outlook may represent the Fed’s first tentative and small step back from the very accommodative policy settings put in place to counter the pandemic. However, during the press conference, Fed Chair Powell was at pains to emphasise the gradualist nature of policy changes and the transient nature of currently high inflation readings due to last year’s base effects. The timing of US QE tapering still does not appear to be on the Fed’s agenda.
We remain underweight government bonds as the economic recovery broadens and commodity prices move higher indicating some further challenging if transient inflation readings ahead. However, we are not expecting a sudden shift higher in bond yields which would be seen as an undesirable tightening of financial conditions by the Fed and other central banks at this stage.
Instead, progressive shifts higher in yields should be expected in our view as policy gradually moves back to normal settings over the course of the next 18 months. In this regard, beyond 2022 a looser longer-term fiscal policy position in developed markets may indicate a somewhat higher long-term bond yield and tighter monetary policy than investors have become accustomed to in the decade after the 2008 financial crisis.
Conclusion
We remain neutral on equities, balancing a modest level of overvaluation for developed markets in aggregate against the prospect of several years of very low interest rates and the strong earnings growth which should be expected in the post-pandemic recovery. It may be tempting to take profits now, but we believe the value segment of the market has fundamental support and the inevitable frustration of doing relatively little should be preferred to changing course. The known risk factors for a relapse in economic activity – a peak in the cycle or a tightening of monetary or fiscal policy – remain unusually modest at present.
Edison Insight | 29 April 2021 6
Sector: Technology 1Spatial (SPA) Price: 44.5p Market cap: £49m INVESTMENT SUMMARY Market AIM 1Spatial picked up further notable wins in April with the announcement of a $0.5m contract with Google Real Estate and Workplace Services and a £0.9m contract with Defra, adding Share price graph (p) to the slew of recent contract wins in both the UK and US so far this year. FY21 reported results were comfortably above the baseline set out in its trading statement with a positive outlook statement referencing a growing pipeline and an 'accelerated win rate'. As a result we lifted our FY22 adjusted EPS forecast by 20% but see scope for further increases if current momentum continues.
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 Company description grow at a 10% CAGR to reach annual sales of US$17.5bn by 2023. 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 (9.2) 58.9 111.9 2020 23.4 3.2 0.8 0.58 76.7 85.7 Relative* (12.6) 51.8 71.3 2021 24.6 3.6 0.3 0.18 247.2 12.8 * % Relative to local index Analyst 2022e 25.6 3.7 0.4 0.26 171.2 10.1 Dan Gardiner 2023e 27.2 4.2 0.8 0.53 84.0 9.8
Sector: Technology 4iG (4IG) Price: HUF629.00 Market cap: HUF59126m INVESTMENT SUMMARY Market Budapest stock exchange In March, 4iG announced two M&A deals and a bond issue. First was the acquisition of 70% of the shares of Spacenet, a Cisco Gold partner specialising in data centre infrastructure Share price graph (HUF) solutions. Secondly, on 25 March 4iG issued a HUF15.45bn (c €43m) 10-year bond bearing a 2.9% coupon. The proceeds from the issue will be used for domestic and regional expansion. Finally, on 29 March 4iG announced the conditional acquisition of DIGI Group, a leading Hungarian telecoms services provider (FY20 revenues HUF70bn (c €195m), adjusted EBITDA HUF19bn (c €53m)). This acquisition will make 4iG one of the leading Hungarian telecoms services companies when it completes in Q321.
INDUSTRY OUTLOOK
Management anticipates continuing consolidation-driven growth, with organic growth Company description supplemented by market share gains and accelerating market consolidation. Management 4iG is one of the leading IT services is positioning the group to benefit from high-demand new technologies including and systems integrators in Hungary, working with public sector clients, large digitalisation, blockchain, deep learning, artificial intelligence, industry 4.0, cyber security corporates and SMEs. Management is 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 (fd) P/E P/CF Price performance (HUFm) (HUFm) (HUFm) (HUF) (x) (x) % 1m 3m 12m Actual 1.9 0.0 30.5 2019 41129.0 4075.0 3314.0 30.77 20.4 14.2 Relative* 3.9 2.0 0.1 2020 57284.0 5051.0 4155.0 35.54 17.7 11.5 * % Relative to local index Analyst 2021e 62076.0 5614.0 4632.0 42.38 14.8 10.3 Richard Williamson 2022e 70261.0 6955.0 5883.0 53.20 11.8 8.3
Edison Insight | 29 April 2021 7 Sector: Media 4imprint Group (FOUR) Price: 2315.0p Market cap: £650m INVESTMENT SUMMARY Market LSE 4imprint’s FY20 revenues were, as indicated at January’s update, slightly ahead of our previous forecast after more positive Q4 trading. Indications are that revenues are Share price graph (p) continuing to regain ground as the US economy builds back. In January and February, quieter trading months, order counts were at 65% of FY19 levels, with March (to date) showing further progress, allowing us to move FY21 estimates ahead. The group’s considerable cash resource has enabled it to trade through the shutdowns while keeping its infrastructure and people in place. The speed of its financial recovery will inevitably reflect the timing and scale of the rebound in US corporate health.
INDUSTRY OUTLOOK
The Advertising Specialty Institute, an industry body, estimated the value of the US Company description promotional products distribution market in 2020 at US$20.7bn, down 20% on prior year, 4imprint is the leading direct marketer after an extended period of growth at a 10-year CAGR of 5.0%. However, the FY20 figure of promotional products in the United States, Canada, the UK and Ireland. In includes US$6bn of PPE sales, without which sales would have fallen by 43% year-on-year. FY20, 98% of revenues were Notwithstanding its market-leading position, 4imprint’s share is therefore less than 3% generated in the United States and Canada. (3.6% excluding PPE).
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (2.3) (2.5) 30.4 2019 860.8 59.1 55.6 157.2 20.4 15.9 Relative* (6.0) (6.9) 5.4 2020 560.0 8.4 5.0 13.8 231.9 122.4 * % Relative to local index Analyst 2021e 645.0 21.6 17.9 49.5 64.6 39.1 Fiona Orford-Williams 2022e 725.0 29.6 25.8 71.7 44.6 29.2
Sector: General industrials AAC Clyde Space (AAC) Price: SEK2.60 Market cap: SEK383m INVESTMENT SUMMARY Market Nasdaq FN Premier AAC Clyde Space is at the forefront of the rapidly growing and innovative market for small satellites. As nanosatellite build rates and deployments rise sharply over the next decade, Share price graph (SEK) increasing systems and platform sales should be enhanced by growing services revenue. Management is navigating the growth phase and targeting opportunities in New Space. Following the Q420 acquisitions of Hyperion and SpaceQuest, the purchase of Omnisys was approved alongside the contingent c SEK100m fund-raise at an EGM on 22 April 2021. It extends the company's reach and adds pertinent capabilities and technologies, augmenting the drive to profit and positive cash generation.
INDUSTRY OUTLOOK
Of over 1,000 nanosatellites launched since 1998, AAC Clyde Space is represented on Company description 30–40%. Over the next five years around 3,000 nanosatellites should be launched as Headquartered in Sweden, AAC Clyde technology development extends the applications for low earth orbit (LEO) constellations, Space is a world leader in nanosatellite end-to-end solutions, subsystems, especially for communications. AAC Clyde Space has operations in Glasgow, Sweden, platforms, services and components, Holland and the US and is developing its 'Satellite as a Service' offering, as well as sales of including supply to third parties. It has production and development subsystems to third-party satellite providers. operations in Sweden, Scotland, the Netherlands and the United States. Y/E Dec Net Sales EBITDA PBT EPS (fd) P/E P/CF Price performance (SEKm) (SEKm) (SEKm) (öre) (x) (x) % 1m 3m 12m Actual (3.6) (36.5) (21.0) 2019 66.4 (27.3) (38.2) (44.55) N/A N/A Relative* (8.5) (43.9) (49.1) 2020 98.4 (17.5) (26.2) (25.27) N/A N/A * % Relative to local index Analyst 2021e 192.8 6.1 (5.1) 0.0 N/A 39.9 Andy Chambers 2022e 253.0 21.0 11.5 0.0 N/A 20.6
Edison Insight | 29 April 2021 8 Sector: General industrials Accsys Technologies (AXS) Price: 149.0p Market cap: £252m INVESTMENT SUMMARY Market LSE A year end update (15 April) noted strong H2 sales growth – after a small COVID-19 related dip in H1 – resulting in FY21 revenue progress of c 9%. Accoya wood volumes (+ c4%) and Share price graph (p) associated revenues have been firm with the Arnhem plant effectively operating at capacity and this has supported a sustained gross margin improvement as seen at the H1 stage. Expansion via a fourth reactor at Arnhem is on track for delivery by the end of FY22 and progress is also being made towards establishing Accoya production in North America. The new Hull/Tricoya plant is in the final stages of construction – after some COVID-19 and engineering-related delays – and management expects full operational ramp-up to commence in H2 FY22. Accsys ended FY21 with €12.5m net debt. 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 (9.3) 5.1 105.5 2019 75.2 0.9 (6.2) (0.38) N/A N/A Relative* (12.7) 0.4 66.2 2020 90.9 7.0 (2.2) (0.08) N/A 103.6 * % 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: Mining Alkane Resources (ALK) Price: A$0.76 Market cap: A$450m INVESTMENT SUMMARY Market ASX Production at Tomingley in Q221 and Q321 were both materially above our expectations and caused Alkane to increase its guidance (for the second time this year) for FY21 from Share price graph (A$) 47–52koz to 50–55koz at a reduced AISC of A$1,400–1,550/oz (cf A$1,450–1,600/oz previously). At the same time, Alkane 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. To date, this has resulted in an increase in Roswell's resource of 50% and the promotion of substantially all of San Antonio's inferred resource into the indicated category (NB: Feasibility studies for both are expected this quarter).
INDUSTRY OUTLOOK
Post the de-merger of ASM, our most recent valuation of Alkane attributes 21c/share in Company description value to Tomingley plus net cash (A$30.1m as at end-Q321). To this should then be added Alkane Resources is an Australian up to 27c for its Roswell and San Antonio resources plus up to a further 67c from contingent production and development company. It previously produced 70,000oz of assets such as Boda and 10c from other investments. gold per year from the open-pit operations at its Tomingley gold mine, but is transitioning to underground operations and expects to produce c 47,500oz in FY21. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual 7.1 (11.2) 8.6 2019 94.0 33.0 25.4 4.57 16.6 10.5 Relative* 2.2 (14.1) (21.8) 2020 72.5 29.4 20.6 2.56 29.7 14.8 * % Relative to local index Analyst 2021e 104.2 34.8 22.9 2.89 26.3 19.9 Charles Gibson 2022e 125.3 41.4 26.3 3.31 23.0 13.6
Edison Insight | 29 April 2021 9 Sector: Technology Allied Minds (ALM) Price: 22.4p Market cap: £54m INVESTMENT SUMMARY Market LSE The capital markets day provided further visibility on Allied Minds’ portfolio – FY21 funding rounds are anticipated for Federated Wireless, BridgeComm, Spin Memory, Spark Insights Share price graph (p) and OcuTerra. The board remains open to considering all options to realise value for shareholders in a reasonable timeframe and return cash to shareholders, but does not believe that a fire sale of assets is in shareholders’ interests. Pending positive funding news, we maintain the value of Spin Memory and Spark Insights at zero in our estimated adjusted NAV. Allied Minds’ shares trade at a material discount to our FY20 adjusted NAV estimate of 42.2p per share.
INDUSTRY OUTLOOK
COVID-19 fears have abated, with sustained tech valuations and amidst a robust funding Company description environment. Investors have preferred stocks that demonstrate portfolio progress and offer Allied Minds is a technology the potential for meaningful exits in a realistic timeframe. Consistency of NAV performance, investment company with a concentrated portfolio focused on capital preservation, realisations and exits 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 (17.0) (21.4) (21.0) 2019 2.7 (47.2) 49.5 20.97 1.5 N/A Relative* (20.1) (25.0) (36.1) 2020 0.5 (12.9) (54.5) (21.49) 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: Mining Alphamin Resources (AFM) Price: C$0.57 Market cap: C$673m INVESTMENT SUMMARY Market JSE , TSX-V Alphamin offers rare exposure to immediate positive cash flow from a metal that both Rio Tinto and MIT regard as being the most likely to benefit from the widespread electrification Share price graph (C$) of the world economy. Fortuitously, its Bisie tin mine in the north-eastern DRC is hitting its stride at just the moment that the tin price is experiencing its biggest squeeze in decades, providing it with a golden opportunity to repay debt and even consider making distributions to shareholders as early as next year.
INDUSTRY OUTLOOK
With the tin price having risen over 30% since Q420, we estimate that there is scope for Alphamin to reduce net debt to zero before end-FY21. Beyond that, at a long-term tin price of US$23,425/t, we estimate a value for Alphamin of 39.1 US cents, or 49.6 Canadian cents Company description per share on its current mine plan and potentially as high as C$1.117/share in the event that Alphamin Resources owns (84.14%) exploration expands and/or extends the life of operations (see 12 March exploration and operates the Mpama North tin mine in the North Kivu province of the update). Q121 results are scheduled for 7 May. Democratic Republic of the Congo with a grade of c 4.5% Sn (the world’s highest). Accounting for c 4% of the world’s mined supply, it is the second largest tin mine in the world outside China and Indonesia. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (3.4) 14.0 267.7 2019 27.2 8.5 (2.6) 0.6 75.8 N/A Relative* (5.6) 6.5 174.4 2020 187.4 58.3 (0.7) (0.8) N/A 26.6 * % Relative to local index Analyst 2021e 271.0 141.3 113.3 6.0 7.6 4.8 Charles Gibson 2022e 258.2 131.5 109.6 5.8 7.8 5.1
Edison Insight | 29 April 2021 10 Sector: Technology Applied Graphene Materials (AGM) Price: 37.0p Market cap: £24m INVESTMENT SUMMARY Market AIM Applied Graphene’s (AGM’s) H121 results show the beneficial impact of the management’s decision announced in October 2019 to focus on supplying customers in the protective Share price graph (p) coatings market with graphene in easy-to-use dispersions. Revenues grew by 20% year-on-year, albeit from a low base, and adjusted EBITDA losses narrowed by £0.3m to £1.6m. Management estimates that the £5.5m (net) raised in January has extended the company’s cash runway well into calendar 2023, enabling it to convert the current opportunity pipeline totalling £3.7m (after applying a probability of success factor) into meaningful annual revenues during the period.
INDUSTRY OUTLOOK
At the end of March AGM announced that its customer, Constellation Chemicals, had Company description launched two new sealants in its car detailing product range that were enhanced with Applied Graphene Materials (AGM) graphene nano-platelet technology. These new product launches demonstrate further develops graphene dispersions that customers use to enhance the progress in the deployment of AGM's graphene nano-platelet dispersions in the car care properties of coatings, composites and market. 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 (9.8) (43.1) 289.5 2019 0.1 (4.6) (4.8) (7.9) N/A N/A Relative* (13.1) (45.7) 214.9 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
Sector: Financials Appreciate Group (APP) Price: 40.5p Market cap: £76m INVESTMENT SUMMARY Market AIM Ahead of results due 29 June, APP says that FY21 underlying PBT was in line with market expectations of £4.1–£4.8m, and above our forecast, excluding c £3.0m of non-recurring Share price graph (p) costs related to the ongoing strategic repositioning. The resilient H221 performance was driven by strong corporate demand, increased sales of higher margin digital product, and previous restructuring actions. Total group billings for the year were £406.5m (FY20: £419.9m), including £23m generated by the low margin, non-recurring free school meal initiative. 'Underlying billings' within the corporate business and HSV continued to stabilise, down 8% for the year (H121: down 40%). Less positively, the current year Christmas Savings order book is expected to be c 11% lower, primarily due to restricted face-to-face agent activity during the lockdown. The in-line results come despite the pandemic slowing customer redemptions, deferring c £3m of profits for the year but supporting the healthy Company description end-year free cash position of £32.9m. We will review our estimates. Appreciate Group is a specialised financial services business and is the INDUSTRY OUTLOOK UK’s leading provider of multi-retailer redemption products. Consumers can The market is estimated at c £6bn by the UK Gift Card & Voucher Association, and is access products directly through its market-leading Christmas Savings fragmented, providing significant opportunities for market share growth. 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 12.0 (7.0) (4.4) 2019 110.4 12.3 12.5 4.8 8.4 11.0 Relative* 7.8 (11.2) (22.7) 2020 112.7 11.7 11.4 4.9 8.3 11.0 * % Relative to local index Analyst 2021e 93.5 6.0 4.2 1.9 21.3 N/A Martyn King 2022e 101.0 9.2 7.1 3.1 13.1 28.3
Edison Insight | 29 April 2021 11 Sector: General industrials ArborGen Holdings (ARB) Price: NZ$0.17 Market cap: NZ$85m INVESTMENT SUMMARY Market NZSX ArborGen’s underlying H1 trading performance was robust with good control of opex leading to a reduced seasonal EBITDA loss despite market challenges. The US selling season Share price graph (NZ$) started well in H2 though the 13 January update noted that sales had been slower than previously anticipated. Our headline FY21 PBT estimate reduced by c 1% (or c 30% underlying before COVID-19 employment support monies) with no material change for FY22. An increase in supply of higher-value seedlings in the US remains on track and is expected to drive group earnings higher from FY22.
INDUSTRY OUTLOOK
Prior to the COVID-19 outbreak, the economic growth outlook in each of its core countries, the United States, Brazil, New Zealand and Australia, was either good or improving, Company description according to OECD data. At this point, the primary end-markets served by its plantation ArborGen Holdings (formerly Rubicon) forestry customer base (ie construction and the pulp and paper industries) were in a positive is an NZX-listed investment company. Its subsidiary ArborGen is the world’s cyclical phase. largest integrated developer, commercial manufacturer and supplier of advanced forestry seedlings with operations in the United States, 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 2.4 3.0 3.0 2019 49.1 4.6 4.7 1.0 12.1 14.6 Relative* 0.4 9.4 (13.1) 2020 56.9 7.7 6.0 1.4 8.6 12.5 * % Relative to local index Analyst 2021e 54.7 7.1 9.4 2.0 6.0 5.3 Toby Thorrington 2022e 65.3 12.1 12.3 2.5 4.8 5.0
Sector: Travel & leisure Aspire Global (ASPIRE) Price: SEK68.00 Market cap: SEK3159m INVESTMENT SUMMARY Market Nasdaq FN Premier We have initiated coverage of Aspire Global (AG). Following recent acquisitions that give AG a presence across most parts of the iGaming value chain, the strategy is to expand its Share price graph (SEK) scalable platforms into more markets and increase the number of customers per market, organically and via the acquisition of complementary companies to enhance the offer. Its success is apparent in its increasing geographic presence (26 markets) and roster of leading online gaming brands.
INDUSTRY OUTLOOK
AG is exposed to favourable growth trends. First, the online gaming market is enjoying structural growth due to increasing global wealth, internet/mobile penetration and regulation. The geographic markets to which AG currently has some exposure are forecast to grow Company description gross gaming revenue (GGR; ie customer wagers less their winnings) from US$37.6bn in Aspire Global is a leading B2B 2019 to US$69.1bn by 2025 (source: H2 Gambling Capital). Secondly, online gaming provider of iGaming solutions, offering partners all relevant products to markets are highly competitive with differing levels of regulation. These combine to make operate a successful iGaming brand. It the operation of an online gaming brand challenging, particularly when working across many also owns/offers B2C online gaming brands, including Karamba. Aspire geographies. operates in 26 regulated markets across Europe, the US, South America and Africa. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 20.4 46.2 261.7 2019 131.4 21.7 17.9 32.7 20.4 68.3 Relative* 14.2 29.1 133.1 2020 161.9 27.1 18.4 32.6 20.5 10.5 * % Relative to local index Analyst 2021e 187.7 32.8 28.7 52.7 12.7 9.5 Russell Pointon 2022e 211.3 38.5 31.7 60.7 11.0 8.2
Edison Insight | 29 April 2021 12 Sector: Mining Auriant Mining (AUR) Price: SEK4.56 Market cap: SEK449m INVESTMENT SUMMARY Market NASDAQ OMX First North Auriant’s Tardan plant has been re-modelled to a single carbon-in-leach process, which has resulted in a c 40pp increase in metallurgical recoveries and a c 25% reduction in cash Share price graph (SEK) costs to c US$676/oz (FY20 versus FY19) compared with its previous heap leach operation. In FY20, this resulted in a c 4x increase in EBITDA and a c 3x increase in operational cash flows. Currently, Auriant is completing a definitive feasibility study on Kara-Beldyr and, combined, the two mines are expected to achieve management’s goal of 3t (96.5koz) of gold output pa in c FY25. Simultaneously, confirmatory drilling is underway with a view to accelerating the development of Solcocon.
INDUSTRY OUTLOOK
In the event that it raises US$20m in equity (NB Subject to the gold price and cash flows Company description and could be less) at a share price of SEK5.08/share, we value Auriant at US$1.76/share. Auriant Mining is a Swedish junior gold In the meantime, it is trading on a multiple of only c 6x FY21 earnings. Q121 results are mining company focused on Russia. It has two producing mines (Tardan and scheduled for 31 May. Solcocon), one advanced exploration property (Kara-Beldyr) and one early stage exploration property (Uzhunzhul).
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (2.9) (12.4) 8.5 2019 29.8 7.2 (2.2) (1.3) N/A 5.7 Relative* (7.9) (22.7) (30.1) 2020 53.4 31.2 17.5 13.9 3.8 2.0 * % Relative to local index Analyst 2021e 51.5 25.9 12.4 9.0 5.9 2.5 Charles Gibson 2022e 55.6 35.2 22.0 12.3 4.3 2.1
Sector: Aerospace & defence Avon Rubber (AVON) Price: 3476.0p Market cap: £1078m 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. Avon Protection is now the Share price graph (p) sole focus. The enhancing purchases in the United States of the Helmets & Armor division and Team Wendy helmet systems extended the product portfolio and deepened customer engagement. Q121 revenues grew in Military (+16%) and First Responders (+19%) while Team Wendy added $20m. Order intake remained strong and net debt ended the period at $13m. Management expects to meet FY21 analyst consensus expectations and we trimmed our EPS by 4% to reflect that while maintaining FY22.
INDUSTRY OUTLOOK
Avon's long-standing, multi-level relationship with the US DoD is important to the group and Company description the end market backdrop is supportive. The focus on higher-price sophisticated mask Avon Rubber designs, develops and systems is proving successful, with M50 mask system replenishment and the addition of manufactures personal protection products for Military and First helmets and body armour provides further opportunities. We believe that Avon has the Responder markets. Its main market position, product portfolio and strategic ambition to continue its growth through customers are national security agencies such as the US DOD and c organic and inorganic means. 90% of sales are from the United States. Y/E Sep Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 13.0 7.0 35.3 2019 162.0 36.2 28.3 84.9 56.6 166.5 Relative* 8.8 2.1 9.4 2020 213.6 49.0 36.0 96.2 49.9 N/A * % Relative to local index Analyst 2021e 284.9 66.3 48.1 125.6 38.3 40.7 Andy Chambers 2022e 362.0 88.2 69.4 181.1 26.5 17.7
Edison Insight | 29 April 2021 13 Sector: Travel & leisure bet-at-home (ACXX) Price: €44.70 Market cap: €314m INVESTMENT SUMMARY Market Xetra For FY20, gross gaming revenue (GGR) of €126.9m was in line with guidance (€120–132m) and EBITDA of €30.9m was ahead of guidance (€22–27m) as sports betting, and the initial Share price graph (€) negative effects of regulation changes in Germany from October 2020, which flow through into FY21, were both better than expected. We upgraded our FY21 EBITDA estimates by 54% to €21.2m to reflect this, a less negative stance on the potential effects of German regulation than previously, and assume some y-o-y underlying growth recognising a more favourable sporting environment than FY20.
INDUSTRY OUTLOOK
According to H2 Gambling Capital, the European online sports betting and gaming market is expected to grow 7.4% CAGR between 2019 and 2024. BAH operates mainly in 'grey' Company description markets (no formal regulation but not illegal), which are characterised by strong cash flow, Founded in 1999, bet-at-home is an but also carry commensurately higher regulatory risks. Its main market, Germany is online sports betting and gaming company with c 300 employees. It is becoming fully regulated in FY21. 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 5.8 23.0 21.3 2019 143.3 35.2 33.1 425.53 10.5 10.5 Relative* 1.5 11.7 (16.5) 2020 126.9 30.9 28.8 331.92 13.5 12.8 * % Relative to local index Analyst 2021e 112.0 21.2 19.0 221.18 20.2 18.2 Russell Pointon 2022e 123.2 26.2 24.0 279.17 16.0 14.4
Sector: Technology Boku (BOKU) Price: 180.5p Market cap: £530m INVESTMENT SUMMARY Market AIM Boku reported strong results for FY20, with adjusted revenue and EBITDA growth of 20% and 106% respectively. Trading year to date has been strong for both businesses and Share price graph (p) management is confident of meeting expectations for FY21. The evolution of the platform to address the wider alternative payments market provides upside potential to our forecasts and the share price. Boku recently announced a mobile identity partnership with French carriers, increasing the addressable market for its identity services.
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. Boku is the dominant DCB player, serving the largest merchants such as Apple, Sony, Facebook, Spotify and Netflix, Company description and is expanding into alternative payment methods such as digital wallets. Boku's identity Boku operates a billing and identity verification service enables merchants to sign up and transact with users while meeting verification platform that connects merchants with mobile network regulatory requirements and avoiding fraud. operators in more than 80 countries. It 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 0.3 27.1 113.6 2019 50.1 10.7 4.1 1.20 207.9 N/A Relative* (3.5) 21.4 72.7 2020 56.4 15.3 11.0 3.21 77.7 N/A * % Relative to local index Analyst 2021e 66.5 17.7 12.2 3.15 79.2 N/A Katherine Thompson 2022e 77.8 21.0 15.1 3.87 64.5 N/A
Edison Insight | 29 April 2021 14 Sector: Travel & leisure Borussia Dortmund (BVB) Price: €5.67 Market cap: €521m INVESTMENT SUMMARY Market FRA Borussia Dortmund’s Q221 trading update showed higher profitability y-o-y due to active cost control despite lower revenue in aggregate as a result of COVID-19. Revenue declined Share price graph (€) by 3% y-o-y (we note that three of its five sources of revenue increased) and a 13% reduction in cash costs led to EBITDA 23% higher than the prior year. Our forecasts are broadly unchanged. For FY21, management previously guided that the restrictions required to counter COVID-19 will lead to a 5% decline in revenue which, coupled with other effects (eg lower transfer activity and high operational gearing) will translate into a reported operating loss due to amortisation of intangibles.
INDUSTRY OUTLOOK
Unsustainable spend on wages and transfers is increasingly being penalised by UEFA Company description Financial Fair Play requirements. A 'break-even requirement' obliges clubs to spend no The group operates Borussia more than they generate over a rolling three-year period. Sanctions vary from a warning to a Dortmund, a leading football club, Bundesliga runners up in 2019/20, ban from UEFA competition, fines and a cap on wages and squad size. 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 5.1 7.1 (12.0) 2019 370.3 116.0 101.5 87.95 6.4 17.3 Relative* 0.9 (2.8) (39.4) 2020 370.2 63.0 45.6 46.77 12.1 176.0 * % Relative to local index Analyst 2021e 331.5 39.4 22.9 24.91 22.8 107.4 Russell Pointon 2022e 346.6 60.8 43.8 42.89 13.2 105.6
Sector: Oil & gas Brooge Energy (BROG) Price: US$9.15 Market cap: US$1002m INVESTMENT SUMMARY Market NASDAQ Brooge Energy (BROG) is an independent oil and refined oil products storage and service provider located in the Port of Fujairah, in the UAE. The company is initially developing its Share price graph (US$) terminal’s storage capacity in 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 2017 and Phase II is expected to start in mid-2021. The company has commissioned the feasibility study for Phase III, and this will increase storage capacity by 3.5x once operational (2023). In Q420 BROG diversified its customer base by signing new contracts (for 58% Phase I storage capacity) at premiums of 50% and 60% on fixed fee, benefiting from high oil storage demand. However, the low demand for ancillary services among new customers had a negative effect on revenue in FY20 and may affect revenue in FY21. Our valuation currently stands at Company description $11.4/share and our forecasts are under review. Brooge Energy is an oil storage and service provider strategically located in INDUSTRY OUTLOOK the Port of Fujairah in the United Arab Emirates (UAE). Current storage The COVID-19 pandemic highlighted the importance of oil storage infrastructure and the capacity stands at 399,324m3 and will be increased by 602,064m3 once vital role the business plays in the logistics and trading of crude oil and refined oil products. Phase II is completed.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (16.5) (18.0) (16.8) 2019 44.0 37.0 (75.0) (85.5) N/A 15.2 Relative* (21.9) (24.6) (44.3) 2020 42.0 29.0 17.0 19.0 48.2 27.1 * % Relative to local index Analyst 2021e N/A N/A N/A N/A N/A N/A Marta Szudzichowska 2022e N/A N/A N/A N/A N/A N/A
Edison Insight | 29 April 2021 15 Sector: Oil & gas Canacol Energy (CNE) Price: C$3.49 Market cap: C$627m INVESTMENT SUMMARY Market TSX Canacol offers investors a pure play on the Colombian natural gas market where it holds a c 20% market share of national demand. With gas export capacity now in place, the company Share price graph (C$) is focusing on converting its 4.7tcf of net unrisked prospective resource into reserves, with its 2021 exploration capex the largest in its history. In 2020, the company replaced 61.9bcf of production with 75bcf of reserves (a reserves replacement ration of 122%). 12 wells are planned this year, nine exploration and three development, at an estimated cost of c $66m. The historical success rate of over 80% underpinned by AVO analysis of 3D seismic keeps risks low, while the planned capex and cash dividends are covered by the company’s existing cash and cash generation. We currently value Canacol at a core NAV of C$3.62/share and a RENAV of C$5.87/share.
INDUSTRY OUTLOOK Company description Canacol Energy is a natural gas The Colombian, Caribbean Coast gas market is expected to move into gas deficit in the exploration and production company primarily focused on Colombia. absence of LNG imports, incremental piped gas or the development of recent deepwater discoveries. Canacol sells gas under long-term, fixed-price gas contracts, typically of five to 10 years’ duration with inflation clauses to protect cash flows.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (0.9) (5.4) (5.4) 2018 204.5 138.6 7.3 (12.32) N/A 5.2 Relative* (3.1) (11.6) (29.4) 2019 219.5 162.8 64.7 19.21 14.5 4.6 * % Relative to local index Analyst 2020e 234.3 195.1 92.7 42.95 6.5 2.8 Ian McLelland 2021e 228.4 187.2 85.7 29.92 9.3 3.2
Sector: General industrials Carr's Group (CARR) Price: 148.0p Market cap: £138m INVESTMENT SUMMARY Market LSE Carr’s Group has reported a 5% rise in adjusted operating profit during H121. Strong performances from both the Speciality Agriculture and Agricultural Supplies divisions more Share price graph (p) than compensated for weaker demand from the oil and gas market, which adversely affected the Engineering division. However, the Engineering order book is strengthening with contracts from the nuclear and defence markets, so management expects a second half divisional recovery and its expectations for FY21 group performance are unchanged.
INDUSTRY OUTLOOK
Noting the strong performance from the agricultural activities during H121, which management expects to continue during the second half, we have raised divisional estimates slightly but increased central costs, leaving FY21 adjusted PBT and EPS broadly Company description unchanged. Incoming CEO Hugh Pelham’s strategic review maintains the direction of all Carr's Group's Agriculture divisions three divisions, while accelerating and intensifying programmes to improve internal serve farmers in the North of England, South Wales, the Welsh Borders and processes and thus profitability. Scotland, the US, Germany, Canada and New Zealand. The Engineering division offers remote handling equipment and fabrications to the global nuclear and oil and gas 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 18.9 11.9 19.4 2019 403.9 23.8 18.0 14.2 10.4 9.9 Relative* 14.4 6.9 (3.5) 2020 395.6 23.4 14.9 11.8 12.5 7.0 * % Relative to local index Analyst 2021e 433.2 23.6 15.4 12.0 12.3 5.6 Anne Margaret Crow 2022e 447.0 24.7 16.5 12.7 11.7 8.3
Edison Insight | 29 April 2021 16 Sector: Financials Cenkos Securities (CNKS) Price: 88.0p Market cap: £50m INVESTMENT SUMMARY Market AIM Cenkos full year 2020 results announced in March showed the benefits of the recovery in equity markets and capital markets activity following the initial impact of the pandemic. Share price graph (p) Cenkos raised £0.9bn for clients during the year (versus £0.7m for 2019) including four IPOs. Revenue increased by 23% to £31.9m and underlying profit by 188% to £4.0m (£1.4m). Reported pre-tax profit was £2.3m versus £0.1m. Diluted EPS were 3.3p (0.1p). A final dividend of 2.5p gave full year total of 3.5p (3.0p).
INDUSTRY OUTLOOK
New CEO Julian Morse and executive board member Jeremy Osler (co-head of corporate finance) will take up their positions once FCA approval has been received and in the meantime existing CEO Jim Durkin will remain in place. The group’s strategy will be to focus Company description on entrepreneurial growth companies and investment trusts, forming deep long-term Cenkos is a leading UK securities relationships with clients. On outlook the company reported a healthy pipeline and with business, which acts as nominated advisor, sponsor, broker and financial approaching 100 corporate clients and a strong balance sheet (cash £32.7m and surplus adviser to companies, focusing on capital over pillar 1 of £14.5m) it is well placed to deliver on its strategy. entrepreneurial growth companies and investment trusts. Since inception in 2005 it has raised more than £20bn in equity capital for corporate clients, which stood at 94 at end December Y/E Dec Revenue EBITDA PBT EPS P/E P/CF 2020. Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 20.6 50.4 83.3 2019 25.9 0.4 0.1 0.1 880.0 N/A Relative* 16.1 43.6 48.2 2020 31.9 2.6 2.3 3.3 26.7 7.9 * % 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: Media Centaur Media (CAU) Price: 40.0p Market cap: £59m INVESTMENT SUMMARY Market LSE Centaur’s FY20 results were a shade ahead of our forecast and show a resilient performance considering the impact of the pandemic. Q1 trading was reported in line, in Share price graph (p) what is generally the quietest quarter for revenues with no scheduled events or Mini MBA courses, and cash at end February was £8.2m (IFRS liabilities only). The group is now reinstating dividend payments and will pay 0.5p for FY20, with a minimum payment of 1.0p set out for future years. Centaur’s MAP23 strategy, laid out in January, gives the framework and impetus for revenue growth and improving profitability, which should in turn drive an increasing valuation.
INDUSTRY OUTLOOK
The events industry has faced particularly difficult challenges with the COVID-19 pandemic, Company description but it has forced accelerated innovation and it seems likely that at least an element of virtual Centaur Media is an international delivery will be maintained as restrictions ease. In other areas of B2B market intelligence, provider of business information, training and specialist consultancy for there may be a greater propensity for clients to adopt digital solutions, albeit on a slower the marketing and legal professions. sales conversion cycle, provided they deliver greater efficiencies. Its Xeim and The Lawyer business units serve the marketing and legal sectors respectively and, across both, offer customers a wide range of products and services targeted at Y/E Dec Revenue EBITDA PBT EPS P/E P/CF helping them add value. Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 1.3 23.1 56.9 2019 39.6 4.0 (1.5) (1.4) N/A 12.2 Relative* (2.5) 17.5 26.8 2020 32.4 3.8 (0.3) 0.2 200.0 27.4 * % Relative to local index Analyst 2021e 36.2 5.1 1.2 0.6 66.7 11.3 Fiona Orford-Williams 2022e 41.5 7.6 3.6 2.0 20.0 7.8
Edison Insight | 29 April 2021 17 Sector: Technology CentralNic Group (CNIC) Price: 85.0p Market cap: £199m INVESTMENT SUMMARY Market AIM CentralNic delivered FY20 revenues of US$241.2m, a 121% y-o-y increase. Adjusted EBITDA rose 71% to US$30.6m, supported by the acquisitions completed in FY19 and Share price graph (p) FY20 and led by growth in Monetisation. On a pro forma basis, the group delivered 9% organic revenue growth in FY20. In FY21, the group has already completed two acquisitions (SafeBrands and Wando) and secured €60m of additional bond headroom from shareholders, of which €15m has been placed to fund Wando and future M&A. The valuation continues to look attractive versus peers.
INDUSTRY OUTLOOK
CentralNic supplies the tools needed for businesses to develop their online presence, providing domain names, hosting, websites, email, security certification, brand protection Company description and website monetisation. It delivers services to c 40m domains, with cross-selling and CentralNic is a leading provider of upselling important drivers of future growth – with organic growth supported by M&A. global domain name services, operating through three divisions: Indirect, Direct and Monetisation. Services include domain name reselling, hosting, website building, security certification and website monetisation. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 1.5 (15.0) (4.0) 2019 109.2 17.9 16.1 9.24 12.7 12.6 Relative* (2.3) (18.8) (22.4) 2020 241.2 30.6 19.8 10.25 11.5 12.8 * % Relative to local index Analyst 2021e 323.4 39.5 26.7 9.71 12.1 8.7 Richard Williamson 2022e 350.0 43.7 30.1 10.70 11.0 7.5
Sector: Technology Checkit (CKT) Price: 58.0p Market cap: £36m INVESTMENT SUMMARY Market AIM Checkit’s results confirm that FY21 was a game of two halves: in H1 it coped with COVID-19 disruption and kept costs and cash burn under control; H2 saw the return to Share price graph (p) more normal trading while working on business transformation to lay the groundwork for future growth. Despite the pandemic, FY21 revenue grew 3% y-o-y and ARR grew 46% y-o-y. So far in FY22, the company has expanded operations in the US and ramped up its sales and marketing efforts. We have revised our forecasts to reflect faster growth in ARR combined with higher sales and marketing spend.
INDUSTRY OUTLOOK
With its workflow management software, Checkit is focused on connecting and empowering deskless mobile workers who are not able to use desktop software in their day-to-day Company description working environment. Only a small proportion of the current enterprise software market is Checkit optimises the performance of designed for this group of workers. Checkit’s sweet spot is supporting workers who perform people, processes and physical assets with connected digital solutions. It is a combination of routine tasks and infrequent but important tasks where the volume and headquartered in Cambridge, UK and variety of tasks is such that it is difficult to build a targeted application. has its operations centre in Fleet, UK.
Y/E Jan Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 16.0 13.7 65.7 2020 9.8 (4.9) (6.4) (4.0) N/A N/A Relative* 11.7 8.6 34.0 2021 13.2 (2.5) (3.1) (5.2) N/A N/A * % Relative to local index Analyst 2022e 15.2 (3.9) (4.5) (7.2) N/A N/A Katherine Thompson 2023e 17.8 (2.0) (2.7) (4.3) N/A N/A
Edison Insight | 29 April 2021 18 Sector: Financials Civitas Social Housing (CSH) Price: 113.2p Market cap: £704m INVESTMENT SUMMARY Market LSE The Q321 trading update showed the portfolio continuing to perform in line with expectations, with no COVID-19 impact on rent collections or property valuations, while the Share price graph (p) 1.35p quarterly DPS leaves the company well on track to meet its annual targeted 5.4p (+1.9%). Q321 IFRS NAV per share increased slightly to 108.17p (Q221: 108.01p) and including DPS paid the quarterly NAV total return was 1.4%. A first transaction since the recent £85m secured debt facility with M&G has been completed; a portfolio of 15 supported living and care facilities, providing long-term support for individuals with learning disabilities and mental health care needs have been acquired for £10.9m. A significant pipeline of similar opportunities is progressing well providing an opportunity to further deploy the new debt facility, enhance earnings and increase diversification.
INDUSTRY OUTLOOK Company description Civitas is the leading listed UK social Private capital is crucial in meeting the current and future needs for care based social housing REIT. Its investment objective is to provide an attractive level of housing which is widely recognised to improve lives in a cost-effective manner compared income, with the potential for capital with the alternatives of residential care or hospitals. 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 3.1 6.8 15.5 2019 35.7 26.1 19.9 3.6 31.4 20.6 Relative* (0.8) 2.0 (6.6) 2020 46.2 36.4 38.0 4.6 24.6 21.4 * % Relative to local index Analyst 2021e 49.0 39.5 35.8 5.1 22.2 15.6 Martyn King 2022e 55.2 45.7 46.8 5.8 19.5 15.3
Sector: Technology Claranova (CLA) Price: €7.55 Market cap: €300m INVESTMENT SUMMARY Market Euronext Paris Claranova made good progress in H121, with organic constant currency revenue growth of 17% y-o-y and EBITDA growth of 106% y-o-y. Recent acquisitions made by PlanetArt are Share price graph (€) progressing well and the division is seeing growing demand in its target markets. Avanquest has completed most of the shift to subscription licensing, positively affecting margins. We have revised our forecasts to reflect stronger growth and profitability for PlanetArt.
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 consumer software business, is focused on developing and marketing software in three key product areas: PDF, photo editing and security/privacy. The IoT business's myDevices Company description platform provides a simple and effective way for SMEs and corporates to deploy IoT Claranova consists of three applications. businesses focused on mobile and internet technologies: PlanetArt (digital photo printing; personalised gifts), Avanquest (consumer software) and myDevices (internet of things (IoT)).
Y/E Jun Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 11.8 9.5 48.0 2019 262.3 16.0 12.0 24.66 30.6 N/A Relative* 6.6 (1.7) 5.5 2020 409.1 20.6 11.3 20.04 37.7 N/A * % Relative to local index Analyst 2021e 479.2 40.0 29.2 45.81 16.5 N/A Katherine Thompson 2022e 564.1 45.0 35.4 52.90 14.3 N/A
Edison Insight | 29 April 2021 19 Sector: Aerospace & defence Cohort (CHRT) Price: 621.0p Market cap: £255m INVESTMENT SUMMARY Market AIM Cohort's defence and security orientation has proven relatively resilient during the pandemic. It delivered higher H121 operating profits on 10% lower revenues. There is a Share price graph (p) significant H221 weighting as management expects similar FY21 performance for the ongoing businesses to FY20. A £219m record order backlog provides 92% cover for FY21 consensus sales and the £25m 10-year follow-on contract foe SEA to manage and upgrade in-service sonar equipment for the MOD was announced in late March. ELAC SONAR will make its initial contribution in H221. Our estimates are maintained and the shares trade at a modest discount to UK defence peers.
INDUSTRY OUTLOOK
Cohort is heavily influenced by activities in defence and security (90% of FY20 sales). Company description These markets require highly differentiated technologies and services with high barriers to Cohort is an AIM-listed defence and entry based on customer relationships, regulation and high-level security clearances. security company operating across six divisions: MASS (31% of FY20 sales), Defence is generally quite resilient in periods of significant economic disruption and the SEA (24%), MCL (11%), 80%-owned £4bn pa increase in the UK defence budget announced in November 2020 appears to EID (14%), 81%-owned Chess Technologies (19%) and newly mitigate concerns over imminent budget constraints. acquired ELAC SONAR.
Y/E Apr Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (0.3) 0.2 22.2 2019 121.2 17.3 15.9 33.6 18.5 21.8 Relative* (4.0) (4.4) (1.2) 2020 131.1 20.9 17.5 37.1 16.7 19.4 * % Relative to local index Analyst 2021e 142.1 21.4 17.7 33.6 18.5 16.7 Andy Chambers 2022e 158.9 23.3 19.4 36.3 17.1 11.7
Sector: Property Custodian REIT (CREI) Price: 97.6p Market cap: £410m INVESTMENT SUMMARY Market LSE DPS for the three months ended 31 December 2020 (Q321) was further increased by 19% to 1.25p, fully covered by net cash receipts and well covered by EPRA earnings of 1.5p. Share price graph (p) CREI targets a similar level for Q421, also covered by net cash receipts, with a minimum aggregate 5.0p for the year ending 31 March 2022 (FY22), based on rent collection levels in line with expectations. Positive valuation movements, driven by asset management and industrial properties, contributed towards an increase in NAV per share to 96.4p (Q221:95.2p) and including DPS paid the quarterly NAV total return was 2.4%. The portfolio is well-diversified and gearing is moderate (Q321 net LTV of 24.0%) 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 capital values through cycles while income returns have been more stable. The pandemic REIT focused on commercial property in the UK outside London. It is and Brexit contribute to a highly uncertain UK economic outlook and while the supply income-focused, with a commitment to demand balance for regional office and industrial property has hitherto remained generally pay a high but sustainable and covered dividend. firm the weakness that was previously confined to the retail sector may 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 9.1 10.5 6.1 2019 37.6 32.7 28.5 7.26 13.4 10.6 Relative* 5.0 5.5 (14.2) 2020 38.1 33.4 28.7 7.00 13.9 12.9 * % Relative to local index Analyst 2021e 35.5 29.3 24.3 5.79 16.9 13.9 Martyn King 2022e 35.4 30.7 25.7 6.12 15.9 13.5
Edison Insight | 29 April 2021 20 Sector: Technology Datatec (DTCJ) Price: ZAR28.10 Market cap: ZAR5661m INVESTMENT SUMMARY Market JSE Datatec is resilient, profitable, cash-generative and on an improving financial track despite the impact of COVID-19. H121 group sales fell 1% to US$2bn (2.8% rise in constant Share price graph (ZAR) currency (cc)), with adjusted EBITDA of US$67m. Westcon sales rose 4% to US$1.3bn, while Logicalis sales fell by 10% to US$0.7bn (1.9% fall cc), due to currency weakness in Latin America. The group is benefiting from the surge in remote working, including business investment in security and communications. Datatec trades on a valuation that neither reflects the group's recent transformation nor its future prospects.
INDUSTRY OUTLOOK
While a challenging global economic environment may affect top-line growth in the short term, Datatec’s high variable cost base and resilient business model should mitigate the Company description impact on its underlying performance. We expect Datatec to continue to benefit from the Datatec is a South Africa-listed streamlining of its operations and cost base, with progressive margin improvement at multinational ICT business, serving clients globally, predominantly in the Logicalis and improving profitability at Westcon. networking and telecoms sectors. The group operates through three main divisions: Westcon International (distribution); Logicalis (IT services); and Analysys Mason (consulting). Y/E Feb Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 0.0 3.9 14.3 2019 4332.4 86.8 65.7 2.95 65.7 15.1 Relative* (2.9) (1.2) (15.7) 2020 4304.8 158.7 79.1 10.59 18.3 2.3 * % Relative to local index Analyst 2021e 4258.4 136.5 67.0 10.15 19.1 3.9 Richard Williamson 2022e 4418.9 165.0 84.6 16.39 11.8 3.9
Sector: Media Dentsu Group (4324) Price: ¥3280.00 Market cap: ¥945984m INVESTMENT SUMMARY Market TSE Dentsu is making progress with its plans to streamline its business and integrate its offering to better address the needs of its blue-chip client base, including 95 of the world’s top 100 Share price graph (¥) advertisers. The balance sheet has been strengthened by the sale of most of the Recruit shareholding. It has agreed the sale of two properties for ¥30bn (funding FY21’s share buyback) and continues to consider a sale and leaseback of its Tokyo headquarters. Restructuring inevitably means some short-term disruption, but this should drive revenue growth (targeted at 3–4% CAGR FY21–24) and improve margins. The valuation, while in line with peers, is yet to reflect the programme’s likely benefits. Q1 figures are scheduled for 14 May.
INDUSTRY OUTLOOK
Company description Dentsu estimates global ad spend declined 8.8% in FY20. A 5.8% bounce is forecast for Dentsu Group is a holding company FY21 but with large variations. Digital marketing and eCommerce spend should increase with two operational networks: Dentsu Japan Network and Dentsu faster. The Japanese ad market still lags the digital transition curve, with TV prominent International. Operating in over 145 (26.8% share), exceeded by digital (33%). The postponement of the Tokyo Olympics countries, Dentsu Group provides a wide range of client-centric integrated contributed to a y-o-y ad spend decline of 16.6% in Japan. Forecast recovery is 5.3% in communications, media and digital services. FY21, in line with global GDP growth and based on the Olympics taking place as scheduled. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (¥m) (¥m) (¥m) (¥) (x) (x) % 1m 3m 12m Actual (14.3) 4.8 59.8 2019 1047881.0 160279.0 101340.0 271.0 12.1 11.5 Relative* (11.7) 1.6 19.0 2020 939243.0 90061.0 123470.0 249.0 13.2 15.9 * % Relative to local index Analyst 2021e 954424.0 65966.0 124710.0 269.0 12.2 5.1 Fiona Orford-Williams 2022e 1010255.0 159866.0 149710.0 335.0 9.8 27.1
Edison Insight | 29 April 2021 21 Sector: Electronics & elec eqpt discoverIE Group (DSCV) Price: 813.0p Market cap: £727m INVESTMENT SUMMARY Market LSE discoverIE confirmed a return to organic revenue growth in the last two months of FY21 and 17% organic growth in orders over the same period, helped by robust performance in target Share price graph (p) markets, which make up more than 70% of revenue. With board expectations for underlying earnings now ahead of the consensus range, we have upgraded our forecasts reflecting higher revenue and lower interest expense, resulting in an upgrade to underlying EPS of 7.7% for FY21e and 3.3% EPS for FY22e.
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 (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 17.8 13.6 63.9 2019 438.9 37.0 28.4 28.4 28.6 N/A Relative* 13.4 8.4 32.5 2020 466.4 50.9 34.6 31.8 25.6 N/A * % Relative to local index Analyst 2021e 453.6 47.9 31.5 25.6 31.8 N/A Katherine Thompson 2022e 489.0 50.3 33.4 27.2 29.9 N/A
Sector: Technology Doctor Care Anywhere Group (DOC) Price: A$1.03 Market cap: A$184m INVESTMENT SUMMARY Market ASX Doctor Care Anywhere's Q121 update showed that it continues to grow robustly in 2021, with revenue and consultations up c 260% y-o-y, ending the period with a solid balance Share price graph (A$) sheet (net cash of £35.1m). Management remains confident of the growth potential for the rest of the year and expects revenue in 2021 to grow by at least 100% above 2020 levels, implying at least £23.2m in group revenue in 2021.
INDUSTRY OUTLOOK
The global telehealth market is forecast to grow at a CAGR of 23.1% from US$5.3bn in 2019 to US$14.9bn by 2024, primarily driven by COVID-19 related changes to consumer habits. The robust growth in demand for telehealth since the start of the pandemic combined with the stellar returns investors earned by investing in Teladoc, the largest Company description Telehealth company in the world, led to a raft of telehealth company listings in 2020, raising Doctor Care Anywhere is a an aggregate US$1.88bn in IPO proceeds and have posted a median return of 26.9% since fast-growing telehealth company focused on delivering high-quality care listing, which has meant that investor appetite for IPOs is likely to continue in 2021. to its patients, while reducing the cost of providing healthcare for health insurers and healthcare providers.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 2.0 (24.8) N/A 2019 5.7 (3.8) (4.4) (3.71) N/A N/A Relative* (2.7) (27.3) N/A 2020 11.6 (7.8) (13.5) (7.81) N/A N/A * % Relative to local index Analyst 2021e 23.4 (15.5) (16.3) (5.09) N/A N/A Brendan D’Souza 2022e 37.4 (11.4) (9.0) (2.80) N/A N/A
Edison Insight | 29 April 2021 22 Sector: Technology Draper Esprit (GROW) Price: 834.0p Market cap: £1160m INVESTMENT SUMMARY Market AIM In its FY21 trading update, Draper Esprit indicated an unaudited NAV per share of not less than 728p, at least a 21% increase over its H121 NAV per share of 600p and a 31% Share price graph (p) increase since 31 March 2020 (FY20: 555p). The performance was driven by an exceptionally strong tech market, reflecting a fair value increase in Draper Esprit’s portfolio of over 47% for the year (vs management’s targeted 20% return through the cycle), despite currency headwinds of over £50m. Draper Esprit made £128m of PLC investment, with realisations of £206m. Cash at year-end stood at £161m (H121: £62.1m).
INDUSTRY OUTLOOK
Technology valuations have had a very strong run as COVID-19 fears have abated, with sustained valuations amidst a robust funding environment. Investors have preferred stocks Company description with embedded value that offer the potential for meaningful exits in a realistic timeframe. Draper Esprit is a London-based Consistency of NAV performance, realisations and cash exits are the key metrics by which venture capital (VC) firm that invests in the European technology sector. to judge success. Draper Esprit has a portfolio of c 70 investee companies and includes a range of funds (seed, EIS and VCT) within the group, as well as its flagship balance sheet VC fund. Y/E Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (3.5) 23.0 132.3 2019 120.8 N/A 114.3 118.35 7.0 N/A Relative* (7.1) 17.5 87.8 2020 52.0 N/A 41.4 34.51 24.2 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: Media Ebiquity (EBQ) Price: 46.5p Market cap: £36m INVESTMENT SUMMARY Market AIM As indicated at the pre-close update, trading conditions eased for Ebiquity in H220 as advertisers ventured back into the market after a COVID-19 affected first half. The group Share price graph (p) also gained new business, some following the withdrawal of Accenture from the media assurance market, with momentum continuing into Q121. Demand for Ebiquity’s services should be amplified by the complexity of the market and advertisers’ need to optimise the return on their spend. We expect the increased emphasis on digital capabilities, encapsulated in new KPIs, should help revenues – and profits – recover, which in turn will likely lead to an improved rating.
INDUSTRY OUTLOOK
Ebiquity has launched its Digital Innovation Centre, based around Digital Decisions. This Company description offering is designed to address the depletion prevalent in digital marketing, which remains Ebiquity is a leading, tech-enabled, beset by issues of transparency, fraud and wastage, with up to 30% of digital ad spend independent marketing and media consultancy. It helps the world's wasted. Total global digital ad spend is set to have exceeded a 50% share of total ad spend biggest brands leverage data and in 2020, so this opportunity is clearly substantial, with no major incumbents providing this analytics to drive greater transparency in the marketing ecosystem, to create service. more impactful customer experiences and to deliver greater returns on marketing investment. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 58.2 125.7 89.8 2019 68.1 8.6 4.7 2.9 16.0 10.3 Relative* 52.3 115.5 53.4 2020 55.9 1.8 (1.3) (1.9) N/A 106.0 * % Relative to local index Analyst 2021e 61.0 5.0 2.6 2.5 18.6 10.8 Fiona Orford-Williams 2022e 68.3 7.4 5.0 4.7 9.9 9.5
Edison Insight | 29 April 2021 23 Sector: Technology EMIS Group (EMIS) Price: 1242.0p Market cap: £786m INVESTMENT SUMMARY Market AIM Throughout FY20, EMIS focused on helping its customer base in the fight against COVID-19, adapting its solutions to support testing and treatment of the disease and the Share price graph (p) vaccine roll-out programme. EMIS reported flat revenue and adjusted operating profit for the year and has indicated that it expects growth to resume in FY21. Development of the EMIS-X platform, started in 2018, positions the company well to meet the evolving needs of the healthcare sector, opening up opportunities in health data analytics and collaboration between the health and life sciences sectors.
INDUSTRY OUTLOOK
EMIS is the leading software supplier to the UK GP market, with a greater than 50% market share. It has a strong position in community pharmacies, community health, A&E and Company description hospital pharmacies. The EMIS-X platform is being developed to promote greater EMIS is a software supplier with two interoperability between NHS departments, in line with the NHS Long Term Strategy. divisions. EMIS Health supplies integrated care technology to the NHS, 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 analytics. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 13.3 8.2 24.2 2019 159.5 55.6 41.0 53.5 23.2 15.6 Relative* 9.1 3.3 0.4 2020 159.5 53.5 43.4 56.4 22.0 12.2 * % Relative to local index Analyst 2021e 164.1 55.7 43.8 56.2 22.1 16.9 Katherine Thompson 2022e 172.7 59.1 46.5 59.7 20.8 13.0
Sector: Technology EML Payments (EML) Price: A$5.56 Market cap: A$2012m INVESTMENT SUMMARY Market ASX With the planned acquisition of Sentenial Group (SG), EML Payments is entering the open banking market, adding non-card-based payments technology to its portfolio. EML is paying Share price graph (A$) initial consideration of €70m (56% cash, 44% equity) and an earn-out of up to €40m dependent on strong revenue growth of SG’s Nuapay division. The deal is subject to regulatory approval and is expected to close by the end of June. Incorporating SG into our forecasts from 1 July, our NPATA/share forecast is flat in FY21, down 5.7% in FY22 and up 5.2% in FY23.
INDUSTRY OUTLOOK
In terms of market size, US$1,848bn was loaded onto prepaid cards in 2019 and this is forecast to grow to US$5,511bn by 2027, a CAGR of 14.6% (source: Applied Market Company description Research). EML is keen to gain share of this fast growing market, and as part of its Project EML Payments is a payment solutions Accelerator strategy to position the company at the forefront of payment-related technology, company specialising in the prepaid stored value market, with mobile, has made its first two investments via its FinLabs incubator. physical and virtual card offerings. It manages thousands of programmes across 28 countries in Europe, North America and Australia.
Y/E Jun Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual 10.1 39.0 146.0 2019 97.2 29.7 25.6 7.8 71.3 N/A Relative* 5.1 34.4 77.2 2020 121.0 32.5 21.6 5.5 101.1 N/A * % Relative to local index Analyst 2021e 182.2 50.1 34.7 7.5 74.1 N/A Katherine Thompson 2022e 249.4 71.2 50.7 10.7 52.0 N/A
Edison Insight | 29 April 2021 24 Sector: Mining Endeavour Mining (EDV) Price: C$28.50 Market cap: C$7180m INVESTMENT SUMMARY Market Toronto Endeavour Mining's (EDV's) acquisitions of SEMAFO and Teranga have projected it into the top 10 gold producing companies globally with output of c 1.5Moz pa and a targeted AISC Share price graph (C$) of US$800/oz with at least US$35–40m pa in synergies available to it. It is now (effectively) net debt free and targeting inclusion in the FTSE 100 index mid-year. Production and adjusted EPS in Q420 and FY20 were both materially higher (and AISC lower) than our prior forecasts.
INDUSTRY OUTLOOK
After only four years, EDV’s exploration programme has yielded 84% of its five-year target of 10–15Moz Au, which has already increased medium-term production levels at Ity and Hounde to 0.5Moz pa (combined) until 2028. Since end-June, EDV has been hedge-free, Company description paid a maiden dividend of US$0.37/share for FY20 and added US$342m in value via Following its acquisition of SEMAFO, updated PFSs for Fekekro and Kalana (100% basis). In the aftermath of the Teranga Endeavour joins the ranks of the major gold producers, with two mines in Côte acquisition, we value EDV at US$35.98/share as at 1 January 2021 and potentially as high d’Ivoire and four in Burkina Faso plus as US$55.70/share. three major development projects, all in the West African Birimian greenstone belt.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 15.0 7.5 5.4 2019 1362.1 618.4 220.4 56.95 39.9 5.7 Relative* 12.4 0.4 (21.4) 2020 1847.9 910.3 501.2 181.51 12.5 3.5 * % Relative to local index Analyst 2021e 2579.0 1369.8 919.8 224.48 10.1 5.0 Charles Gibson 2022e 2495.1 1421.5 978.1 265.08 8.6 4.1
Sector: Construction & blding mat Epwin Group (EPWN) Price: 105.5p Market cap: £153m INVESTMENT SUMMARY Market AIM Epwin FY20 results came in c £0.9m ahead of our expected £4.1m PBT (and c £0.6m better on a company defined basis, which excludes share-based payments) with EBIT and net Share price graph (p) interest both slightly better than anticipated. Overall group revenue and EBIT were down y-o-y by c 15% and c 56% respectively, with a group EBIT margin for the year of 3.9% (down 360bp). Almost all of the year-on-year dent occurred in H1 trading which was most directly affected by initial lockdown conditions at the end of March and through most of April. The second half performance was more comparable to H219 (slightly higher in revenue terms, slightly lower at the EBIT level). Our estimates are under review.
INDUSTRY OUTLOOK
Epwin is exposed to both RMI (c 70% revenue) and newbuild (c 30%) in the UK housing Company description market. RMI activity is currently stronger that other sectors which are also recovering Epwin supplies functional gradually. There is some caution associated with potential impacts of rising unemployment low-maintenance exterior building products (including windows, doors, on consumer confidence. roofline and rainwater goods) into a number of UK market segments and is a modest exporter.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 9.3 14.2 57.9 2018 281.1 38.2 16.5 9.8 10.8 5.8 Relative* 5.3 9.0 27.7 2019 282.1 25.4 15.0 8.5 12.4 4.3 * % Relative to local index Analyst 2020e 239.1 30.7 4.1 2.3 45.9 6.6 Toby Thorrington 2021e 260.5 34.4 9.0 5.1 20.7 5.5
Edison Insight | 29 April 2021 25 Sector: Technology EQS Group (EQS) Price: €32.60 Market cap: €245m INVESTMENT SUMMARY Market Scale EQS had a clear benefit in FY20 from the demand for virtual corporate communications but the key to future growth is in the corporate compliance segment. Its cloud-based products Share price graph (€) are set to be the core growth driver over the medium term. With the imminent implementation of European whistleblowing regulation, there is a short-term opportunity to gain new clients, with the potential to expand accounts after. To make the most of this, the group is investing an additional €5.6m in sales and marketing in FY21, reflected in our revised forecasts.
INDUSTRY OUTLOOK
While this EU whistleblowing regulation is now active, the deadline for implementation in national laws is two years, which will be in December 2021. We would therefore expect the Company description benefit to be heavily skewed to H221 and into H122, while the additional sales cost will be in EQS is a leading international provider place for most of H121. The pandemic has provided fertile territory for selling online of regulatory technology in the fields of corporate compliance and investor communications solutions, and we would expect a proportion off this to be retained once relations. Its products enable corporate physical meetings resume in greater numbers. clients to fulfil complex national and international disclosure obligations, minimise risks and communicate transparently with stakeholders. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (6.3) (3.6) 107.6 2019 35.4 2.6 (0.3) (7.41) N/A N/A Relative* (10.1) (12.4) 42.9 2020 37.6 4.8 0.4 4.12 791.3 N/A * % Relative to local index Analyst 2021e 45.5 1.1 (3.1) (26.68) N/A N/A Fiona Orford-Williams 2022e 53.2 4.3 0.1 (0.32) N/A N/A
Sector: Technology Esker (ALESK) Price: €229.50 Market cap: €1331m INVESTMENT SUMMARY Market Euronext Growth In Q121 Esker reported record revenue of €31m (+10% y-o-y, +14% constant currency) and 45% growth in bookings on an annual recurring revenue basis. Management has slightly Share price graph (€) increased its outlook for revenue growth in FY21 (from 15% to 16%) and more explicitly guided on profitability (operating margin of 12–15%). We maintain our conservative forecasts, which are at the lower end of guidance.
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 software companies. Customers move to using DPA software to reduce paper-related costs Company description and errors in processing, to speed up the cash conversion cycle, to improve process Esker provides end-to-end visibility within the enterprise and to improve customer service. SaaS-based document automation solutions supporting order-to-cash and procure-to-pay processes. In FY20, the business generated 56% 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 20.9 7.7 122.8 2019 104.2 20.1 13.6 179.0 128.2 61.1 Relative* 15.3 (3.3) 58.8 2020 112.3 21.9 14.5 195.0 117.7 53.6 * % Relative to local index Analyst 2021e 128.6 25.8 17.7 232.0 98.9 54.2 Katherine Thompson 2022e 151.8 34.2 25.5 329.0 69.8 42.0
Edison Insight | 29 April 2021 26 Sector: Food & drink Evolva (EVE) Price: CHF0.19 Market cap: CHF179m INVESTMENT SUMMARY Market Swiss Stock Exchange Evolva's overall geographical and product footprint continues to expand and the pipeline remains robust. In January 2021 Evolva announced the launch of a new product, Share price graph (CHF) L-arabinose, a natural sugar blocker and reducing sugar. The company's aim remains to reach cash break-even by FY23. Due to COVID-19, Evolva has witnessed a softening in demand for some of its flavour and fragrance products, but recent results demonstrate Evolva's progress in transforming itself from an R&D-driven enterprise towards a commercial company with a product-based revenue model. The Q1 trading update confirmed the company is on track.
INDUSTRY OUTLOOK
Food and health ingredients continue to be in the sweet spot as consumers demand Company description healthier products with cleaner labels without compromising on taste or convenience. Evolva is a Swiss biotech company Evolva's fermentation platform aims to deliver these benefits while reducing production focused on the research, development and commercialisation of products costs. 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 (6.6) (19.1) (14.2) 2019 11.6 (12.3) (15.6) (2.0) N/A N/A Relative* (7.4) (21.0) (26.3) 2020 7.5 (16.7) (23.4) (2.9) N/A N/A * % Relative to local index Analyst 2021e 14.3 (15.1) (17.0) (2.1) N/A N/A Sara Welford 2022e 27.4 (2.5) (4.5) (0.5) N/A N/A
Sector: Technology Expert System (EXSY) Price: €3.14 Market cap: €159m INVESTMENT SUMMARY Market Borsa Italiana The first year of Expert System’s five-year plan ‘Path to Lead’ was essentially a year of investment, and despite the disruption caused by the pandemic, the company made good Share price graph (€) progress meeting key funding, product, marketing and hiring milestones. Management is maintaining its financial projections for the plan for FY21–24, which calls for modest growth this year, followed by accelerating growth in FY22–24, and positive EBITDA from FY23. We have made small changes to our forecasts for FY21 and FY22 and introduce forecasts for FY23.
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 3.8 27.6 14.2 2019 33.7 5.5 (0.5) (1.6) N/A 48.9 Relative* 2.2 15.1 (20.2) 2020 30.6 (1.9) (10.6) (20.2) N/A N/A * % Relative to local index Analyst 2021e 32.2 (7.2) (15.0) (26.6) N/A N/A Katherine Thompson 2022e 45.5 (1.3) (10.0) (17.8) N/A N/A
Edison Insight | 29 April 2021 27 Sector: Industrial support services Forward Industries (FORD) Price: US$2.70 Market cap: US$27m INVESTMENT SUMMARY Market NASDAQ Q121 revenues grew by $1.3m year-on-year during Q121 to $9.7m. $0.4m of the increase was attributable to Kablooe Design, acquired in August 2020. Other design revenues Share price graph (US$) declined slightly because the pandemic affected demand. The pandemic also delayed roll-out of smart furniture to big-box retail stores, so growth here was slower than management had planned. Losses from operations widened by $0.1m to $0.2m, reflecting additional costs associated with developing smart furniture sales channels and the Kablooe acquisition, and a rise in bad debt expenses. Noting the adverse impact of the pandemic, we have withdrawn our estimates.
INDUSTRY OUTLOOK
The group's two product design activities, Intelligent Product Solutions and the more recent Company description acquisition Kablooe Design, have launched a complete medical device design and Forward Industries provides engineering service, integrating the expertise of both firms. The combined services offer outsourced design, manufacturing, sourcing and distribution services. It includes human factors engineering, verification and regulatory support along with upfront creates innovative products based on research and testing. IoT and wearable technology for a wide range of global partners. It also sources carry cases for some of the world’s leading healthcare companies. Y/E Sep Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 0.0 (3.6) 155.9 2019 37.4 (0.2) (0.7) (7.06) N/A N/A Relative* (6.5) (11.4) 71.3 2020 34.5 0.0 (0.4) (4.16) 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
Sector: Consumer support services Games Workshop Group (GAW) Price: 10770.0p Market cap: £3530m INVESTMENT SUMMARY Market LSE Games Workshop’s Q321 update indicated that trading is in line with expectations, while noting that the majority of UK and European locations were subject to COVID-19 closures, Share price graph (p) and there has been some disruption to distribution. A further dividend of 45p/share was announced bringing the year-to-date total to 185p/share versus our forecast for the full year of 200p.
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 value exceeding $12bn. Company description 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 14.1 1.8 110.2 2019 256.6 97.1 81.3 200.8 53.6 48.6 Relative* 9.8 (2.8) 69.9 2020 269.7 115.6 89.4 217.8 49.4 33.8 * % Relative to local index Analyst 2021e 349.1 168.2 140.4 339.2 31.8 28.7 Russell Pointon 2022e 381.4 186.2 157.2 378.8 28.4 23.0
Edison Insight | 29 April 2021 28 Sector: Travel & leisure Gamesys Group (GYS) Price: 1941.0p Market cap: £2128m INVESTMENT SUMMARY Market LSE On 24 March 2021, Gamesys Group and Bally’s Corporation announced that they have reached an agreement in principle on the key terms of a possible combination, in which Share price graph (p) Bally’s would acquire the entire share capital of Gamesys.
INDUSTRY OUTLOOK
For the purposes of the Takeover Code, Edison is deemed to be connected with Gamesys Group as a provider of paid-for research. Under Rule 20.1 Edison must not include any profit forecast, quantified financial benefits statement, asset valuation or estimate of other figures key to the offer, except to the extent that such forecasts, statements, valuations or estimates have been published prior to the offer period (as defined in the Takeover Code) by an offeror or the offeree company (as appropriate) in accordance with the requirements Company description of the Code. Consequently we have removed our estimates until the offer period ends. Gamesys is a leading international online gaming operator. The group was formed after JPJ Group acquired Gamesys for £490m in September 2019.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 18.2 45.7 127.3 2019 565.3 158.9 119.5 100.4 19.3 27.0 Relative* 13.8 39.1 83.8 2020 727.7 206.2 163.1 142.4 13.6 9.4 * % 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: Technology GB Group (GBG) Price: 909.0p Market cap: £1784m INVESTMENT SUMMARY Market AIM GB Group (GBG) expects to report revenue, adjusted operating profit and net cash ahead of consensus for FY21, with strength in the Identity and Location businesses outweighing Share price graph (p) slower business for the Fraud division. Cash generation was well ahead of our expectations, with year-end net cash of £21m compared to our forecast for net debt of £11m, with all debt repaid prior to year-end. We have upgraded our FY21 forecasts to reflect the expected outturn. We have removed the Employ & Comply business from our forecasts (sold 31 March), which reduces revenue by c £6m and adjusted operating profit by c £2m in FY22 and FY23. Overall, our normalised diluted EPS forecasts increase by 9.2% in FY21 and decrease by 4.2% in FY22 and 3.9% in FY23.
INDUSTRY OUTLOOK
Company description Globalisation and the growth in internet trading have also resulted in the need for higher GB Group specialises in identity data compliance standards in light of the rising scope and financial impact of cybercrime. This, in intelligence. Its products/services enable customers to understand and turn, is driving the demand for more complex and comprehensive solutions for the verify clients and employees in fraud, verification of personal data. risk management, compliance and customer on-boarding services. Headquartered in the UK, it operates across 16 countries. Y/E Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 7.2 3.8 42.5 2019 143.5 34.1 31.3 15.7 57.9 N/A Relative* 3.2 (0.9) 15.2 2020 199.1 51.7 45.7 18.2 49.9 N/A * % Relative to local index Analyst 2021e 217.2 61.9 56.3 21.9 41.5 N/A Katherine Thompson 2022e 206.3 50.1 44.9 17.3 52.5 N/A
Edison Insight | 29 April 2021 29 Sector: Mining Gemfields Group (GML) Price: ZAR1.66 Market cap: ZAR1940m INVESTMENT SUMMARY Market JSE On 19 April Gemfields announced exceptional results from five emerald mini-auctions held between 15 March and 17 April which generated US$31.4m, the highest Kagem auction Share price graph (ZAR) revenue since March 2016. The average price of US$115.59/ct is well above that received previously, in part due to the mix of stones offered. Combining this auction result with the October/November mini-auctions (where prices were lower as some of the higher quality goods were not offered) gives an average price of US$93.21/ct – still an all time high. 36 of 37 lots offered were sold (99% of carats offered) and 59 companies submitted bids.
INDUSTRY OUTLOOK
Gemfields' online mini-auction process (as customers cannot travel internationally to auctions as usual, stones were shown in Tel Aviv, Dubai and Jaipur followed by an online Company description auction) has been a resounding success. The very strong auction results announced on 19 Gemfields is a world-leading supplier April add to the US$58.9m generated from the ruby mini-auctions announced 8 April. Not of responsibly sourced coloured gemstones. It owns 75% of Montepuez only does the US$90.3m in 2021 auction revenues to date help shore up Gemfields’ Ruby Mining in Mozambique, 75% of balance sheet while mining operations ramp back up, the success of the auctions is a clear the Kagem emerald mine in Zambia, the Fabergé jewellery business and an indication of the strength of market demand for the company’s high quality emerald and investment in Sedibelo Platinum. ruby production. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 9.2 2.5 (1.2) 2019 216.2 80.9 55.9 1.3 8.8 3.9 Relative* 6.0 (2.6) (27.2) 2020 34.6 (30.0) (84.7) (6.1) N/A N/A * % Relative to local index Analyst 2021e 190.1 33.1 1.2 (1.5) N/A 3.5 Alison Turner 2022e 240.3 80.8 52.2 1.5 7.6 2.3
Sector: General industrials Genuit Group (GEN) Price: 577.0p Market cap: £1426m INVESTMENT SUMMARY Market LSE After trading updates in December and early February – both of which resulted in upgrades – Genuit Group (previously Polypipe) has reported FY20 PBT norm of £35.7m (and EBIT ‘in Share price graph (p) excess of’ £40m’ at £42.2m as recently guided). Gross margin and EBIT were slightly better than we were going for, largely offset by other finance charges. The 4.8p final dividend was also above our estimate. Net bank debt (c £15m) and lease liabilities (c £13m) were both as expected and there were no surprises in the cash flow line items. Genuit has entered FY21 with clear momentum from current trading and underlying performance will be supplemented by the three acquisitions made ytd (ie ADEY, Nu-Heat & 51% of Plura). Our estimates are under review.
INDUSTRY OUTLOOK
Company description The Construction Products Association estimates that sector activity contracted by c 14% Genuit is a leading supplier of largely overall in 2020 and expects this to be followed by a similar percentage rise in output in plastic building products and systems. Operations in the UK (c 90% of 2021, followed by almost 5% in 2022. revenue) address a broad range of sectors including residential, commercial and civil building demand 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 9.1 19.7 2018 433.2 90.6 67.1 28.1 20.5 12.8 Relative* 4.6 4.2 (3.2) 2019 447.6 99.1 70.8 29.2 19.8 12.9 * % Relative to local index Analyst 2020e 400.5 62.8 35.5 13.2 43.7 21.3 Toby Thorrington 2021e 495.1 107.9 76.1 25.3 22.8 15.7
Edison Insight | 29 April 2021 30 Sector: Food & drink Greggs (GRG) Price: 2301.0p Market cap: £2335m INVESTMENT SUMMARY Market LSE Greggs’ FY20 results were in line with expectations. Revenue declined by 36.2% on a like-for-like basis leading to a clean operating loss of £6.2m and loss before tax of £12.9m. Share price graph (p) Following the weak first half, and despite a further year-on-year revenue decline of c 18% in H220, Greggs reported an operating profit of £55.3m (10.8% margin) due to a combination of higher gross margin (+110bp y-o-y to 65.3%) and cost control (opex -14% y-o-y), helped by government financial support. Although current trading remains negative (-28.8% for the first 10 weeks of FY21), it is better than we and management expected and momentum is improving, leading us to increase our FY21 PBT forecast by c 5%.
INDUSTRY OUTLOOK
Greggs enjoys an expanding market. The Project Café2017UK report (Allegra World Coffee Company description portal) valued the UK coffee shop market in 2016 at £8.9bn, +12% y-o-y, with branded With 2,078 shops, and eight outlets accounting for £3.7bn. Allegra estimates it could reach £16bn by 2025. The manufacturing and distribution centres, Greggs is the leading UK squeezed consumer is a potential concern, although Greggs is well placed for the value ‘food-on-the-go’ retailer. It uses vertical switch after widespread refurbishments and extended customer options as it moves to integration to offer differentiated products at competitive prices. widen its 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 8.9 11.9 35.4 2019 1167.9 231.9 114.2 89.7 25.7 9.4 Relative* 4.8 6.9 9.4 2020 811.3 115.4 (12.9) (12.1) N/A 37.7 * % Relative to local index Analyst 2021e 1053.7 186.0 65.0 52.1 44.2 10.0 Russell Pointon 2022e 1144.7 226.3 103.5 85.1 27.0 9.9
Sector: Oil & gas Hellenic Petroleum (ELPE) Price: €5.86 Market cap: €1791m INVESTMENT SUMMARY Market Athens Stock Exchange Despite continued low benchmark refinery margins during H220 due to the impact of COVID-19 on oil products demand, Hellenic Petroleum (ELPE) was able to maintain high Share price graph (€) production levels and generate substantial positive operating margin thanks to the flexibility of its refining system and increased exports. We anticipate a potentially slower recovery of benchmark margins in H121 than previously assumed due to continued sluggish demand. However, with Greece looking to prioritise tourism with reduced restrictions on travel, we anticipate this could accelerate a recovery in domestic demand, especially for jet and road fuels. ELPE expects the Kozani 204MW photovoltaic project to become operational in Q122, as a part of the company’s goal of an overall 600MW installed capacity by 2025. Our valuation stands at €6.55/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 344kbd. It 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 9.5 4.6 (2.8) 2019 8857.0 570.0 205.0 60.6 9.7 3.7 Relative* 1.3 (9.4) (34.1) 2020 5782.0 333.0 5.0 1.8 325.6 4.0 * % Relative to local index Analyst 2021e 7319.0 525.0 196.0 48.0 12.2 3.9 Marta Szudzichowska 2022e 7339.0 634.0 316.0 77.6 7.6 3.2
Edison Insight | 29 April 2021 31 Sector: Oil & gas Hurricane Energy (HUR) Price: 2.4p Market cap: £49m INVESTMENT SUMMARY Market AIM Hurricane Energy (HUR) provided an update to the Lancaster and Lincoln fields reserves and resources with a Competent Person's Report (CPR) summary in April 2021. ERCE Share price graph (p) estimates Lancaster 2P reserves of 7.1mmbbls (down from 16mmbbls for the EPS) and 2C resources of 37.9mmbbls (down from 58mmbbls), of which 34.7mmbbls assume the implementation of water injection. Lincoln 2C resources are now 36.9mmbbls cf to 45mmbbls previously. HUR is working with its stakeholders to assess the merits of side-tracking the existing Lancaster 205/21a-7z well. The company is considering drilling the sidetrack in 2022, and a water injection well in 2022 or 2023. Q221 average production of 11,200bopd was down from 12,700bopd in Q420, though watercut was maintained at 25%. The 205/21a-6 well (P6) most recently tested at 11,600bopd and 28% watercut. We will review our suspended valuation once HUR publishes the full CPR. Our core NAV is Company description likely to be significantly reduced from our previous estimate of 13.6p/share. Hurricane Energy is an E&P focused on fractured basement exploration and INDUSTRY OUTLOOK development in the West of Shetland region. The company’s 100%-owned HUR’s ability to mitigate declines at Lancaster will depend on the outcome of its ongoing Lancaster oil discovery achieved first oil on target in H119. engagement with stakeholders regarding the nature and timing of future investment in the field. 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 (18.7) (5.8) (80.0) 2018 0.0 (12.6) (18.5) (2.2) N/A N/A Relative* (21.7) (10.1) (83.8) 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 Ian McLelland 2021e N/A N/A N/A N/A N/A N/A
Sector: Technology IQE (IQE) Price: 59.6p Market cap: £478m INVESTMENT SUMMARY Market AIM As flagged in IQE’s January trading update, group revenues grew by 27% year-on-year during FY20 to a record £178.0m. Wireless revenues jumped by 38% to £94.2m, benefiting Share price graph (p) from 5G infrastructure deployments in Asia and 5G handset adoption. Photonics revenues rose by 17% to £81.6m. Production for IQE’s major VCSEL customer was consistently strong throughout the year. Given the high proportion of fixed costs, the strong year-on-year revenue growth took the group from a £4.7m adjusted operating loss in FY19 to a £5.4m adjusted operating profit.
INDUSTRY OUTLOOK
These favourable trends have continued into FY21. Industry pundits predict a recovery in global handset sales during FY21, which for IQE means that demand for wireless epiwafers Company description for handsets has been strong so far this year, and demand for photonics wafers for 3D IQE is the leading global supplier of sensing applications remains positive. We have left our FY21 estimates broadly unchanged advanced semiconductor wafer products and material solutions to the on a constant currency basis, but have cut our FY21 revenue estimate by £8.3m and PBT semiconductor industry. Applications by £9.5m to reflect the strengthening of sterling against the USD. include radio frequency semiconductors, optical network devices, VCSELs and infrared semiconductors. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (16.1) (31.3) 56.8 2019 140.0 16.2 (7.0) (2.46) N/A 52.4 Relative* (19.2) (34.4) 26.8 2020 178.0 29.9 3.2 0.29 205.5 13.4 * % Relative to local index Analyst 2021e 175.0 30.3 2.5 0.21 283.8 17.0 Anne Margaret Crow 2022e 185.4 39.0 6.8 0.63 94.6 13.7
Edison Insight | 29 April 2021 32 Sector: Investment companies John Laing Group (JLG) Price: 306.0p Market cap: £1509m INVESTMENT SUMMARY Market LSE John Laing Group's (JLG) Q1 trading was in-line with expectations with total NAV showing a 'small increase' even after taking into account a 3% strengthening of sterling during the Share price graph (p) period. The main feature of 2021 so far is the execution of its strategy to transform the portfolio at pace. In April it announced its first FTTP (Fibre to the Premise) investments (£27m but with the potential to invest more to expand the footprint over time), £50m in retirement living in the UK (alongside Macquarie, again with the potential to expand) and further sales of its renewable portfolio. JLG has already exceeded its investment guidance given at the FY20 results in March (at least £100m) and rising disposals bode well for the FY21 dividend. While foreign exchange headwinds may mask growth in underlying NAV/share in FY21, for FY22 we forecast a 7.6% total return (ie growth in NAV/share plus dividend). Company description INDUSTRY OUTLOOK John Laing is an international originator, active investor and manager of infrastructure projects. Substantial boosts to infrastructure spending are expected as developed economies look to stimulate growth following the COVID-19 pandemic. Digital, transport and energy infrastructure are key parts of many countries recovery plans.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (3.2) (6.6) (5.4) 2019 179.0 111.0 100.0 20.2 15.1 N/A Relative* (6.8) (10.8) (23.5) 2020 25.0 (24.0) (65.0) (13.3) N/A N/A * % Relative to local index Analyst 2021e 124.5 74.5 49.4 10.0 30.6 N/A Dan Gardiner 2022e 173.7 121.7 94.3 18.9 16.2 N/A
Sector: Technology Kcell Joint Stock Company (KCEL) Price: US$5.35 Market cap: US$1070m INVESTMENT SUMMARY Market LSE The recovery from the COVID-19 affected Q2 continued in Q4. Service revenue growth (ex bulk SMS) accelerated to 7.6% y-o-y, resulting in FY20 sales and EBITDA ahead of both Share price graph (US$) our forecasts and guidance. This trend is further evidence of an improving market in our view and leads us to raise our FY21 and FY22 adjusted EPS forecasts by 5% and 6% respectively.
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 Kcell’s major shareholder is now the dominant national telecom player. 2019 saw the Company description company deliver its first growth in service revenues in five years. With little near-term risk of Kcell Joint Stock Company (Kcell) is a regulatory intervention or a resurgence in aggressive competition, the current market mobile operator in Kazakhstan and a listed subsidiary of Kazakhtelecom structure appears sustainable. (KT), a state-owned incumbent with a 70% share of the market.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (KZTbn) (KZTbn) (KZTbn) (KZT) (x) (x) % 1m 3m 12m Actual (7.8) (17.7) (10.5) 2019 156.7 64.4 23.2 50.0 45.5 N/A Relative* N/A N/A N/A 2020 174.7 72.1 31.6 88.0 25.9 N/A * % Relative to local index Analyst 2021e 189.0 78.7 39.4 148.0 15.4 N/A Dan Gardiner 2022e 196.6 81.5 40.5 158.0 14.4 N/A
Edison Insight | 29 April 2021 33 Sector: Mining KEFI Gold and Copper (KEFI) Price: 1.9p Market cap: £41m INVESTMENT SUMMARY Market LSE KEFI is in the process of finalising the specifics of the remaining funding sources for Tulu Kapi ahead of major mine site works and production commissioning in Q422. Inter alia, this Share price graph (p) may involve production of 190koz pa (cf 140koz pa currently assumed). In the meantime, the Ethiopian central bank has approved the project's debt financing structure and community resettlement has been authorised.
INDUSTRY OUTLOOK
Prior to November's equity raising (which increased the number of shares by 14.2%), we valued KEFI at 4.05p/share on the basis of its generating c £65m in free cash flow pa. However, this excluded Hawiah (19.3Mt at 1.86% CuE), on which KEFI has completed a recent preliminary economic assessment showing a post-tax NPV(8%) of US$96m Company description (1.37p/share attributable) and on which it has now embarked on a pre-feasibility study. It KEFI Gold and Copper is an also excluded any beneficial interest for KEFI in Tulu Kapi above 45% (potentially 65% exploration and development company focused on gold and copper deposits adding 1.35p/share) and also the value of its other assets (potentially 3.83–8.74p/share). in the highly prospective 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 (6.4) 3.3 183.0 2018 0.0 (4.1) (4.6) (1.0) N/A N/A Relative* (9.9) (1.3) 128.8 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 104.3
Sector: General industrials Kendrion (KENDR) Price: €23.20 Market cap: €346m INVESTMENT SUMMARY Market AMS Kendrion is a global player in high-quality electromagnetic systems that optimise safety, performance and comfort in automotive and industrial applications. Despite the short-term Share price graph (€) uncertainty, the underlying demand for Kendrion’s products is strong and it will benefit from long-term disruptive trends such as autonomous driving, electrification, emission reduction and industrial automation. Its valuation shows a discount to peers, which should gradually vanish when company targets are met.
INDUSTRY OUTLOOK
Kendrion's targets for 2025 are an organic revenue growth of at least 5% on average per year and an EBITDA margin of at least 15%. For both Automotive and Industrial a market recovery is expected in 2021-2022. In Automotive, Kendrion focuses on the car of the future Company description (fully electric and autonomous), with existing but particularly with relatively new products. Kendrion develops, manufactures and For Industrial Brakes, Kendrion expects the market to grow >5% per year, with markets high-quality electromagnetic systems for automotive (52% of above-average growth in robotics, wind power and industrial trucks. revenues) and industrial applications (48%). The geographical spread of revenues is Germany 39%, other Europe 30%, the Americas 15% and Asia 16%. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 8.2 17.3 125.2 2019 412.4 43.8 11.0 94.0 24.7 N/A Relative* 3.0 8.2 61.3 2020 396.4 44.6 5.7 79.0 29.4 N/A * % Relative to local index Analyst 2021e 432.2 52.0 17.7 99.0 23.4 N/A Johan van den Hooven 2022e 475.5 61.9 28.1 147.0 15.8 N/A
Edison Insight | 29 April 2021 34 Sector: Technology Keywords Studios (KWS) Price: 2996.0p Market cap: £2242m INVESTMENT SUMMARY Market AIM FY20 results were in-line with its trading update (FY20 revenues: €373.5m, PBT: €55.0m), with 12% organic growth in FY20 despite COVID-19. Adjusted EBITDA rose 29% to €74.2m Share price graph (p) with PBT up 35% to €55.0m and PBT margins climbing to 14.7%. The FY21 outlook remains benign, with demand for KWS's services continuing to build in the short to medium term. The arrival of Sonia Sedler as COO (and co-CEO) strengthens the management team, pending Andrew Day’s return as CEO. With €202.9m of net cash and facilities, KWS remains well-placed for further M&A.
INDUSTRY OUTLOOK
Buoyed by exceptional demand for games during lockdown and boosted by the start of the console transition, the global games industry showed y-o-y growth of 20% in FY20 Company description (Newzoo). There are signs of launch delays in 2021, particularly to larger AAA titles, but as Keywords Studios is the largest and a service provider, this may even benefit Keywords, allowing more time for bug-fixing and most diverse supplier of outsourced services to the games industry. polishing. Newzoo is forecasting 10.5% CAGR 2019–23e as the industry returns to trend Through regular acquisitions, it is growth. 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 24.5 15.0 114.9 2019 326.5 57.6 40.9 47.2 73.6 49.1 Relative* 19.9 9.8 73.8 2020 373.5 74.2 55.0 57.7 60.2 30.4 * % Relative to local index Analyst 2021e 475.1 92.7 71.0 73.1 47.5 30.3 Richard Williamson 2022e 536.9 102.9 79.9 82.1 42.3 26.3
Sector: Mining Kopy Goldfields (KOPY) Price: SEK2.22 Market cap: SEK1963m INVESTMENT SUMMARY Market NASDAQ OMX First North Kopy Goldfields has reported its first full year results as a Russian gold producer following the Amur Zoloto reverse acquisition (the comparative 2019 results are for Amur Zoloto Share price graph (SEK) only). The company saw revenue rise 41% to US$98.8m and EBITDA rise 67% to US$45.6m. Having secured a US$42.3m debt facility maturing in September 2023, Kopy is fully funded to support its growth profile and we expect it to end 2021 with net debt of US$61.8m and US$13.7m in cash and undrawn debt facilities.
INDUSTRY OUTLOOK
In our last note on the gold price (The gold rush, published on 11 June 2020), we argued that the sharp increases in the total US monetary base might be expected to support a nominal gold price of US$1,892/oz and potentially as high as US$3,000/oz. While there is a Company description historically strong and statistically significant correlation of 0.909 between the gold price and Following the reverse takeover of Kopy the total US monetary base from 1967 to 2018, there is very little visibility as to how, or to Goldfields by Amur Zoloto in September 2020, the new Kopy boasts what extent, the total US monetary base may be expected to evolve. In the four months to production of >50koz pa of gold from November 2020, the US monetary base was expanding at an average rate of approximately two hard rock mines and a number of smaller placer deposits. Kopy also US$98bn per month, which would equate to an expected increase in the gold price (using retains a 49% interest in the Krasny project and 100% of the Maly Patom the historical correlation) of approximately US$391/oz per year. exploration licences. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (4.9) (2.0) 128.4 2019 70.1 27.3 14.0 1.47 17.7 N/A Relative* (9.8) (13.5) 47.2 2020 98.8 45.6 27.6 2.7 9.6 N/A * % Relative to local index Analyst 2021e 112.3 44.3 30.5 2.7 9.6 N/A Alison Turner 2022e 150.3 72.6 53.4 4.7 5.5 N/A
Edison Insight | 29 April 2021 35 Sector: Food & drink La Doria (LD) Price: €16.74 Market cap: €519m INVESTMENT SUMMARY Market Borsa Italiana The COVID-19 pandemic has increased demand as consumers eat more meals at home. The industrial plan has boosted capacity in the higher-margin products and structurally Share price graph (€) reduced costs in the longer term. FY20 benefitted significantly from increased at-home consumption and we expect volumes to normalise in FY21. That said, we believe there will be a structural increase in home consumption once restrictions are lifted, as more flexible working arrangements will continue. The commercial landscape is currently favourable, with high demand levels owing to the pandemic, and low industry stocks. We therefore expect FY21 profitability to remain high, with increased pricing and a more positive industry backdrop.
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 (17% of revenues) business to reduce the dependence on the more unpredictable ‘red line’. and international (83%) market. It enjoys 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 (5.4) 26.2 76.6 2019 717.7 56.0 32.7 64.0 26.2 13.4 Relative* (6.9) 13.8 23.4 2020 848.1 83.1 63.3 182.8 9.2 9.5 * % Relative to local index Analyst 2021e 805.7 83.8 61.8 153.5 10.9 7.5 Sara Welford 2022e 813.8 89.5 66.5 164.1 10.2 7.3
Sector: Mining Lepidico (LPD) Price: A$0.02 Market cap: A$109m INVESTMENT SUMMARY Market ASX Lepidico's patented technologies produce lithium hydroxide plus a range of by-products from less contested minerals such as lepidolite. Technically, its project has been de-risked Share price graph (A$) by a successful pilot plant campaign and, in May 2020, LPD announced the results of a definitive feasibility study (DFS) to produce c 4,900t of battery grade lithium hydroxide monohydrate pa (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. Since then, Lepidico has advanced the project to development status by awarding an EPCM contract to Lycopodium, concluding an offtake agreement with China's BJR, (effectively) completing the permitting and approvals Company description process and raising initial equity, such that we now value the company at A$0.0476/share if Via its Karibib project in Namibia and it raises the balance of equity at 2.9c/share. In the meantime, the US DFC is also evaluating unique IP, Lepidico is a vertically integrated lithium development the project for potential preferential debt financing. business that has produced both lithium carbonate and lithium hydroxide from non-traditional hard rock lithium-bearing minerals using its registered L-Max and LOH-Max processes. Y/E Jun Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual (22.2) (30.0) 162.5 2019 0.0 (4.0) (5.1) 0.0 N/A N/A Relative* (25.8) (32.3) 89.1 2020 0.0 (4.9) (10.8) 0.0 N/A N/A * % Relative to local index Analyst 2021e 4.1 1.1 (0.4) 0.0 N/A 38.2 Charles Gibson 2022e 0.0 (24.9) (26.0) 0.0 N/A N/A
Edison Insight | 29 April 2021 36 Sector: Financials London Stock Exchange Group (LSEG) Price: 7726.0p Market cap: £38992m INVESTMENT SUMMARY Market LSE LSEG's transformational acquisition of Refinitiv completed on 29 January, substantially strengthening its proposition in data and analytics and adding high-growth execution Share price graph (p) platforms in FX and fixed income. The combined business, with pro forma FY20 revenue of c £6.8bn, has three core business areas: Data & Analytics including real-time data, fundamental data and indices which together account for c 69% of revenue; Capital Markets (LSE markets plus FXall and Tradeweb), 17% of revenue; and Post Trade (OTC and non OTC clearing and collateral cash management), 14% of revenue. In its FY20 results LSEG reported total income growth of 6%, adjusted EBITDA and EPS +5% and basic EPS +1%. The FY DPS increased 7%.
INDUSTRY OUTLOOK
Company description Post-Refinitiv transaction financial targets include: year-five revenue and cost synergies of London Stock Exchange Group >£225m (3.4%) and >£350m (7.1%), respectively, a three-year post deal revenue CAGR of (LSEG) is a diversified global financial markets infrastructure and data 5–7% and a medium-term EBITDA margin of 50%. The group signalled increased business. Its core areas of activity are: investment in capex and operating expenses to provide for growth and separation of Borsa data and analytics (including indices), capital markets and post trade. Italiana but still looks for >30% EPS accretion in the the first year post completion.
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 (15.3) 2.2 2018 2135.0 1066.0 865.0 173.8 44.5 N/A Relative* 2.5 (19.1) (17.4) 2019 2314.0 1265.0 994.0 200.3 38.6 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
Sector: General retailers Lookers (LOOK) Price: 69.1p Market cap: £270m INVESTMENT SUMMARY Market LSE Lookers is the second largest UK new car retailer. In COVID-affected FY20, a £36.1m H120 underlying PBT loss has been followed by strong H220 trading with the 18 March trading Share price graph (p) update statement indicating a c £10m profit for FY20 compared to analyst consensus for a small loss. At 31 December 2020 net debt (ex leases) was around £45m (FY19 £59.5m) and has reduced significantly since then. The ongoing disruption and uncertainties for car retailers in FY21 continue, although the progressive lifting of lockdown should provide some hope for a more normal trading environment. A Q121 trading update on 8 April confirmed that FY21 would be materially ahead of analyst consensus expectations.
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 and economic shocks like these and survived a dramatic crisis for the sector in of used and aftersales activities. It 2008/9. operates 150 franchises, representing 33 marques from 100 sites around the 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 27.7 229.1 215.5 2018 4828.3 117.1 42.8 8.41 8.2 2.2 Relative* 23.0 214.2 155.1 2019 4787.2 90.9 4.2 0.84 82.3 2.0 * % 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
Edison Insight | 29 April 2021 37 Sector: Financials LXi REIT (LXI) Price: 131.4p Market cap: £817m INVESTMENT SUMMARY Market LSE LXi continues its strong growth since IPO in February 2017, with its portfolio recently reaching c £1bn, adding scale and increasing diversification. Building on a proven track Share price graph (p) record of swift capital deployment, c £85m (c 70%) of the March 2021 £125m (gross) equity raise was deployed by the end of that month and LXi expects full deployment into further accretive acquisitions soon. Including debt funding, based on the company’s moderate gearing target (gross LTV of c 30% on a fully developed basis), we forecast an additional c £100m of deployment by end-June (end-Q122). With 99.0% of rents collected in cash (99.8% including agreed deferrals) for the quarter ending June 2021 LXi recently confirmed its aggregate 6.0p DPS target for FY22.
INDUSTRY OUTLOOK
Company description The pandemic and Brexit contribute to a highly uncertain UK economic outlook. Long LXi is an externally managed REIT that upwards-only, mostly index-linked leases may mitigate some of the cyclical volatility in invests in high quality, smaller lot size (£5–15m) assets, let on long typically capital values (and to a lesser extent income returns) historically exhibited by the 20–30 years at inception), mostly commercial property market, especially where careful selection avoids tenant failure and/or index-linked leases to strong financial covenants across a range of sectors where asset selection identifies properties with broad occupier appeal in robust sectors of chosen for their defensive characteristics. the economy. Y/E Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 7.7 9.8 28.7 2019 21.6 18.0 16.4 6.1 21.5 18.0 Relative* 3.7 4.8 4.0 2020 38.5 31.9 30.5 6.3 20.9 24.7 * % Relative to local index Analyst 2021e 43.5 37.3 36.3 6.9 19.0 27.2 Martyn King 2022e 54.9 47.3 44.3 7.1 18.5 18.6
Sector: General retailers Marshall Motor Holdings (MMH) Price: 175.5p Market cap: £137m INVESTMENT SUMMARY Market AIM Marshall Motor Holdings has grown to rank seventh among UK automotive retailers. Strong brand coverage, excellent relationships with major car brands and a strong balance sheet Share price graph (p) support continued strategic development. As indicated trading in Q420 was stronger than management expected despite the national lockdown in November. Adjusted FY20 PBT of £20.9m, was c 10% better than most recent guidance, aided by some positive one-off tailwinds as well as partner and government support. Cash performance also remained strong with adjusted year end net cash of £28.8m. Challenges remain for 2021 (Brexit/COVID-19 etc), and we assume a relatively flat year overall.
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 9.0 35.0 75.5 2019 2276.1 52.0 22.1 22.9 7.7 3.1 Relative* 4.9 28.9 41.9 2020 2154.4 53.4 20.9 21.1 8.3 1.6 * % Relative to local index Analyst 2021e 2266.0 50.1 19.3 19.3 9.1 6.7 Andy Chambers 2022e 2346.3 52.5 21.2 21.3 8.2 3.9
Edison Insight | 29 April 2021 38 Sector: Industrial support services Medserv (MDS) Price: €0.83 Market cap: €45m INVESTMENT SUMMARY Market Maltese Stock Exchange Medserv’s strategy to expand its geographic reach and range of services remains but COVID-19 and lower oil prices has deferred progress. The development of the new oil and Share price graph (€) gas assets in the eastern Mediterranean offer the prospect of recovery in the medium and longer term. The two major shareholders’ intentions to find a strategic investor has led to a proposed reverse takeover by Regis Holdings of Mauritius, which should underpin the balance sheet and provide expansion opportunities into sub-Saharan Africa. The transaction is subject to Medserv shareholder approval at an EGM.
INDUSTRY OUTLOOK
Medserv operates in the upstream oil and gas segment, providing onshore bases in the Mediterranean, the Middle East and the Americas for onshore and offshore exploration and Company description production customers. The acquisition of METS in February 2016 added onshore OCTG Medserv is a Malta-based provider of services to the historical integrated offshore services offered in Malta, Cyprus and now integrated offshore logistics and services in support of drilling Egypt. As new territories are brought on stream, the potential for future revenue growth operations in the Mediterranean, remains which the Regis deal should augment. MENA and South America. The 2016 acquisition of the METS companies diversified Medserv into onshore steel tube stockholding and servicing in the Middle East and beyond. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 43.1 11.4 (6.7) 2018 36.2 6.3 (3.4) (6.76) N/A 6.8 Relative* 35.6 11.3 (7.0) 2019 68.7 11.5 1.1 1.2 69.2 6.6 * % 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: Investment companies Mercia Asset Management (MERC) Price: 34.0p Market cap: £150m INVESTMENT SUMMARY Market AIM Mercia has built a sustainably profitable, cash-generative, specialist asset manager, delivering high levels of contracted recurring revenue. With seven cash exits since its IPO in Share price graph (p) 2014, Mercia's portfolio is now sufficiently mature to start to generate more frequent, attractive exits. We believe the NAV discount should close as the market starts to appreciate Mercia's transition from having a sub-scale portfolio dependent on periodic capital injections to a cash-generative, dividend-paying business, with increasing upside from portfolio realisations.
INDUSTRY OUTLOOK
Mercia's management has set out a clear vision for the company, with the acquisition of NVM’s VCT business accelerating Mercia's transition towards managing fee-paying Company description third-party funds. COVID-19 fears have abated, with sustained valuations amidst a robust Mercia Asset Management is a funding environment. Growth in FUM and profitability as well as consistency of NAV regionally focused specialist asset manager. Its stated intent is to become performance, realisations and exits are the key metrics by which to judge success. 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 9.7 38.8 81.3 2019 10.7 (1.4) 3.0 1.00 34.0 N/A Relative* 5.6 32.5 46.6 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
Edison Insight | 29 April 2021 39 Sector: Mining Monarch Mining Corporation (GBAR) Price: C$0.82 Market cap: C$58m INVESTMENT SUMMARY Market TSX Monarch Gold (MQR) sold its Wasamac and Camflo assets to Yamana for C$200m but retains a suite of potentially high-return projects as Monarch Mining, which it spun out in Share price graph (C$) January 2021. Its portfolio is located in the established and highly prospective Abitibi gold belt. Beaufor should start production in FY22 with minimal capex. Once in production, its cash flows plus existing cash (Monarch Mining is debt free) will be invested in Croinor, due to start up in FY24. Our valuation is C$0.99/share comprising C$0.69 for Beaufor and Croinor and C$0.30/share for second tier assets McKenzie Break and Swanson. With financing, Croinor could be brought forward, accelerating cash flows. Meanwhile, given the highly prospective locations ongoing exploration is likely to add to available resources and potentially life extensions, offering considerable valuation upside.
INDUSTRY OUTLOOK Company description Monarch Mining Corporation is a Canada ranks second in the world and Quebec ranks top quartile overall in the 2020 Fraser Canadian gold explorer with one past producing asset, one major near-term Institute index of mining attractiveness. M&A activity in the region has picked up in recent project and two second tier projects in years, with the QMX Gold acquisition in January implying a valuation C$170/oz and a peer the Abitibi, Quebec, gold belt. group trading at an average of C$61/oz versus Monarch at C$49/oz at the time of our initiation. Y/E Sep / Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (C$m) (C$m) (C$m) (c) (x) (x) % 1m 3m 12m Actual (5.8) N/A N/A 2019 N/A N/A N/A N/A N/A N/A Relative* (7.9) N/A N/A 2020 0.0 (1.9) (2.0) (2.2) N/A N/A * % Relative to local index Analyst 2021e 0.0 (2.6) (2.8) (4.1) N/A N/A Rene Hochreiter 2022e 21.0 (1.8) (2.2) (3.1) N/A N/A
Sector: Consumer support services Mondo TV (MTVI) Price: €1.44 Market cap: €63m INVESTMENT SUMMARY Market Milan Stock Exchange Mondo TV produced good FY20 results, with production value up by 14% to €30.4m and an uptick in EBITDA margin (on production value) from 61.4% to 61.8%. The strengthening of Share price graph (€) the balance sheet through Atlas’s capital injection (the €10.5m bond conversion is now complete) has given the group the resource to invest in its Toon2Tango JV and in the development of its own 3D CGI animation studio in Gran Canaria. The dispute with the tax authorities is now resolved. With robust global content demand and continuing deal flow, the valuation discount looks overdone.
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, with children’s content particularly valued focused on the production, acquisition and exploitation of animated children’s in order to attract household subscriptions. Licensing and merchandising markets have television series. It owns the rights to been more difficult. >1,600 TV episodes and films, which it distributes across 75 markets.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 1.1 13.7 (21.1) 2019 23.1 16.4 6.2 11.3 12.7 9.9 Relative* (0.5) 2.6 (44.9) 2020 24.7 18.8 6.4 13.2 10.9 4.5 * % Relative to local index Analyst 2021e 29.2 24.6 10.5 15.0 9.6 4.7 Fiona Orford-Williams 2022e 30.6 26.9 12.3 16.5 8.7 2.8
Edison Insight | 29 April 2021 40 Sector: General industrials Mytilineos (MYTI) Price: €15.20 Market cap: €2172m INVESTMENT SUMMARY Market Athens Stock Exchange Mytilineos is a leading industrial company with international presence in all five continents. Mytilineos’s FY20 results, published 4 February, showed a strong H2 turnaround. This not Share price graph (€) only demonstrates that the company's strategy is resilient and capable of withstanding headwinds from the ongoing pandemic, but also provides a platform for solid performance in 2021. Strong maturing pipelines of renewables (0.6GW own + €0.6bn third party) and sustainable engineering (>€1.5bn) projects should drive growth in these businesses. Mytilineos recently announced an offering of €500m senior notes to finance/refinance green projects. Also, it provided an update on its €300m combined cycle gas turbine (CCGT) plant, which is on track to be completed by end of 2021.
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 13.7 23.9 125.5 2019 2256.0 313.0 180.0 103.0 14.8 8.9 Relative* 5.1 7.3 53.0 2020 1899.0 315.0 N/A 91.0 16.7 N/A * % Relative to local index Analyst 2021e N/A N/A N/A N/A N/A N/A James Magness 2022e N/A N/A N/A N/A N/A N/A
Sector: Technology Nanoco Group (NANO1) Price: 27.0p Market cap: £83m INVESTMENT SUMMARY Market LSE During H121 Nanoco successfully delivered on the technical and commercial milestones for its programme with a major customer to develop new nanomaterials for sensing Share price graph (p) applications. Management implemented further restructuring actions, cutting cash-burn to £0.4m/month and extending the cash runway to calendar H222. The group remains focused on new commercial revenues to sustain organic activities in H221 and beyond, with contingency plans in place if needed.
INDUSTRY OUTLOOK
Ahead of development projects moving to commercial production we believe that at this point Nanoco’s value lies in a satisfactory resolution of the patent infringement dispute with Company description Samsung. Although the value of the potential payout has not been disclosed, we calculate Nanoco is a global leader in the that lost revenue in the US attributable to the patent infringement to date could be in the development and manufacture of cadmium-free quantum dots and other region of US$200–250m or more. Any damages award could also make an additional nanomaterials. Its platform includes c allowance for future sales of Samsung TVs using QDs and sales in other territories. 740 patents. 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 20.0 125.0 187.2 2019 7.1 (3.8) (5.0) (1.34) N/A N/A Relative* 15.5 114.8 132.2 2020 3.9 (2.9) (4.9) (1.38) N/A N/A * % Relative to local index Analyst 2021e 1.4 (3.0) (4.4) (1.13) N/A N/A Anne Margaret Crow 2022e 2.0 (2.2) (3.6) (0.97) N/A N/A
Edison Insight | 29 April 2021 41 Sector: Mining Newmont Corporation (NEM) Price: US$65.72 Market cap: US$52597m INVESTMENT SUMMARY Market New York Stock Exchange Newmont is the world’s largest gold mining company with forecast production of 6.5Moz in FY21 plus a further 1.3Moz AuE (at standardised prices) out of attributable (end-FY20) Share price graph (US$) reserves of 94.2Moz and reserves & resources of 195.4Moz in top tier jurisdictions. It seeks to distinguish itself from its peers via its high environmental, social and governance (ESG) standards, its management strength and experience, its operating model, its capital discipline, its track record of returns (eg its industry-leading dividend), its methodical approach to project development and its conservatism (eg reserves calculated at US$1,200/oz).
INDUSTRY OUTLOOK
Newmont has a number of sources of organic growth plus three major new projects in the Company description form of Tanami Expansion 2, Ahafo North and Yanacocha Sulphides that we forecast will Newmont Corporation is the world’s result in a c 50% increase in pre-financing cash flows at NEM by FY25, supporting both its leading gold company with a world-class portfolio of assets in North market leading dividend and our valuation of US$76.34/share. Q121 results are scheduled and South America, Australia and for 29 April. Africa. It is the only gold producer in the S&P 500 Index and is widely recognised for its ESG practices and as a leader in value creation, safety and mine execution. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 9.3 6.4 5.3 2019 9740.0 3734.0 1473.0 131.6 49.9 16.9 Relative* 2.3 (2.2) (29.6) 2020 11497.0 5537.0 2929.0 265.5 24.8 10.8 * % Relative to local index Analyst 2021e 12256.0 5925.0 3226.0 247.3 26.6 12.0 Charles Gibson 2022e 12329.0 6243.0 3651.0 287.5 22.9 10.6
Sector: General industrials Norcros (NXR) Price: 302.0p Market cap: £244m INVESTMENT SUMMARY Market LSE FY21 started in the teeth of the COVID-19 pandemic but ended with a third estimates upgrade in six weeks, resulting in earnings expected to be ahead of FY20. Both the UK and Share price graph (p) South African divisions had strong H2 trading periods with like-to-like CER revenue growth of 115% and 123% respectively and the improved mix (including strong trading at Triton and Merlyn) is probably the key driver behind the required uplift to our FY21 EBIT estimate. Norcros ended FY21 with net cash (pre-IFRS 16 leases) of c £10m, representing a remarkable c £46m net cash inflow from the end-FY20 net debt position. Following the year-end update, we upgraded our EPS estimates by c 8% for FY21 and 5–6% for the following two years and made a sharper increase to our expected FY21 DPS.
INDUSTRY OUTLOOK
Company description RMI has been a stronger sub-sector during/exiting the UK COVID-19 lockdown phase while Norcros is a leading supplier of new residential new-build gathered momentum more gradually. The South African economy showers, enclosures and trays, tiles, taps and related fittings and has faced a number of challenges; wider distribution of wealth and an emerging middle accessories for bathrooms, kitchens, class should benefit consumer spending over time. Management's (pre COVID-19) 2023 washrooms and other commercial environments. It has operations in the financial targets targeted £600m revenue with a balanced UK/overseas split with sustained UK and South Africa, with some export activity from both countries. ROCE of 15%+. Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 19.4 40.5 88.8 2019 331.0 42.2 30.9 29.6 10.2 N/A Relative* 14.9 34.1 52.6 2020 342.0 38.8 27.1 26.1 11.6 N/A * % Relative to local index Analyst 2021e 324.5 38.7 28.0 26.9 11.2 N/A Toby Thorrington 2022e 337.5 41.4 31.1 29.9 10.1 N/A
Edison Insight | 29 April 2021 42 Sector: Financials Numis Corporation (NUM) Price: 380.0p Market cap: £410m INVESTMENT SUMMARY Market LSE Numis’s update for H121 (to end March) reported continued very strong trading across the group. A 75% revenue increase to c £110m is expected. Investment Banking revenue is Share price graph (p) expected to be ahead of the high level achieved in H220, with increased IPO and M&A activity more than offsetting the tailing-off of COVID-19-related fund-raising for clients. Activity has tended to focus on those areas benefiting from changes accelerated by the pandemic evidencing Numis’s credibility in the digital economy. Equities is also expected to generate revenue ahead of H220, helped by increased market share, activity levels and strong gains on the trading book.
INDUSTRY OUTLOOK
Reflecting the first half revenue guidance, we increased our FY21 revenue forecast by 14% Company description to £185m cautiously assuming a normalisation of activity at some point in the second half Numis is one of the UK's leading (revenue assumed of c £75m). The outcome could be higher if current activity levels are independent investment banking groups, offering a full range of maintained but the potential upside must be balanced against the considerable uncertainties research, execution, equity capital surrounding the market and economic background. Operational gearing means that our markets, corporate broking and advisory services. It employs c 290 FY21 pre-tax profit estimate was increased by 40% to £52.4m. staff in offices in London and New York. Y/E Sep Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 1.1 12.8 59.7 2019 111.6 15.3 12.4 8.1 46.9 N/A Relative* (2.7) 7.7 29.1 2020 154.9 39.6 37.1 26.7 14.2 N/A * % Relative to local index Analyst 2021e 185.0 57.3 52.4 36.7 10.4 N/A Andrew Mitchell 2022e N/A N/A N/A N/A N/A N/A
Sector: Investment companies Ocean Wilsons Holdings (OCN) Price: 915.0p Market cap: £324m INVESTMENT SUMMARY Market LSE Ocean Wilsons Holdings (OCN) reported FY20 earnings of $48m down 21% y-o-y, due to the impact of COVID-19 on both Wilsons Sons' operations and the significant BRL Share price graph (p) devaluation. The pandemic led to container terminal and towage volume dropping 1% and 0.4% y-o-y, respectively. However, there are good underlying trends of stronger prices in both towage and container terminals and we also note that volumes in the off-shore vessels grew 4.4%. The investment portfolio had a good year, beating its benchmark (up 4.4% in 2020) by 6.5%. The current 40% discount to a look-through valuation is above its long-term average in the mid-20s.
INDUSTRY OUTLOOK
The oil price recovery has been welcome news and improves Brazil’s deepwater pre-salt Company description industry's prospects for later this year. This will help businesses such as the offshore Ocean Wilsons Holdings is an support companies as well as towage. The coronavirus crisis initially hurt China and Asian investment company based in Bermuda. It has a controlling shipping, but the impact broadened as it became a pandemic and currently Brazil is lagging shareholding in Wilson Sons, a quoted in its vaccination programme. Our FY21 forecasts remain suspended until we get more maritime services company in Brazil, and holds a portfolio of international clarity on the impact of COVID-19. investments.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 5.8 4.0 37.6 2018 460.2 156.0 60.2 37.6 33.6 2.9 Relative* 1.8 (0.7) 11.2 2019 406.1 147.9 82.5 132.6 9.5 2.8 * % 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
Edison Insight | 29 April 2021 43 Sector: Travel & leisure OPAP (OPAP) Price: €12.20 Market cap: €4165m INVESTMENT SUMMARY Market Athens Stock Exchange OPAP’s Q320 results showed a strong sequential improvement in revenue from Q220 as trading returned towards normality, which led to an improvement in profitability and free Share price graph (€) cash flow generation. Further regional lockdowns and a second full national lockdown from November led us to downgrade revenue forecasts for FY20 by c 15%. Most significantly, the new licence for Lotteries and Sports Betting from FY20–30 with reduced taxes on revenue, agreed in FY11, became effective in October 2020 with no reaction from the Greek government, leading to significant upgrades to our forecasts for EBITDA, free cash flow and distributions to shareholders in FY21.
INDUSTRY OUTLOOK
The Hellenic Gaming Commission estimates that the total legal Greek gaming market Company description amounted to €2.2bn gross gaming revenue (GGR) in 2019, of which OPAP games OPAP was founded in 1958 as the comprised €1.36bn GGR. OPAP's other activities (lottery games and horse racing betting) Greek national lottery and it is the exclusive licensed operator of all took its total Greek GGR to €1.54bn. Revenue from land-based casinos comprised an numerical lotteries, sports betting and estimated €247m and total legal online amounted to €437m for the overall market. horse racing. OPAP listed in 2001 and was fully privatised in 2013. Sazka Regulation of the online gaming market is currently underway. Group has a 41.7% stake and significant board representation. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 8.7 16.2 56.2 2018 1547.0 356.6 238.0 52.57 23.2 N/A Relative* 0.6 0.6 6.0 2019 1619.9 411.2 286.6 67.69 18.0 N/A * % Relative to local index Analyst 2020e 1155.0 269.6 123.8 27.11 45.0 N/A Russell Pointon 2021e 1656.0 658.5 489.3 104.20 11.7 N/A
Sector: Technology Osirium Technologies (OSI) Price: 24.0p Market cap: £5m INVESTMENT SUMMARY Market AIM Osirium has raised gross proceeds of £2.17m from a placing and subscription of new shares. The first placing (3.9m shares at 22p per share) raised £858k and the second Share price graph (p) placing (5.6m shares at 22p per share) raised £1,242k. The subscription offer to management raised £70k (318k shares at 22p per share). The second placing is subject to shareholder approval at the meeting scheduled for 12 May. The net proceeds of £1.92m will be used to fund growth, strengthen the balance sheet and support key hires in marketing and product development.
INDUSTRY OUTLOOK
The market for privileged access management (PAM) software is currently worth US$2.2bn and is forecast to grow to US$5.4bn by 2025 (source: KuppingerCole), with demand driven Company description by regulation, the shift to the cloud and adoption spreading to smaller organisations. The UK-based Osirium Technologies complexity of established solutions means fewer mid-market businesses use PAM software designs and supplies subscription-based cybersecurity than enterprises, so this is a market ripe for development. software. Its PAM platform includes privileged access, task, session and behaviour management. It recently launched a secure process automation solution and a privileged endpoint management 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 (22.6) (9.4) (27.3) 2018 1.0 (1.8) (2.7) (18.14) N/A N/A Relative* (25.5) (13.5) (41.2) 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
Edison Insight | 29 April 2021 44 Sector: Financials OTC Markets Group (OTCM) Price: US$40.25 Market cap: US$474m INVESTMENT SUMMARY Market OTC QX OTCM's Q420 revenue was up 23% y-o-y at $19.8m. High levels of equity market trading and new subscribers on OTC Link ECN boosted OTC Link revenue(+73%). Market Data Share price graph (US$) Licensing revenue was also strong, +18% following price increases and higher numbers of professional and retail users. Corporate Services revenue rose 6% with Virtual Investor Conferences up by more than 3x and the Disclosure and News Service +14%. Expenses +5% and a lower tax charge left net income +50% to $5.7m with a similar increase in EPS. Full year diluted EPS increased by 22% to $1.53. A maintained first quarter dividend of $0.15 was announced.
INDUSTRY OUTLOOK
We assume trading activity levels will normalise at some point, potentially reducing OTC Company description Link revenues. However, the Corporate Services segment is set to benefit from fee OTC Markets Group operates the increases of 15% or more for corporate clients in both its premium markets in FY21 and OTCQX, OTCQB and Pink financial markets for over 11,000 US and global may sustain the improvement in client additions seen recently. Over 80% of revenues are securities. OTC Link LLC, a member of subscription-based. On a longer view, the group keeps its focus on delivering better FINRA, operates OTC Link ATS and OTC Link ECN, both SEC-registered informed and more efficient markets. OTCM's April investor day is available on the OTCM Alternative Trading Systems. In FY20 82% of revenues were of a IR webpage. subscription-based recurring nature. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 1.3 17.3 51.7 2019 62.8 19.4 18.0 124.7 32.3 20.4 Relative* (5.3) 7.8 1.5 2020 71.2 23.2 21.4 153.4 26.2 15.9 * % Relative to local index Analyst 2021e 73.6 24.8 23.1 157.2 25.6 15.9 Andrew Mitchell 2022e 76.3 26.8 25.0 168.6 23.9 15.2
Sector: Property Palace Capital (PCA) Price: 238.0p Market cap: £110m INVESTMENT SUMMARY Market LSE Ahead FY21 results in June, a trading update reported on continuing robust rent collection, further disposals of non-core assets, and perhaps most important of all, the completion of Share price graph (p) the flagship Hudson Quarter (HQ) development in York, on budget, later this month. We expect HQ to be a significant driver of returns and deleveraging over the next two years, producing development gains of c 20p per share and recurring income of c £0.9m as the residential apartments are sold and the commercial space let. Completion of HQ also represents a significant de-risking and an opportunity to de-gear. We estimate peak year-end LTV of just over 40% at FY21, falling to c 30% as apartment sales complete, before potential accretive reinvestment.
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 pandemic and Brexit contribute to a highly opportunities where it can enhance uncertain UK economic outlook and while the supply demand balance for regional office and long-term income and capital value through asset management and industrial property has hitherto remained generally firm the weakness that was previously strategic capital development in locations outside London. confined to the retail sector may 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 5.8 23.8 19.2 2019 18.8 12.4 8.9 17.3 13.8 9.2 Relative* 1.8 18.2 (3.7) 2020 21.1 14.6 8.0 17.5 13.6 7.0 * % Relative to local index Analyst 2021e 16.7 10.0 6.7 14.5 16.4 9.2 Martyn King 2022e 16.5 9.7 6.6 14.3 16.6 18.3
Edison Insight | 29 April 2021 45 Sector: Mining Pan African Resources (PAF) Price: 17.7p Market cap: £342m INVESTMENT SUMMARY Market AIM Pan African (PAF) produced a forecast beating 179.6koz gold in FY20, resulting in net debt declining by 52.6% in H220 alone to just US$62.0m and allowing it to increase its dividend Share price graph (p) more than five-fold such that it is among the top 20 yielding precious metals companies, globally. Since then, EPS has almost doubled again to 2.11c/share in a record H121 after production of 98.4koz (cf FY21 guidance of 190koz).
INDUSTRY OUTLOOK
With the 8 Shaft pillar project having now achieved steady state, near-term development opportunities for PAF include Egoli (ZAR2.01bn NPV and 50.1% IRR), which has now been sanctioned, the Prince Consort shaft pillar, the Fairview sub-vertical shaft (adding 7–10koz to production pa) and the Royal Sheba project (c 30koz pa). In the meantime, its acquisition Company description of Mintails' assets holds out the possibility that it could develop another Elikhulu. Until then, Pan African Resources has three we value PAF at 38.19c/share (27.46p/share) plus the value of c 19.2m underground major producing precious metals assets in South Africa: Barberton Witwatersrand oz (estimated 0.22–5.24c/share). (target output 95koz Au pa), the Barberton Tailings Retreatment Project (20koz) and Elikhulu (55koz), now incorporating the Evander Tailings Retreatment Project (10koz). Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 6.8 (25.2) 20.5 2019 218.8 65.5 37.1 1.64 14.9 7.9 Relative* 2.8 (28.6) (2.5) 2020 274.1 115.2 80.8 3.78 6.5 6.4 * % Relative to local index Analyst 2021e 357.0 157.1 122.2 4.24 5.8 3.5 Charles Gibson 2022e 336.2 177.1 151.4 5.43 4.5 2.8
Sector: General industrials paragon (PGN) Price: €11.00 Market cap: €50m INVESTMENT SUMMARY Market Xetra The market disruptions developed rapidly due to COVID-19 and management focused on mitigating its impact. The sale process of its remaining stake in Voltabox continues but has Share price graph (€) yet to be finalised. In 9M20 paragon's continuing Automotive were €83.8m with an EBITDA margin of 9%. The reported 9M20 EBIT loss was €6.5m, with sequential improvement in Q320 benefiting from previous cost reduction measures and management's COVID-19 mitigation efforts. Management has indicated sales for Automotive for FY20 should be c €120m with potential for €125m and a 12% EBITDA margin rising to €140m in FY21 with an EBITDA margin of 12–15%, and FCF of c €10m.
INDUSTRY OUTLOOK
We believe paragon's identification of, and investment in, solutions to address megatrends Company description in global automotive markets is understood by investors. It is growing faster than its markets paragon designs and supplies due to innovative products that are driving changes in customer perceptions, creating new automotive electronics and solutions, selling directly to OEMs, including growth engines for the group. These should reassert themselves as the COVID-19 sensors, interior, digital assistance and pandemic wanes. 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 14.6 13.5 (4.2) 2018 187.4 30.3 14.8 144.58 7.6 N/A Relative* 10.0 3.1 (34.1) 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
Edison Insight | 29 April 2021 46 Sector: Property Phoenix Spree Deutschland (PSDL) Price: 370.0p Market cap: £358m INVESTMENT SUMMARY Market LSE As expected by PSD and its advisers, the German Federal Court, the highest court in Germany, has ruled the Berlin rent-cap law unconstitutional. Rental agreements have been Share price graph (p) structured to revert to pre-cap levels and allow for the retrospective back-payment of rents, which the company estimates at €1.8m as of 31 March 2021. PSD is now clear to resume its reversionary rental strategy to drive income and capital growth while crystallising a part of this value through selected condominium sales at a premium to book value. Despite the market disruption caused by the rent cap during the past year FY20 net attributable earnings increased by c one-third to €29.8m or c 31 cents per share (FY19: c 22 cents). The external property valuation prepared by JLL fully reflected the rent cap for a full 5 year term yet still showed a like for like increase of 6.3%, driving EPRA net tangible asset (EPRA NTA) per share growth of 7.3%. Including DPS paid the EPRA NTA total return in the year Company description was 8.8%. PSD is a long-term investor in mid-market residential property in INDUSTRY OUTLOOK Berlin. Its core strategy is to acquire unmodernised apartment blocks that With strong demand for housing in Berlin driven by net migration and a relative lack of may be improved to the benefit of tenants, generating attractive returns supply, free market rents and capital values have steadily increased, while the rise in for shareholders based on improved rents and capital values. condominium prices appears to be continuing. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 13.9 10.5 37.0 2019 22.6 44.6 28.6 21.8 19.7 313.0 Relative* 9.6 5.5 10.8 2020 23.9 48.3 37.9 30.1 14.3 63.3 * % 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 Picton Property Income (PCTN) Price: 90.8p Market cap: £497m INVESTMENT SUMMARY Market LSE FY21 results will be released on 27 May. With continuing strong rent collection and progress with leasing, Q321 DPS increased 14% to 0.8p (an annualised 3.2p), following the 12% Share price graph (p) increase in Q221 DPS to 0.7p. EPRA NAV per share increased 3.0% to 95.5p (Q220: 92.7p) reflecting a 2.7% like-for-like increase in portfolio value, driven by the industrial assets that make up c 52% of the portfolio. Q321 NAV total return was 3.7% and DPS paid was 122% covered by EPRA earnings which included additional provisions against outstanding rents. Net LTV remains low (21.3%) with £50m of undrawn borrowing facilities available and the portfolio continues to offer significant opportunities to grow income, primarily through void reduction (end-Q321 occupancy steady at 90%) from leasing recently refurbished assets.
INDUSTRY OUTLOOK Company description Picton Property Income is an internally The commercial property market is cyclical, historically exhibiting substantial swings in managed UK REIT that invests in a diversified portfolio of commercial capital values through cycles while income returns have been more stable. The pandemic property across the UK. It is total and Brexit contribute to a highly uncertain UK economic outlook and while the supply return driven with a strong income focus and aims to generate attractive demand balance for regional office and industrial property has hitherto remained generally returns through proactive management of the portfolio. firm the weakness that was previously confined to the retail sector may 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 2.4 10.3 26.1 2019 38.3 32.5 31.4 4.25 21.4 14.1 Relative* (1.5) 5.3 2.0 2020 33.6 28.1 22.4 3.66 24.8 23.2 * % Relative to local index Analyst 2021e 32.7 27.7 10.2 3.60 25.2 21.1 Martyn King 2022e 33.9 28.3 20.4 3.74 24.3 16.1
Edison Insight | 29 April 2021 47 Sector: General industrials PIERER Mobility (PMAG) Price: €72.30 Market cap: €1630m INVESTMENT SUMMARY Market Vienna PIERER Mobility is a leading manufacturer of powered two wheelers (PTWs) focused on premium markets through the KTM, HUSQVARNA and GASGAS motorcycle brands. With Share price graph (€) e-bikes it adds a new organic growth stream as urban e-mobility markets develop rapidly. Strong global demand for motorcycles and e-bikes continued in Q121 following FY20 sales of €1.53bn that beat expectations. FY20 EBIT was €107.2m, a margin of 7% despite the pandemic and management has proposed a FY20 dividend increase to €0.5 a share. Following strong Q121 trading, guidance for FY21 sales is increased to €1.85bn to €1.95bn, with EBIT margins of 8–9% and EBITDA margin of over 15%.
INDUSTRY OUTLOOK
PIERER Mobility’s historic target PTW market has been for motorcycles greater than 120cc Company description that retail for over €2,500. The segment represents 6m units or around 11% of the global PIERER Mobility (previously KTM PTW market. PIERER had a market share of around 9.5% of this market in 2019 with a Industries) is a leading manufacturer of powered two wheelers, focusing on record 280.9k registrations, up 10% on 2018; 66.2k were through the Indian jv partner, premium motorcycles and two-wheeled Bajaj. The market for e-bikes and scooters has grown strongly in Europe, supported by electric vehicles. With its well-known brands – KTM, HUSQVARNA and structural long-term trends especially cleaner transport solutions. 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 9.6 8.7 144.3 2019 1520.0 241.0 118.0 241.8 29.9 6.3 Relative* 5.4 2.7 68.7 2020 1530.0 239.0 91.0 155.1 46.6 5.2 * % Relative to local index Analyst 2021e 1829.0 306.0 143.0 262.1 27.6 8.3 Andy Chambers 2022e 2014.0 335.0 168.0 312.9 23.1 5.9
Sector: Technology Piteco (PITE) Price: €10.85 Market cap: €219m INVESTMENT SUMMARY Market Borsa Italiana FY20 demonstrated Piteco's resilience. Despite the COVID-19 pandemic slowing down progress during the year, Piteco SpA generated both revenue and EBITDA growth of 5%. Share price graph (€) As expected, Juniper and Myrios had a tougher year, and hence group revenue was up 3% for FY20, while group EBITDA fell 3%. EBITDA margins remained above 40%. While Piteco’s products can help steer financial and treasury decision-making at times of crisis, the acquisition of new clients slowed. 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 are software solutions used by corporate treasuries and finance departments to manage Company description transactions and support decision-making. The software and ICT solutions market in Italy is Piteco is Italy’s leading company in valued at €6.3bn (Assinform 2016). A small slice of this (Piteco suggests c 5%) represents designing, developing and implementing software for treasury, the treasury and financial planning software market. IDC forecasts the worldwide treasury finance and financial planning and risk management applications market to grow by 4.9% to reach $2.7bn in 2022. management.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 9.2 0.9 80.8 2019 24.0 10.2 6.7 33.47 32.4 N/A Relative* 7.5 (9.0) 26.4 2020 24.7 9.9 5.9 30.01 36.2 N/A * % Relative to local index Analyst 2021e 38.0 18.0 15.3 62.73 17.3 N/A Sara Welford 2022e 40.6 19.6 17.0 69.76 15.6 N/A
Edison Insight | 29 April 2021 48 Sector: Property Primary Health Properties (PHP) Price: 150.2p Market cap: £1995m INVESTMENT SUMMARY Market LSE Reflecting the low risk business model, FY20 results produced no surprises. With a Q121 DPS of 1.55p already declared, annualising at 6.2p (+5.1%), PHP is now in its 25th year of Share price graph (p) consistent DPS growth. FY20 adjusted NTA per share increased to 112.9p (FY19: 107.9p) and including DPS paid the total return was 10.1%. FY21 will benefit from continuing acquisitions, development completions, asset management projects and underlying rent growth. Management internalisation is expected to deliver cost savings of c £4.0m pa and allow shareholders to fully benefit from further portfolio growth. The investment pipeline is strong and PHP has significant funding headroom.
INDUSTRY OUTLOOK
The sector enjoys strong income visibility, with long leases and upwards-only rents, 90% Company description backed directly or indirectly by government bodies, with little exposure to the economic Primary Health Properties is a cycle, or fluctuations in occupancy. Healthcare planning, with broad political support, long-term investor in primary healthcare property in the UK and the already suggests strong underlying demand for modern healthcare properties in both the Republic of Ireland. Assets are mainly UK and the Republic of Ireland while the pandemic highlights existing pressures and may long-let to GPs and the NHS or the HSE, organisations backed by the UK well lead to increased healthcare spending over the longer term. and Irish governments, respectively.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 2.0 1.2 (4.0) 2019 115.7 103.4 59.7 5.5 27.3 17.4 Relative* (1.8) (3.4) (22.4) 2020 131.2 118.0 73.1 5.8 25.9 16.0 * % Relative to local index Analyst 2021e 137.4 127.8 82.8 6.3 23.8 15.8 Martyn King 2022e 142.4 132.7 86.6 6.5 23.1 15.2
Sector: Financials ProCredit (PCZ) Price: €8.88 Market cap: €523m INVESTMENT SUMMARY Market FRA ProCredit (PCB) has extensive experience in supporting SMEs in emerging economies (and strong ESG profile), with a focus on Southeastern (SEE) and Eastern Europe (EE) and Share price graph (€) banking operations in Ecuador. It recently streamlined its business, which involved a digital direct bank strategy for private clients and a reduced branch network and headcount. While lately PCB’s ROE has been below peers, we note its relative stability throughout the cycle. Our forecasts are under review following the FY20 results but we continue to believe its respective mid-term ROE and CIR targets of 10% and <60% are achievable.
INDUSTRY OUTLOOK
While the SEE and EE region benefitted from secular GDP growth of 3–5% pa in the five years prior to COVID, the pandemic is expected to have triggered a recession with the IMF Company description forecasting a 2.0% decline in Emerging and Developing Europe in 2020, rebounding to c ProCredit Holding is a Germany-based 4.4% growth in 2021. PCB’s in-depth, impact-oriented relationships with SME borrowers group operating regional banks across Southeastern and Eastern Europe, as (94% of loan book at end-2020), prudent credit risk management and solid capital base well as in Ecuador. The banks focus (CET-1 ratio of 13.3% at end-2020) should help reduce the impact of macro headwinds. on small and mid-size enterprises (SMEs) and private middle-income and Longer term, PCB’s business should be assisted by the low banking sector penetration in high earners. At end-2020, the group’s total assets stood at €7.3bn. the region (loan 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 5.1 26.9 84.2 2019 252.6 N/A 76.9 89.0 10.0 N/A Relative* 0.8 15.2 26.8 2020 223.5 N/A 52.1 70.0 12.7 N/A * % Relative to local index Analyst 2021e N/A N/A N/A N/A N/A N/A Milosz Papst 2022e N/A N/A N/A N/A N/A N/A
Edison Insight | 29 April 2021 49 Sector: General industrials Quadrise Fuels International (QFI) Price: 4.0p Market cap: £56m INVESTMENT SUMMARY Market AIM Quadrise is still pre-revenue. Stripping out share option and exceptional charges, operating losses narrowed by £0.4m y-o-y in FY H121 (calendar H220) to £1.4m, reflecting lower Share price graph (p) production and development and administrative costs. Free cash outflow decreased by £0.4m to £1.3m. Post-period end, the group completed a placing and oversubscribed open offer, raising £7.0m (gross) at 2.7p/share. Management expects it now has the cash resources to progress the ongoing trial programmes to commercial revenues and positive sustainable cash flows by July 2022.
INDUSTRY OUTLOOK
Quadrise successfully completed a pilot trial at a customer site in Morocco during calendar H220 and launched its biofuel variant, bioMSAR which produces 20–30% lower carbon Company description dioxide (CO2) emissions as well as lower nitrogen oxide and particulates. The company is Quadrise Fuels International is the currently preparing for larger scale trials in Morocco, a pilot trial in Utah and on-vessel trials innovator, supplier and global licensor of disruptive residual oil technology with MSC Shipmanagement, having signed a joint development agreement with the that produces a synthetic, enhanced shipping company this January. Management notes that these activities could potentially heavy fuel oil called MSAR. The technology enables refiners to produce result in the first commercial shipments of MSAR by the end of calendar 2021. 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 15.4 28.6 153.1 2019 0.0 (2.8) (3.0) (0.32) N/A N/A Relative* 11.1 22.7 104.6 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
Sector: Aerospace & defence RADA Electronic Industries (RADA) Price: US$12.30 Market cap: US$603m INVESTMENT SUMMARY Market NASDAQ On 8 March 2021, RADA announced the closing of a secondary offering raising $59.5m (gross proceeds, $56.1m net) for general corporate purposes, with the number of shares in Share price graph (US$) issue increasing by 5.2m to 48.9m. The successful raise reflects the strong growth the company is seeing in the business and is likely to be used to satisfy the continued working capital required to execute this growth. On the same day RADA announced new orders for January and February 2021 of $15m, 150% higher than the same period in 2020. This robust start to 2021 helps support our recently (12 February 2021) upgraded 2021 revenue forecasts. The 2020–24 forecast EPS CAGR of 25.4% supports our unchanged DCF valuation of $17. The company also trades at a significant 50% PEG discount to the peer group despite almost double the growth rate.
INDUSTRY OUTLOOK Company description RADA Electronic Industries develops, While defense spending could be pressured due to a less hawkish incoming US manufactures, markets and sells defence electronics to various armed administration and COVID-19-related factors, RADA’s markets are deemed priorities and as forces and companies worldwide. It such are likely to remain broadly unaffected. RADA’s participation in major multi-year offers land-based tactical radars for defence forces, critical infrastructure programs increases visibility as it transforms into a supplier to the US Army for long-term protection solutions and military avionics systems. programs rather than on an urgent needs basis. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 5.3 11.1 200.0 2019 44.3 0.4 (1.1) (2.01) N/A N/A Relative* (1.5) 2.1 100.8 2020 76.2 9.7 7.1 16.40 75.0 81.9 * % Relative to local index Analyst 2021e 120.8 23.8 21.3 44.88 27.4 44.2 Will Manuel 2022e 157.1 31.7 30.1 60.01 20.5 25.4
Edison Insight | 29 April 2021 50 Sector: Property Raven Property Group (RAV) Price: 29.7p Market cap: £174m INVESTMENT SUMMARY Market LSE As a growing and essential part of the supply chain, all of Raven’s warehouses continued to operate throughout 2020. Occupancy increased to 94% (FY19: 90%) and more than 99% of Share price graph (p) rents were collected. Rouble weakness obscured this strong operational progress in the sterling results, although underlying earnings, excluding FX movements, were £19.0m (FY19: £15.7m). The unadjusted IFRS loss was £14.2m. FY20 valuations edged up 0.5% in roubles but with yields high (c 11%), interest rates low (down 1.5% to 4.25% in 2020) and construction costs increasing, rent growth should increasingly drive capital growth. Circulars published in relation to the proposed repurchase of ordinary and preference shares indicate no change in the trading outlook since the FY20 results. Shareholders will vote on the repurchases at a general meeting on 6 May with completion expected shortly afterwards.
INDUSTRY OUTLOOK Company description Raven Property Group (formerly The Russian economy has begun to recover from the negative impacts of the pandemic. Raven Russia) invests mainly in Class A warehouses in Russia. It also owns Strong demand for space, especially driven by e-commerce activity, combined with low three office buildings in St Petersburg, vacancy, a lack of new supply, and increased construction costs are positive indicators for a third-party logistics company in Russia and a residential development increased rents and valuations. 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 6.1 6.1 (15.6) 2019 127.0 N/A 54.0 6.4 4.6 N/A Relative* 2.1 1.3 (31.8) 2020 113.0 N/A (25.0) (6.9) N/A N/A * % Relative to local index Analyst 2021e 100.0 N/A 31.0 4.1 7.2 N/A Martyn King 2022e 102.0 N/A 22.0 2.5 11.9 N/A
Sector: Financials Record (REC) Price: 84.1p Market cap: £167m INVESTMENT SUMMARY Market LSE At end March Record’s AUME stood at $80.1bn, an increase of 7% during Q421 (or £58.1bn, +6%). For FY21 as a whole (to end March) the increase was 37% or 23% in dollar Share price graph (p) or sterling terms respectively. Within the FY21 increase net flows contributed 17% growth, market moves in underlying assets 14% and FX/scaling moves 6%. Another indicator of progress is the increase in client count with 10 added in the final quarter and 17 for the full year giving a total of 89 (the additions included new funds from existing clients and new clients). During the quarter there was progress on succession plans with Dmitri Tikhonov, who has been with Record for over 18 years, assuming the role of CIO.
INDUSTRY OUTLOOK
The diversity of revenue has increased and there is potential for this trend to continue as Company description new products are launched, including a new EM Sustainable Finance fund in Q122. Work Record is a specialist independent continues on introducing new software and technology to facilitate this and enhance currency manager that provides a number of products and services, efficiency and scalability. including passive and dynamic hedging, and a range of currency for return strategies, including funds and customised segregated accounts.
Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 30.0 71.3 158.8 2019 25.0 8.2 8.0 3.25 25.9 23.7 Relative* 25.1 63.6 109.2 2020 25.6 8.5 7.7 3.26 25.8 25.3 * % Relative to local index Analyst 2021e 25.7 7.3 6.3 2.62 32.1 31.7 Andrew Mitchell 2022e 30.7 11.5 10.5 4.35 19.3 18.8
Edison Insight | 29 April 2021 51 Sector: Property Regional REIT (RGL) Price: 82.5p Market cap: £356m INVESTMENT SUMMARY Market LSE FY20 results confirmed full cover of the already declared aggregate DPS of 6.4p. Resilient earnings and uninterrupted quarterly DPS during the year were supported by strong rent Share price graph (p) collection (more than 98% for 2020 including monthly rents and agreed collection plans) and this strength has continued into Q121. EPRA earnings were £27.9m (FY19: 30.1m) or EPS of 6.5p. The pandemic slowed leasing and asset management activity but the annualised rent roll and EPRA occupancy were little changed y-o-y. EPRA net tangible assets (NTA) per share was confirmed at 98.6p (FY19: 112.6p). The balance sheet remains liquid and LTV of 40.8% was broadly in line with target. The Q121 DPS will be confirmed as usual in May; meanwhile RGL has reiterated its commitment to income-led returns.
INDUSTRY OUTLOOK
Company description The commercial property market is cyclical, historically exhibiting substantial swings in Regional REIT owns a highly capital values through cycles while income returns have been more stable. The pandemic diversified commercial property portfolio of predominantly offices and Brexit contribute to a highly uncertain UK economic outlook and while the supply located in the regional centres of the demand balance for regional office and industrial property has hitherto remained generally UK. It is actively managed and targets a total shareholder return of at least firm the weakness that was previously confined to the retail sector is likely to continue to 10% with a strong focus on income. broaden. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 7.8 6.7 18.4 2019 55.0 44.1 30.6 7.8 10.6 N/A Relative* 3.8 1.9 (4.3) 2020 53.3 42.0 27.7 6.5 12.7 N/A * % Relative to local index Analyst 2021e 53.6 42.8 28.9 6.7 12.3 N/A Martyn King 2022e 55.3 44.5 30.4 7.0 11.8 N/A
Sector: Oil & gas Renergen (RENJ) Price: ZAR23.45 Market cap: ZAR2756m INVESTMENT SUMMARY Market JSE Renergen secured final funding for Phase 1 of its Virginia Gas Project in H219. The project is now in the development phase,and first liquid production of both LNG and helium is now Share price graph (ZAR) expected in H221 (reflecting some delays due to COVID-19). In January 2021, Renergen awarded contracts with three companies to carry out engineering studies for Phase 2, to be completed around Q221.The company has also signed its first 'Direct to Customer' deal with a German automotive supplier to take helium from Phase 2 of the project. Our risked NAV stands at ZAR23.9/share, although this does not reflect the COVID-related project delays. 2020 saw further wells drilled, including the re-drilled MDR1 well, producing 164,000cf/d by April 2021 and the P007 exploration well, tested at 200,000cf/d. An independent estimate from Sproule from July 2020 estimates that the Virginia Project holds 2U (P50) prospective helium resources of 106bcf. Global helium demand is c 6bcf/pa. Company description INDUSTRY OUTLOOK Renergen is an emerging producer of helium and liquefied natural gas (LNG), with existing production and Renergen is targeting the heavy-duty LNG truck market which is a rapidly evolving market sales of compressed natural gas. 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 2.0 83.4 113.2 2018 2.9 (26.9) (27.1) (0.3) N/A N/A Relative* (1.0) 74.3 57.1 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 Ian McLelland 2021e N/A N/A N/A N/A N/A N/A
Edison Insight | 29 April 2021 52 Sector: General industrials Renewi (RWI) Price: 50.3p Market cap: £402m INVESTMENT SUMMARY Market LSE A positive Q4 trading update from Renewi pointed to a management FY21 (to March) EBIT expectation of €68m versus an existing consensus in the mid fifties (€m). Our estimates are Share price graph (p) now in line with this, after increasing the Commercial division contribution. We have made no changes to other years at this stage – though there should be downward pressure on finance costs at least given the cash performance - earnings still show some progression beyond FY21. Renewi has a well explained strategy for increasing profitability over the next three years and remains very well positioned in its markets which are at the centre of the circular economy.
INDUSTRY OUTLOOK
The Dutch waste market, accounting for the largest single business within Renewi, was Company description growing as the economy recovered from cyclical lows ahead of the coronavirus outbreak. Renewi is a waste-to-product company 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 3.7 28.3 122.6 2019 1780.7 179.7 63.1 6.0 N/A N/A Relative* (0.2) 22.5 79.9 2020 1775.4 167.1 54.3 5.4 N/A N/A * % Relative to local index Analyst 2021e 1627.1 149.3 39.2 3.6 N/A N/A Toby Thorrington 2022e 1691.3 159.0 46.4 4.3 N/A N/A
Sector: Technology Riber (ALRIB) Price: €1.86 Market cap: €40m INVESTMENT SUMMARY Market Euronext Paris Riber has announced that FY20 revenues will total €30.2m which is around €3.2m lower year-on-year. Ten MBE systems were shipped compared with 12 in FY19, though the FY19 Share price graph (€) total included two MBE systems where deliveries had slipped into Q119. Total revenues would have been over €31m had the French government not refused export licences for R&D systems and certain types of spares to China.
INDUSTRY OUTLOOK
The FY20 year-end order book contained only two MBE systems, both for R&D activity, reflecting delays in customers signing contracts and difficulties obtaining export licences. Order intake appears to be picking up, with a contract announced in January from an Asian customer for use in research including telecom lasers for fibre optical networks, an order in Company description March from an Asian customer for its second multi-wafer production system and one in April Riber designs and produces molecular from another Asian customer for its fifth multi-wafer production system which will be used to beam epitaxy (MBE) systems and evaporator sources and cells for the manufacture electronic and optoelectronic devices. All three of these systems are semiconductor industry. This scheduled for delivery in FY21. Each of the production systems is priced at several million equipment is essential for the manufacturing of compound euros. 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 16.6 16.6 31.9 2018 31.3 3.3 2.0 6.59 28.2 N/A Relative* 11.2 4.7 (6.0) 2019 33.5 2.5 1.8 6.16 30.2 N/A * % Relative to local index Analyst 2020e 30.2 1.5 0.0 0.11 1690.9 N/A Anne Margaret Crow 2021e 29.1 2.4 0.9 2.98 62.4 N/A
Edison Insight | 29 April 2021 53 Sector: Financials S&U (SUS) Price: 2500.0p Market cap: £304m INVESTMENT SUMMARY Market LSE S&U reported FY21 revenue of £83.8m (-7%), pre-tax profit of £18.1m (FY20: £35.1m) and diluted EPS of 120.7p (FY20: 239.4p). A final dividend of 43p gave a total of 90p for the Share price graph (p) year (FY20: 120p). Advantage Motor Finance profit fell from £34.0m to £17.2m, driven by forward-looking pandemic-enlarged provisions of £36m versus £16.5m. Payment holidays and forbearance meant collections fell by £16m to £180m but lower advances of £102.6m (£149m) lead to cash inflows. Aspen property bridging saw a strong recovery in activity in the second half and nearly matched H220 profit giving a full-year profit of £0.8m versus £1.2m. Customer receivables at the year end increased to £34m (£21m).
INDUSTRY OUTLOOK
S&U’s results for FY21 were significantly affected by the pandemic, but a near-term bounce Company description back in demand for motor finance is in prospect as dealer showrooms reopen and S&U’s Advantage motor finance consumer confidence improves. Underpinning the longer-term outlook for Advantage has business lends on a simple HP basis to lower- and middle-income groups been continued work to adapt and improve the business. Aspen Bridging also looks set to who may have impaired credit records contribute to growth with loan-book growth reviving in the second half of FY21 and likely to restricting access to mainstream products. It has c 63,000 customers. see further significant growth in the next two years. The Aspen property bridging business has been developing since its launch in 2017. Y/E Jan Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 16.8 10.1 51.5 2020 89.9 40.4 35.1 239.4 10.4 61.2 Relative* 12.5 5.2 22.5 2021 83.8 22.2 18.1 120.7 20.7 9.2 * % Relative to local index Analyst 2022e 88.6 28.7 23.9 159.2 15.7 N/A Andrew Mitchell 2023e 94.5 38.2 31.8 211.9 11.8 N/A
Sector: General retailers SandpiperCI Group (SANDPI) Price: 82.0p Market cap: £82m INVESTMENT SUMMARY Market TISE Sandpiper has been able to leverage its relationships with its franchise partners to open their brands in additional geographies: initially Gibraltar and more recently the Isle of Man. It Share price graph (p) is a dependable operator and upholds the franchisor’s brand values, while the tax differential between the Channel Islands and the rest of the UK allows it to arbitrage the additional logistics and employment costs. It owns a high-quality freehold property portfolio, valued at £60m in January 2020, which provides a barrier to entry for the competition. Over the last three years, Sandpiper has witnessed revenue CAGR of 6.6% and trading EBITDA CAGR of 16.7%. There are some opportunities for in-fill across existing geographies, but we believe that more significant long-term opportunities lie in developing into new territories and an expansion into an adjacent segment such as hospitality. However, this is unlikely to occur in the short term given the ongoing pandemic. FY21 results are due on 13 May. Company description INDUSTRY OUTLOOK SandpiperCI operates a high-quality portfolio of retail brands covering food, clothing and specialist products. It Our medium-term sales growth of 3.5% for Sandpiper reflects consensus RPI forecasts of c primarily operates franchise stores but 3% and modest space growth, as Sandpiper expands across its existing geographies. also a number of its own food convenience stores. It is the leading Channel Islands retailer and is also present in Gibraltar and the Isle of Man. Y/E Feb Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual N/A N/A N/A 2019 189.1 10.0 3.8 3.04 27.0 17.0 Relative* N/A N/A N/A 2020 188.5 11.0 4.5 3.56 23.0 28.4 * % Relative to local index Analyst 2021e 195.2 11.3 5.4 4.33 18.9 10.1 Sara Welford 2022e 202.2 11.7 5.1 4.10 20.0 8.5
Edison Insight | 29 April 2021 54 Sector: General industrials Schaltbau Holding (SLT) Price: €33.35 Market cap: €295m INVESTMENT SUMMARY Market Deutsche Börse Schaltbau Holding should benefit from trends towards digitalisation and interconnectivity in its core Rail segment (68% of FY20 revenues), while restoring profitability levels. The ability Share price graph (€) to leverage direct current (DC) switching expertise should provide opportunities in growth markets, such as new energy, e-mobility, the DC industry and smart grids. Schaltbau’s valuation offers re-rating potential now that the company is on the verge of restoring profitability after an extensive restructuring programme.
INDUSTRY OUTLOOK
Schaltbau expects to realise growth of around 5% in the modestly growing Railway market until 2026, driven by the modernisation of Rail, and to significantly improve EBIT margins towards 6–8% in 2026, up from an estimated 2–3% in FY20. Higher growth will come from Company description the Components division with exposure to high growth markets such as new energy (wind Schaltbau Holding specialises in and solar) and e-mobility. Growth is these segments is estimated at >20% per annum for products for rail infrastructure and rolling stock and also road vehicles the next couple of years. and other industrial applications. Rail represents 68% of revenues. The geographical spread of revenues in FY20 is Germany 36%, other Europe 47% and rest of the world 17%. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (1.9) 3.6 35.0 2019 513.7 45.1 10.5 105.0 31.8 5.4 Relative* (5.9) (6.0) (7.1) 2020 502.3 43.1 14.5 147.0 22.7 10.7 * % Relative to local index Analyst 2021e 530.5 47.5 22.8 146.0 22.8 23.4 Johan van den Hooven 2022e 567.5 56.5 30.4 190.0 17.6 7.6
Sector: Financials Secure Trust Bank (STB) Price: 1160.0p Market cap: £216m INVESTMENT SUMMARY Market LSE STB reported FY20 PBT of £20.1m versus our estimate of £13m, mostly due to lower than expected impairments (2.3% vs 2.7%). PBT was about 50% down on FY19, but the ROE of Share price graph (p) 6.2% shows resilience given the pandemic. The latest lockdown is affecting H121, but we estimate loan growth of 5% and 15% for FY21 and FY22. We see impairment dropping to 1.5% by 2022, which should help drive ROE to 11.1%. Its solid good capital base (CET1 14.2) supports management’s strategy of seeking growth opportunities both organically and through possible M&A. We have increased our fair value to 2,163p/share (from 1,756p) mainly due to rolling forward one year.
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 M&A opportunities may exist as the economy emerges from consumer and commercial banking. the crisis. Operationally, the bank can increase lending fairly quickly as the economy improves. The key challenge will be assessing the new lending conditions 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 5.0 25.0 28.9 2019 165.5 N/A 41.1 180.2 6.4 N/A Relative* 1.1 19.4 4.2 2020 166.1 N/A 20.1 85.2 13.6 N/A * % Relative to local index Analyst 2021e 165.7 N/A 27.4 115.2 10.1 N/A Pedro Fonseca 2022e 190.8 N/A 41.5 175.0 6.6 N/A
Edison Insight | 29 April 2021 55 Sector: Engineering Severfield (SFR) Price: 79.6p Market cap: £245m INVESTMENT SUMMARY Market LSE Severfield’s year end trading update (22 April) led management to raise guidance following a solid performance in the UK in H2 founded on operational execution and good cost Share price graph (p) control. The Indian JV traded at break-even in H2, as expected and there has been no further COVID-19 disruption in JSSL’s main operating regions at this stage. Order books have firmed slightly in both cases in H2 with a higher proportion of domestic site projects – supplemented by the acquisition of DAM in Q4 – in the UK and stronger commercial bias in India. Severfield has ended FY21 in a £4m net cash position – after the c £18m DAM initial consideration – and the company retains a healthy liquidity position. Our estimates are under review.
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 3.4 13.7 20.6 2019 274.9 29.0 25.1 6.80 11.7 13.4 Relative* (0.5) 8.6 (2.5) 2020 327.4 33.2 29.1 7.89 10.1 8.7 * % Relative to local index Analyst 2021e 354.5 28.6 22.4 5.91 13.5 10.6 Toby Thorrington 2022e 365.3 33.6 26.9 7.15 11.1 8.3
Sector: General industrials Stern Groep (STRN) Price: €13.60 Market cap: €81m INVESTMENT SUMMARY Market AMS In 2020, Stern has taken the opportunity to restructure its balance sheet by impairing tax assets and goodwill, and accelerating its digital strategy. This places the company in a good Share price graph (€) position to weather the current storm and also to play an active part in European or local consolidation. We expect profitability to increase in the next years driven by the restructured organisation, a focus on margin over volume and an improving market environment. We believe that valuation is undemanding at 6.5x 2022e P/E, certainly given the €3.32 p/s market value of the participation in insurer Bovemij.
INDUSTRY OUTLOOK
Automotive retail already had to deal with structural changes to its business model and COVID-19 has presented another big challenge. Flexibility is what is required and Stern Company description already started optimising its dealer network by reducing geographical overlap, focusing on With 75 locations and revenues of omnichannnel and moving out of unattractive car brands, while eyeing new network almost €1bn Stern Groep is the second largest car retailer group in the additions and executing stringent cost controls. 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 11.5 10.6 64.3 2019 876.8 26.4 (1.4) 29.13 46.7 N/A Relative* 6.2 2.0 17.7 2020 751.1 27.8 0.8 (85.41) N/A N/A * % Relative to local index Analyst 2021e 819.8 17.7 9.0 139.46 9.8 N/A Edwin De Jong 2022e 846.7 20.8 12.0 179.73 7.6 N/A
Edison Insight | 29 April 2021 56 Sector: General retailers Studio Retail Group (STU) Price: 290.0p Market cap: £252m INVESTMENT SUMMARY Market LSE Studio Retail Group’s Q421 trading update highlighted continued strong trading for the core online retail business, Studio through the end of FY21, buoyed in part by the forced closure Share price graph (p) of competitors on the high street. The y-o-y improvement in both collections and the arrears profile of the credit book is testament to the multi-year investment in customer screening and management of its credit offer given prior fears about the potential negative effects of a more challenging macroeconomic environment. The (completed) disposal of the more challenged Education business completes the multi-year refocusing of the portfolio and leads to SRG now being a pure-play online retailer with an improved growth outlook than previously.
INDUSTRY OUTLOOK
Company description Against a challenging macroeconomic backdrop, Studio is outperforming much of the retail Studio Retail Group is a leading online market through its unique digital-first value proposition, combined with the backing of value retailer with an integrated financial services offer. The growth flexible, and increasingly tailored, responsible consumer credit solutions. strategy is based around three key levers: value, choice and payment options, and management’s medium-term target is to achieve revenue of £1bn. Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 12.8 (1.2) 51.4 2019 506.8 45.1 25.6 23.2 12.5 11.2 Relative* 8.6 (5.7) 22.4 2020 434.9 35.0 11.0 12.0 24.2 15.2 * % 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: Financials Supermarket Income REIT (SUPR) Price: 114.0p Market cap: £924m INVESTMENT SUMMARY Market LSE Since closing its well received, upscaled £150m (£153m including the PrimaryBid offering) equity raise in March SUPR has deployed £63.0m. With a strong pipeline of investment Share price graph (p) opportunities that meet the strict investment criteria, we anticipate full deployment of the proceeds to be achieved quickly. H121 results, already overtaken by continuing portfolio growth, provided evidence of both the financial benefits of increased scale and the key role of omnichannel stores in supermarket distribution strategies. Rental income increased 71% to £20.4m, fully collected, and EPRA earnings by 116% to £15.5m; EPRA earnings cover of increased DPS rose to 112%. With the net initial yield on directly owned stores tightening from 5.0% to 4.7%, in part reflecting a strengthening tenant covenant, H121 EPRA NTA per share was 104p.
INDUSTRY OUTLOOK Company description Supermarket Income REIT, listed on Supermarket property has a long record of positive total returns underpinned by stable the special funds segment of the LSE, invests in supermarket property, let to income returns in part due to long-leases, a strong occupier covenant, and the non-cyclical leading UK supermarket operators, on nature of grocery retailing. Supermarkets have been net beneficiary of the pandemic which long, RPI-linked leases. The investment objective is to provide an has boosted sales, particularly online and fulfilled by omnichannel stores. attractive level of income, with the potential for capital growth. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 6.5 7.0 7.0 2019 16.9 21.2 9.9 5.0 22.8 16.2 Relative* 2.6 2.2 (13.5) 2020 25.5 38.9 16.8 5.0 22.8 14.2 * % Relative to local index Analyst 2021e 45.8 59.2 40.5 6.2 18.4 18.0 Martyn King 2022e 66.3 61.5 58.3 7.2 15.8 15.8
Edison Insight | 29 April 2021 57 Sector: Property Target Healthcare REIT (THRL) Price: 117.2p Market cap: £600m INVESTMENT SUMMARY Market LSE Continuing the consistent trend of positive returns, in the three months to 31 March (Q321) EPRA NAV per share increased 0.8% to 109.1p and including DPS paid the quarterly NAV Share price graph (p) total return was 2.5%. Inflation-indexed like-for-like rent growth continues to support income and capital returns and property valuation yields have continued to tighten. With the care home vaccination programme well advanced, COVID cases remain low (<1% of beds) and occupancy within the homes has stabilised, with strong enquiries a positive indicator for recovery. Rent collection remains robust and progress has been made with the small number of underperforming homes; with one re-tenanted on favourable terms that immediately enhance its value. The company expects to announce acquisitions in the near term as due diligence approaches completion.
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 3.0 1.7 7.9 2019 34.3 N/A 20.1 5.45 21.5 24013.0 Relative* (0.9) (2.9) (12.8) 2020 44.3 N/A 23.2 5.27 22.2 24572.9 * % 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: €2.59 Market cap: €612m INVESTMENT SUMMARY Market Euronext Paris Technicolor’s FY20 results show it is on track to meet FY22 guidance, now adjusted for forex and the disposal of the post-production business. FY21 trading prospects are Share price graph (€) improved, with 75% of Production Services’ pipeline in place. Strong domestic broadband demand continues to buoy Connected Home, although the FY21 result may be dampened by delays from semiconductor shortages. Our forecasts align with guidance, which is for a marked margin uplift as revenues rebuild and the cost saving programme benefits kick in. FY20’s financial restructuring, coupled with the anticipated business improvements, should support cash flow generation and may act as a catalyst for an equity re-rating. The next update will be with the Q1 figures on 11 May.
INDUSTRY OUTLOOK
Company description COVID-19 has highlighted the importance of reliable domestic broadband and high-quality Technicolor is a worldwide technology wi-fi as homes increasingly act as devolved workplaces alongside greater content leader operating in the media and entertainment industry. Its activities are consumption. This is unlikely to change as the global economy reopens. In Production organised in three business segments, Services, the live content industry continues to re-emerge, while animation demand is still Production Services, DVD Services and Connected Home. strong. Fresh, high-quality content will be crucial to reinforce the attractiveness of VoD 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 3.2 40.0 (55.2) 2019 3800.0 325.0 (73.0) (492.18) N/A 0.6 Relative* (1.6) 25.6 (68.1) 2020 3006.0 167.0 (43.0) (33.64) N/A N/A * % Relative to local index Analyst 2021e 2933.0 270.0 (3.0) (2.97) N/A 5.9 Fiona Orford-Williams 2022e 3255.0 385.0 117.0 42.67 6.1 2.1
Edison Insight | 29 April 2021 58 Sector: Technology Thin Film Electronics (THIN) Price: NOK0.81 Market cap: NOK944m INVESTMENT SUMMARY Market Oslo Following the tape-out (effectively formal completion) of the first product design in January this year, Thinfilm has been able to progress engagement with potential customers and is Share price graph (NOK) now in commercial agreement discussions with five OEMs in the hearables and wearable electronics markets. Thinfilm has manufactured its first prototype cells based on this initial design. These have demonstrated the key performance parameters expected. The company has also demonstrated its ability to stack cells.
INDUSTRY OUTLOOK
Successful production of the first prototype cells has confirmed which processes are required. This has enabled the company to order the remaining tool conversions required to adapt the R2R line for microbattery production. Importantly, Thinfilm has successfully run Company description the ultra-thin steel tools that are a key enabler of the high-energy densities achievable using Thin Film Electronics’ solid-state its technology. lithium battery technology combines advanced energy cell design with proprietary materials and manufacturing innovation to produce thin, flexible batteries that can power safer and more capable hearables and wearable devices. 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 (1.3) 38.2 17.6 2019 1.2 (30.6) (35.9) (61.23) N/A N/A Relative* (3.3) 30.9 (11.3) 2020 0.5 (11.4) (15.3) (3.90) 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
Sector: General industrials Thrace Plastics (PLAT) Price: €5.19 Market cap: €227m INVESTMENT SUMMARY Market Athens Stock Exchange FY20 was an outstanding year for Thrace which benefitted from a sharp increase in demand for personal protective equipment (PPE) arising from the COVID-19 pandemic but also Share price graph (€) delivered a very strong organic increase in underlying profitability in group PBT from continuing operations. Margins improved at all levels in both divisions with Technical Fabrics’ EBIT rising almost five-fold, while Packaging EBIT more than doubled. Year-end net debt at c €32m (€38m including IFRS 16 leases) was better than we were looking for and less than half of end-FY19 levels. Medical sector revenues were relatively small prior to FY20 so management deserves a lot of credit for achieving the step up in activity – including multi-location investments – to meet a wholly unforeseen pandemic-related uptick. Our estimates are under review.
INDUSTRY OUTLOOK Company description Thrace Plastics is an established Thrace manufactures a wide range of products that are used in a variety of sectors, ranging international producer of Technical Fabrics (FY19: 72% of net revenues) from construction/infrastructure to food packaging, medical and horticulture primarily in and Packaging (28%). Each division Europe. Management’s high-level financial objective is to pursue profitable growth using two uses a number of manufacturing processes and produces a wide range primary levers: increased capacity and value capture. 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 27.5 42.2 201.0 2018 322.7 29.0 11.5 21.0 24.7 9.8 Relative* 17.9 23.1 104.3 2019 327.8 30.6 10.2 12.8 40.5 8.6 * % Relative to local index Analyst 2020e 342.2 72.6 52.0 90.6 5.7 2.9 Toby Thorrington 2021e 360.9 73.2 52.2 90.1 5.8 3.6
Edison Insight | 29 April 2021 59 Sector: Media Tinexta (TNXT) Price: €24.84 Market cap: €1173m INVESTMENT SUMMARY Market Borsa Italiana STAR Tinexta’s FY20 results were broadly in line with management’s prior guidance and demonstrated margin leverage despite it being a more challenging year due to COVID-19, Share price graph (€) and a significant improvement in free cash flow generation and net debt. The acquisitions of the Cyber Security businesses have enhanced the group’s growth revenue and EBITDA growth profile, albeit diluting the group’s EBITDA margin.
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, the company is exploiting these trends internationally. In particular, given recent regulatory changes, in Digital Trust the group is leveraging its Italian expertise to expand on an Company description EU-wide basis with a unified legal base across the region. At the same time, Tinexta is likely Tinexta has four divisions: Digital Trust to make acquisitions in Italy and Europe that will further expand its addressable markets – solutions to increase trust in digital transactions; CIM – services to and seek cross-selling opportunities between the business units. manage credit; IMS – consulting services to help clients develop their businesses; and Cybersecurity.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 8.7 20.3 114.5 2019 258.7 71.3 53.5 80.3 30.9 21.3 Relative* 7.0 8.5 49.9 2020 269.0 77.9 58.6 86.7 28.7 14.0 * % Relative to local index Analyst 2021e 370.2 96.2 73.5 110.6 22.5 18.7 Russell Pointon 2022e 411.7 110.6 86.9 130.8 19.0 14.9
Sector: Financials Town Centre Securities (TOWN) Price: 133.0p Market cap: £71m INVESTMENT SUMMARY Market LSE H121 results showed significant strategic progress with asset disposals and debt reduction while the continuing business has been resilient. Including £3.2m of negative COVID-19 Share price graph (p) impacts (H220: £3.6m), focused on the car parking operations, EPRA earnings before tax were £0.2m (H120: £4.1m) or 0.4p per share. The increasingly diversified property business (retail & leisure reduced to c 39%) delivered consistently robust rent collection (almost 90%, including agreed deferrals) with valuations reduced by just 0.8% on a like-for-like basis. EPRA NTA was 278p (end-FY20: 285p) and adjusted LTV was 48.6% (end-FY20: 53.2%). The uncovered interim dividend of 1.75p reflects management's expectation of a quick recovery as lockdown eases, particularly for the car park operations.
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. The pandemic and focused primarily on Leeds, Manchester, Scotland and (mainly Brexit contribute to a highly uncertain UK economic outlook and while the supply demand suburban) London. It also has a car balance for regional office and industrial property has hitherto remained generally firm with parking operation (CitiPark). The investment portfolio is intensively the exception of the industrial sector the weakness that was previously confined to the retail managed for income and capital growth. sector has broadened. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (2.2) 13.7 1.5 2019 19.6 N/A 6.4 12.0 11.1 6.4 Relative* (5.9) 8.5 (17.9) 2020 16.1 N/A 2.1 4.9 27.1 4.9 * % 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
Edison Insight | 29 April 2021 60 Sector: Technology Trackwise Designs (TWD) Price: 245.0p Market cap: £70m INVESTMENT SUMMARY Market AIM In January management announced that it expected FY20 revenues to be c £6.1m, which was lower than our £7.1m estimate, reflecting disruptions to supply chains caused by tighter Share price graph (p) coronavirus restrictions and uncertainty about the Brexit deal. However, careful cost control meant that management expected adjusted operating losses to be c £0.2m, in line with our estimate. We updated our FY20 forecasts but left our FY21 estimates unchanged as these are underpinned by the EV order which is worth up to £38m over three years.
INDUSTRY OUTLOOK
The main growth drivers are broadly unaffected by either the pandemic or Brexit. IHT revenues are supported by the major EV contract. Having delivered samples to its lead electro-surgical catheter customer, a large US medical OEM, management anticipates Company description further orders in 2021 and is targeting early 2022 for production revenues. While the Trackwise Designs is a UK commercial aerospace industry has been badly affected by the pandemic, investment in manufacturer of specialist products using printed circuit technology. These new technology such as IHT, which cuts both carbon emissions and operating costs, include a lightweight replacement for continues. The number of IHT customers and qualified opportunities rose from 82 in June to conventional wiring harnesses known as IHT and RF antennae. In FY19, 87 in December. 64% of 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 1.2 (21.0) 191.2 2018 3.5 0.6 0.3 2.14 114.5 N/A Relative* (2.5) (24.5) 135.4 2019 2.9 0.6 0.2 1.13 216.8 N/A * % Relative to local index Analyst 2020e 6.1 0.7 (0.3) 0.35 700.0 N/A Anne Margaret Crow 2021e 14.3 2.7 1.3 4.86 50.4 N/A
Sector: Food & drink Treatt (TET) Price: 1155.0p Market cap: £689m INVESTMENT SUMMARY Market LSE Treatt once again delivered a strong performance in the first half of FY21, with good momentum across multiple categories contributing to growth. Operating margins have Share price graph (p) benefited from the improved product mix as Treatt continues to move up the value chain and partners with its customers to develop new products. Its technical expertise is being utilised across a growing range of applications, which has led to revenue growth and margin expansion. The UK facility is opening in April 2021 with commissioning of the machinery later in the calendar year, and the outlook for FY21 remains optimistic.
INDUSTRY OUTLOOK
Treatt has migrated its business from that of a pure supplier to the food and beverage industries to being a valued partner in the development of new ingredients. Citrus, tea, fruit Company description and vegetable flavours and sugar reduction are core areas of focus, with the latter Treatt provides innovative ingredient undergoing a structural growth trend. solutions from its manufacturing bases in Europe and North America, principally for the flavours and 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 12.7 20.6 135.7 2019 112.7 15.8 14.0 19.0 60.8 33.2 Relative* 8.5 15.1 90.6 2020 109.0 17.9 15.8 21.3 54.2 44.1 * % Relative to local index Analyst 2021e 123.2 23.3 19.4 26.4 43.8 42.3 Sara Welford 2022e 130.6 28.0 21.5 29.3 39.4 28.4
Edison Insight | 29 April 2021 61 Sector: Property Triple Point Social Housing REIT (SOHO) Price: 103.2p Market cap: £416m INVESTMENT SUMMARY Market LSE With rent collection or property valuations unaffected by the COVID-19 pandemic SOHO delivered strong FY20 results in line with our expectations. Driven by portfolio growth, Share price graph (p) bringing much-needed new supply of supported housing to market, income increased by 37%. With operational gearing, adjusted earnings increased by 44% to £17.7m and adjusted EPS by 40% to 4.9p. DPS increased by 1.7% to 5.18p and EPRA NTA per share by 1% to 105.4p. EPRA NTA total return was 5.9%. As SOHO deploys the £55m (gross) proceeds from October’s equity issue, along with increased debt funding, we expect acquisitions, rent indexation, and development completions to drive further strong earnings growth in FY21, supporting a continuation of the progressive dividend policy, fully covered by adjusted earnings.
INDUSTRY OUTLOOK Company description Triple Point Social Housing REIT Private capital is crucial in meeting the current and future needs for care based social (SOHO) invests in primarily newly built and newly renovated social housing housing which is widely recognised to improve lives in a cost-effective manner compared assets in the UK, with a particular with the alternatives of residential care or hospitals. focus on supported housing. SOHO aims to provide a stable, long-term inflation-linked income with the potential for capital growth. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 1.7 (4.9) 0.5 2019 21.1 15.1 11.9 3.39 30.4 22.2 Relative* (2.1) (9.2) (18.8) 2020 28.9 22.3 16.6 4.61 22.4 15.2 * % Relative to local index Analyst 2021e 33.9 26.9 20.6 5.11 20.2 12.7 Martyn King 2022e 36.1 28.9 22.4 5.57 18.5 14.2
Sector: Financials Tungsten Corporation (TUNG) Price: 33.2p Market cap: £42m INVESTMENT SUMMARY Market LSE Tungsten H121 results were announced in December. COVID-19 effects caused a 6% fall in transaction volume versus H120 but the stability of recurring revenue meant group revenue Share price graph (p) of £18m was down just 1%. Adjusted EBITDA at £0.8m was down £0.2m. A further non-cash goodwill impairment (£26.2m) was taken against the core Tungsten Network business, reflecting the negative effect of the pandemic on trading and the time taken to sign up new customers. This resulted in a pre-tax loss of £30.5m (versus £2.4m). Period-end net cash stood at £1m (£1m) with £2m available on a rolling credit facility.
INDUSTRY OUTLOOK
The diversity of Tungsten's customer mix and presence of over 50% of subscription and software maintenance revenues is supportive. New contracts added in FY21 include the first Company description for a customer using Total AR, AP and Workflow products together. A partnership with a Tungsten Corporation operates a large US bank has been secured and the trade finance partnership with Orbian is transaction platform with services including e-invoicing, e-billing and generating income. For FY21 management guides to maintained revenues and adjusted purchase order handling. Spending EBITDA of at least £3.2m. In March the phased withdrawal of a customer accounting for 5% analysis, invoice data capture and, through a partnership, supply chain of revenue was reported but the company is working to replace the lost income and, longer finance are also offered, providing additional benefits to customers. term, the benefits of adopting e-invoicing provide an underlying driver of growth. Y/E Apr Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 11.0 15.3 (12.6) 2019 36.0 0.6 (5.3) (3.1) N/A N/A Relative* 6.9 10.1 (29.4) 2020 36.8 2.7 (26.0) (20.6) N/A 9.1 * % Relative to local index Analyst 2021e 36.8 3.3 (30.2) (23.9) N/A 19.9 Andrew Mitchell 2022e 40.1 5.7 0.5 0.4 83.0 7.3
Edison Insight | 29 April 2021 62 Sector: Technology TXT e-solutions (TXT) Price: €7.38 Market cap: €96m INVESTMENT SUMMARY Market Borsa Italiana STAR Despite a tough year, TXT reported organic revenue and EBITDA growth and acquired two profitable fintech businesses. To deal with COVID-19 restrictions, management quickly Share price graph (€) shifted operations to remote working, which will now be a permanent feature. From a demand perspective, long-term contracts and a focus on sectors less hit by the pandemic have helped support the business. TXT is now positioned to benefit as hard-hit sectors gradually see demand return and its earlier-stage fintech investments increasingly win business.
INDUSTRY OUTLOOK
In the aerospace and aviation division, the rapid pace of innovation combined with increasing regulation drives demand for TXT's software and services. In the fintech division, Company description TXT has expanded from providing software testing services to Italian banks to providing a TXT e-solutions provides IT, consulting range of software and services (eg risk management, digital payments, supply chain finance and R&D services to aerospace, aviation, automotive, banking and solutions, credit management software) to an international customer base. finance customers.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 5.4 (0.1) (10.7) 2019 59.1 7.0 7.6 45.6 16.2 N/A Relative* 3.8 (10.0) (37.6) 2020 68.8 8.6 7.1 46.8 15.8 N/A * % Relative to local index Analyst 2021e 84.6 10.5 8.2 50.7 14.6 N/A Katherine Thompson 2022e 90.0 11.5 9.3 57.3 12.9 N/A
Sector: Construction & blding mat Tyman (TYMN) Price: 408.5p Market cap: £802m INVESTMENT SUMMARY Market LSE Tyman’s FY20 revenue was slightly better than anticipated including a strong H2 recovery and PBT at £68.4m was c £3m ahead of our expectations. This was driven by a strong Share price graph (p) close to the year in North America, which saw Q4 like-for-like revenues 11% higher year-on-year. Underlying cash flow was also c £20m better than expected, leaving year-end net debt of £99m (from £163m a year earlier), 1.1x EBITDA. Tyman also returned to the dividend list with a 4p final. End FY20 trading momentum carried over into the early part of FY21; US dollar translation effects partly offset our upwardly revised underlying revenue and EBIT estimates while lower interest cost expectations benefit the PBT/EPS level.
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 P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 7.9 16.1 175.3 2019 613.7 100.8 71.0 27.3 15.0 7.2 Relative* 3.9 10.8 122.5 2020 572.8 94.9 68.4 27.1 15.1 7.3 * % Relative to local index Analyst 2021e 569.4 97.3 72.3 28.4 14.4 9.2 Toby Thorrington 2022e 587.3 102.4 78.1 30.3 13.5 7.6
Edison Insight | 29 April 2021 63 Sector: General industrials VivoPower International (VVPR) Price: US$8.66 Market cap: US$147m INVESTMENT SUMMARY Market NASDAQ The move into electric vehicles (EVs) through the acquisition of Tembo is a step-change for VivoPower International. It brings significant growth potential in a niche market while the Share price graph (US$) group’s scale and presence has already delivered a transformational deal for the business. Gaining market traction provides the potential to scale Tembo to being a truly global specialist EV business. In addition, Vivo provides additional wrap around services from electrical infrastructure to solar development.
INDUSTRY OUTLOOK
The move to a low carbon environment is accelerating the drive towards electrification of the economy. In transportation this involves a full chain from generation (solar, wind etc), associated infrastructure (grid robustness and charging), electric vehicles as internal Company description combustion engines are phased out and storage requirements (battery management). The VivoPower International’s strategy is to speed of regulation is acceleration as are the commitments from companies including the provide sustainable energy solutions on an international scale. Key activities mining sector, a key opportunity for Vivo. at present are electric vehicles, critical power and solar development. Its primary operations are in Australia, Europe and North America.
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 (2.8) (37.6) 1054.7 2019 39.0 (4.0) (8.6) (63.80) N/A N/A Relative* (9.1) (42.7) 672.8 2020 48.7 3.9 (1.0) (12.00) N/A N/A * % Relative to local index Analyst 2021e 41.6 4.9 0.1 0.41 2112.2 N/A David Larkam 2022e 52.3 5.3 (0.9) (4.06) N/A 24.7
Sector: Technology WANdisco (WAND) Price: 481.0p Market cap: £253m INVESTMENT SUMMARY Market AIM WANdisco’s FY20 trading statement highlights the significant strategic progress made during the year and confirms its expectations for FY21 (revenues of at least $35m). In Share price graph (p) March it raised $42m (gross) at 446p, with the proceeds used to accelerate the execution of its existing business plan and bolster its balance sheet ahead of a potential US listing. It has also struck a partnership deal with Snowflake to help accelerate the migration of on-premise Hadoop data.
INDUSTRY OUTLOOK
WANdisco has set out its ambition to generate annual revenue of at least $100m in the next three to five years from a combination of 1) data migration; 2) hybrid cloud; and 3) multi-cloud. Ahead of a shift to recurring revenue visibility is limited but our updated analysis Company description suggests that the Microsoft relationship alone could generate more than $80m in annual WANdisco’s proprietary replication revenues by 2023 and highlighted that the data migration element alone could present a technology enables its customers to solve critical data management $1.4bn opportunity in total. challenges created by the shift to cloud computing. It has established partner relationships with leading players in the cloud ecosystem including Amazon and Microsoft. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 1.3 1.3 (6.6) 2018 17.0 (9.4) (16.3) (37.5) N/A N/A Relative* (2.5) (3.3) (24.5) 2019 16.2 (11.7) (18.4) (38.8) N/A N/A * % Relative to local index Analyst 2020e 10.5 (21.5) (28.6) (60.0) N/A N/A Dan Gardiner 2021e 37.0 (2.4) (9.4) (17.4) N/A N/A
Edison Insight | 29 April 2021 64 Sector: Mining Wheaton Precious Metals (WPM) Price: C$53.34 Market cap: C$23991m INVESTMENT SUMMARY Market TSX Wheaton Precious Metals (WPM) generated record operating cash flow and revenue in FY20, resulting in a 30% increase in its quarterly dividend to 13c/share. While production Share price graph (C$) remained solid in Q4, sales lagged owing to the coronavirus. However, this effect should prove only temporary. In the meantime, the finalisation of new streaming agreements with Caldas and Capstone proves that WPM is still able to conclude new business in a COVID-19 context. Q121 results are scheduled for 6 May.
INDUSTRY OUTLOOK
Under normal circumstances, we believe that WPM could easily justify a valuation of US$62.07 (or C$78.03) per share, in FY23. If precious metals return to favour however, we believe that a valuation as high as US$84.17 (C$106.36) is achievable. In the meantime, it Company description remains cheaper than the average valuations of its peers in a majority of cases. This follows Wheaton Precious Metals is the the settlement reached between WPM and the CRA in December 2018 whereby income pre-eminent ostensibly precious metals streaming company, with 32 from WPM’s international subsidiaries will remain exempt from Canadian tax. high-quality precious metals streaming and early deposit agreements relating to assets in Mexico, Peru, Canada, Brazil, Chile, the US, Argentina, Sweden, Greece, Portugal and Colombia. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 11.4 3.6 (2.3) 2019 861.3 548.3 242.7 54.0 78.8 34.6 Relative* 8.9 (3.2) (27.1) 2020 1096.2 763.8 503.2 112.0 38.0 24.3 * % Relative to local index Analyst 2021e 1312.0 921.8 680.0 147.0 28.9 20.3 Charles Gibson 2022e 1637.3 1238.1 924.6 200.0 21.3 15.5
Sector: Technology XP Power (XPP) Price: 5200.0p Market cap: £1021m INVESTMENT SUMMARY Market LSE XP reported another robust quarter for order intake (+7% y-o-y, +38% q-o-q in constant currency), strengthening the backlog for the coming quarters. Demand from the Share price graph (p) semiconductor manufacturing sector remains strong and demand from the industrial technology sector has started to rebound, more than compensating for the moderation in orders from the healthcare sector. Management reiterates its outlook for underlying revenue growth in FY21 and we maintain our forecasts.
INDUSTRY OUTLOOK
XP supplies four end-markets: healthcare, industrial electronics, semiconductors and technology, across Europe, North America and Asia. The industrial electronics segment is relatively fragmented, but the company sees demand across various applications. The Company description healthcare business continues to gain market share, with corporate approvals from the XP Power is a developer and designer major suppliers in place. The semiconductor segment is the most cyclical, tracking the of power control solutions with production facilities in China, Vietnam capex requirements of semiconductor manufacturers. and the United States, and design, service and sales teams across Europe, the United States 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 5.1 (1.5) 69.4 2019 199.9 44.5 32.3 141.4 36.8 N/A Relative* 1.1 (6.0) 36.9 2020 233.3 56.8 44.3 198.4 26.2 N/A * % Relative to local index Analyst 2021e 227.8 54.6 41.5 171.4 30.3 N/A Katherine Thompson 2022e 237.8 58.4 44.9 185.3 28.1 N/A
Edison Insight | 29 April 2021 65 Sector: Media YouGov (YOU) Price: 1015.0p Market cap: £1123m INVESTMENT SUMMARY Market AIM YouGov's interim results were as indicated at the period end, with 9% underlying growth. As flagged, the closure of the Kurdistan operation and adverse forex weighed on the statutory Share price graph (p) figures. A strong sales performance gives good momentum into H221 and through to FY22, with a greater number of larger, strategic contracts now on the books. We lifted our estimated FY21 revenue by 6%, resulting in an uplift to adjusted EPS of 8%. YouGov remains valued towards the top of its peer set, reflecting its strong market positioning, attractive cash generation and cash-positive balance sheet.
INDUSTRY OUTLOOK
YouGov’s business has weathered the ongoing impact of the COVID-19 pandemic well, with agencies holding up and the tech sector continuing to grow. The increasing emphasis on Company description data privacy and the forthcoming changes to third-party cookie usage are highlighting the YouGov is an international research benefits and value inherent in permissioned, first-party data. YouGov's developments, data and analytics group. Its data-led offering supports and improves a wide particularly those such as YouGov Safe, sit well in this shifting environment. spectrum of marketing activities of a customer base including media owners, brands and media agencies. It works with some of the world’s most recognised brands. Y/E Jul Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 4.6 (6.0) 53.8 2019 136.5 31.7 20.4 13.8 73.6 28.1 Relative* 0.7 (10.3) 24.3 2020 152.4 39.2 24.7 15.7 64.6 28.2 * % Relative to local index Analyst 2021e 170.0 47.9 30.6 17.4 58.3 23.9 Fiona Orford-Williams 2022e 185.0 54.3 37.0 21.3 47.7 20.8
Edison Insight | 29 April 2021 66
Edison dividend list
Company name FY0 period end Currency DPS FY0 DPS FY1 DPS FY2 4imprint Group 2020/12 USD 0.0 25.0 35.0 Appreciate Group 2020/03 GBP 0.0 1.2 1.5 Augean 2019/12 GBP 0.0 0.0 4.0 Canacol Energy 2019/12 USD 0.1 0.2 0.2 Cenkos Securities 2020/12 GBP 3.5 Centaur Media 2020/12 GBP 0.5 1.0 1.0 Cohort 2020/04 GBP 10.1 11.1 12.2 discoverIE Group 2020/03 GBP 3.0 10.4 10.7 Ebiquity 2020/12 GBP 0.0 0.5 1.3 Epwin Group 2019/12 GBP 1.8 1.0 2.5 Esker 2020/12 EUR 35.0 40.0 45.0 Games Workshop Group 2020/05 GBP 145.0 200.0 220.0 Gamesys Group 2020/12 GBP 40.0 GB Group 2020/03 GBP 0.0 6.0 3.3 GCP Student Living 2020/06 GBP 6.2 5.7 5.7 Genuit Group 2019/12 GBP 4.0 4.0 8.5 Greggs 2020/12 GBP 0.0 20.0 34.0 Hellenic Petroleum 2020/12 EUR 10.0 24.0 31.0 Impact Healthcare REIT 2020/12 GBP 6.3 6.4 6.5 La Doria 2020/12 EUR 50.0 41.0 44.0 Lookers 2019/12 GBP 1.5 LXi REIT 2020/03 GBP 5.8 5.6 6.0 Marshall Motor Holdings 2020/12 GBP 0.0 6.0 6.6 Norcros 2020/03 GBP 3.1 5.5 8.0 Numis Corporation 2020/09 GBP 12.0 12.0 Ocean Wilsons Holdings 2019/12 USD 70.0 OTC Markets Group 2020/12 USD 125.0 125.0 135.0 Palace Capital 2020/03 GBP 12.0 10.0 12.0 Pan African Resources 2020/06 USD 0.8 1.1 1.1 Phoenix Spree Deutschland 2020/12 EUR 7.5 Primary Health Properties 2020/12 GBP 5.9 6.2 6.4 Record 2020/03 GBP 2.3 2.3 2.3 Secure Trust Bank 2020/12 GBP 44.0 46.1 70.0 Severfield 2020/03 GBP 2.9 2.9 3.0 Supermarket Income REIT 2020/06 GBP 5.8 5.9 6.0 Sureserve Group 2019/09 GBP 0.5 0.5 0.8 Target Healthcare REIT 2020/06 GBP 6.7 Thrace Plastics 2019/12 EUR 4.6 4.6 4.6 Treatt 2020/09 GBP 6.0 7.5 8.3 Triple Point Social Housing REIT 2020/12 GBP 5.2 5.3 5.4 TXT e-solutions 2020/12 EUR 4.0 6.0 8.0
Edison Insight | 29 April 2021 67
Company Sector Most recent note Date published
1Spatial Software & comp services Update 28/04/21 4iG IT services Update 04/03/21 4imprint Group Media Update 16/03/21 AAC Clyde Space Aerospace & defence Update 07/04/21 Aberdeen Asian Income Fund Investment companies Investment company review 20/04/21 Aberdeen Diversified Inc & Growth Trust Investment companies Investment company review 18/12/20 Aberdeen Latin American Income Fund Investment companies Investment company review 23/02/21 Aberdeen New Thai Investment Trust Investment companies Investment company review 29/01/21 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 03/11/20 Alkane Resources Metals & mining Update 08/12/20 Allied Minds Investment companies Update 09/04/21 Appreciate Group Financial services Update 12/01/21 ArborGen Basic materials Update 21/01/21 Aspire Global Travel & leisure Initiation 12/04/21 Atlantis Japan Growth Fund Investment companies Investment company review 11/01/21 Attica Bank Banks Update 18/06/20 Augean Industrial support services Update 18/01/21 Auriant Mining Metals & mining Update 17/03/21 Avon Rubber Aerospace & defence Update 09/04/21 Axiom European Financial Debt Fund Investment companies Initiation 13/04/21 Baillie Gifford China Growth Trust Investment companies Initiation 15/10/20 Baker Steel Resources Trust Investment companies Investment company review 21/01/21 BayWa Consumer staples Update 19/01/21 BB Biotech Investment companies Investment company review 01/03/21 bet-at-home Travel & leisure Outlook 15/03/21 BioPharma Credit Investment companies Investment company review 01/04/21 Biotech Growth Trust (The) Investment companies Investment company review 09/03/21 BlackRock Greater Europe Inv. Trust Investment companies Investment company review 16/03/21 BlackRock Latin American Inv. Trust Investment companies Investment company review 27/04/21 Boku Software & comp services Outlook 22/03/21 Borussia Dortmund Travel & leisure Update 10/02/21 Brooge Energy Oil & gas Update 12/03/21 Brunner Investment Trust (The) Investment companies Investment company review 01/02/21 Canacol Energy Oil & gas Update 09/03/21 Canadian General Investments Investment companies Investment company review 08/12/20 Carr’s Group Food & drink Update 21/04/21 Cenkos Securities Financial services Update 12/04/21 Centaur Media Media Update 17/03/21 CentralNic Group Software & comp services Update 05/03/21 Checkit Software & comp services Update 29/04/21 China Water Affairs Group Utilities Outlook 23/07/20 Civitas Social Housing Real estate Update 13/11/20 Claranova Software & comp services Update 07/04/21 Cliq Digital Media Update 28/04/21 Codere Travel & leisure Update 18/11/19 Cohort Aerospace & Defence Update 10/12/20 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 14/01/21 Datatec IT services Initiation 02/11/20 Dentsu Group Media Initiation 23/02/21 Deutsche Beteiligungs Investment companies Investment company review 16/02/21 discoverIE Group Electronics & electrical equipment Update 21/04/21
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Company Sector Most recent note Date published
Diverse Income Trust (The) Investment companies Investment company review 29/04/21 Doctor Care Anywhere Group Healthcare equipment & services Initiation 08/04/21 Draper Esprit Listed venture capital Flash 26/04/21 Ebiquity Media Update 26/03/21 EJF Investments Investment companies Flash 27/04/20 Electra Private Equity Investment companies Update 16/04/21 EMIS Group Software & comp services Update 22/03/21 EML Payments Software & comp services Update 14/04/21 Endeavour Mining Metals & mining Update 25/03/21 Epwin Group Industrials Update 06/01/21 EQS Group Media Update 12/04/21 Esker Technology Update 16/04/21 European Assets Trust Investment companies Investment company review 25/02/21 European Investment Trust (The) Investment companies Investment company review 19/06/19 Evolva Food & beverages Update 03/03/21 Expert System Technology Update 01/04/21 Fidelity Asian Values Investment trusts Investment company review 03/02/21 Fidelity China Special Situations Investment companies Investment company review 11/12/20 Fidelity European Trust Investment companies Investment company review 26/04/21 Fidelity Japan Trust Investment companies Investment company review 03/03/21 Fidelity Special Values Investment companies Investment company review 09/02/21 FinLab Investment companies Initiation 27/08/19 Finsbury Growth & Income Trust Investment companies Investment company review 26/01/21 Foresight Solar Fund Investment companies Initiation 18/02/21 Forward Industries Consumer discretionary Initiation 02/11/20 Fundsmith Emerging Equities Trust Investment companies Initiation 29/01/21 Games Workshop Group Consumer goods Outlook 22/03/21 Gamesys Group Travel & leisure Update 09/03/21 GB Group Technology Update 22/04/21 GCP Student Living Real estate investment trusts Outlook 05/10/20 Gemfields Group Metals & mining Update 29/04/21 Genesis Emerging Markets Fund Investment companies Investment company review 01/04/20 Georgia Capital Investment companies Investment company review 05/03/21 Greggs Food & drink Update 17/03/21 Gresham House Strategic Investment companies Investment company review 08/10/20 Hansa Investment Company Investment companies Investment company review 20/11/20 HarbourVest Global Private Equity Investment companies Investment company review 29/09/20 HBM Healthcare Investments Investment companies Investment company flash 04/02/21 Hellenic Petroleum Oil & gas Update 12/03/21 Henderson Far East Income Investment companies Investment company review 03/12/20 Henderson International Income Trust Investment trusts Investment company review 01/02/21 Henderson Opportunities Trust Investment trusts Investment company review 14/01/21 HgCapital Trust Investment companies Investment company review 31/03/21 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 01/04/21 Invesco Asia Trust Investment companies Investment company review 02/09/20 IQE Tech hardware & equipment Update 25/03/21 Jersey Electricity Industrials Outlook 14/03/19 John Laing Group Investment companies Update 10/03/21 JPMorgan Global Growth & Income Investment companies Investment company review 06/04/21 Jupiter UK Growth Investment Trust Investment trusts Investment company review 13/05/19 Kcell Joint Stock Company Telecoms Flash 24/02/21 KEFI Gold and Copper Mining Outlook 30/09/20 Kendrion Industrial engineering Initiation 19/04/21 Keywords Studios Software & comp services Update 26/03/21
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Company Sector Most recent note Date published
Kopy Goldfields Metals & mining Update 01/04/21 La Doria Food & drink Update 22/03/21 Lepidico Metals & mining Update 21/04/21 Lookers General retailers Update 24/08/20 Lowland Investment Company Investment companies Investment company review 09/04/21 LXi REIT Real estate Initiation 19/04/21 Marble Point Loan Financing Investment companies Outlook 23/11/20 Marshall Motor Holdings Automotive retailers Update 12/03/21 Martin Currie Global Portfolio Trust Investment companies Investment company review 21/01/21 Medserv Industrial support services Flash 12/04/21 Merchants Trust (The) Investment companies Investment company review 18/03/21 Mercia Asset Management Investment companies Outlook 02/03/21 Mirriad Advertising Media Update 11/09/20 Monarch Gold Metals & mining Update 06/11/20 Monarch Mining Corporation Metals & mining Initiation 24/03/21 Mondo TV Media Update 07/04/21 Murray Income Trust Investment companies Investment company review 26/11/20 Murray International Trust Investment companies Investment company review 25/03/21 Mynaric Technology Initiation 30/10/20 Mytilineos General industrials Flash 10/02/21 Nanoco Group Tech hardware & equipment Update 30/03/21 NB Private Equity Partners Investment companies Initiation 14/10/20 Newmont Corporation Metals & mining Update 19/04/21 Norcros Construction & materials Update 19/04/21 Numis Corporation Financial services Update 30/03/21 Ocean Wilsons Holdings Investment companies Outlook 11/09/19 OPAP Travel & leisure Update 07/12/20 OPG Power Ventures Utilities Initiation 10/03/21 Osirium Technologies Software & comp services Flash 15/01/21 OTC Markets Group Financial services Update 24/03/21 Palace Capital Real estate Update 20/04/21 Pan African Resources Metals & mining Update 03/03/21 paragon General industrials Update 27/11/19 Phoenix Spree Deutschland Real estate Update 06/04/21 Picton Property Income Property Update 01/02/21 PIERER Mobility Automobiles & parts Update 15/02/21 Piteco Software & comp services Update 31/03/21 Polypipe Construction & materials Update 26/02/21 PowerHouse Energy Group Alternative energy Flash 15/07/20 Premier Miton Global Renewables Trust Investment companies Initiation 05/02/21 Primary Health Properties Property Outlook 05/03/21 Princess Private Equity Holding Investment companies Investment company review 10/12/20 ProCredit Holding Banks Update 23/11/20 Quadrise Fuels International Alternative energy Update 30/03/21 RADA Electronic Industries Industrials Update 12/02/21 Raven Property Group Property Update 19/03/21 Record Financials Update 26/04/21 Regional REIT Real estate Outlook 12/04/21 Renergen Oil & gas Update 30/01/20 Renewi Industrial support services Update 17/03/21 Riber Tech hardware & equipment Update 02/02/21 Riverstone Credit Opportunities Income Investment companies Initiation 11/03/21 Rock Tech Lithium Metals & mining Update 18/12/20 S&U Financials Outlook 08/04/21 SandpiperCI Group Retail Initiation 15/01/21 Schaltbau Holding Industrial engineering Initiation 08/04/21
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Company Sector Most recent note Date published
S Immo Real estate Update 01/09/20 SDX Energy Oil & gas Update 21/12/20 Secure Trust Bank Financials Outlook 09/04/21 Securities Trust of Scotland Investment companies Initiation 02/12/20 Severfield Construction & materials Update 27/04/21 Silver One Resources Metals & mining Initiation 28/08/20 Standard Life Private Equity Trust Investment companies Investment company review 24/02/21 Standard Life UK Smaller Cos Trust Investment companies Investment company review 26/04/21 Stern Groep Automotive retail Update 29/03/21 Studio Retail Group Retail Flash 20/04/21 Supermarket Income REIT Property Update 24/03/21 Target Healthcare REIT Property Update 11/02/21 Technicolor Media Update 16/03/21 Templeton Emerging Markets Inv Trust Investment companies Investment company review 28/01/21 Tetragon Financial Group Investment companies Investment company review 27/04/21 The Bankers Investment Trust Investment trusts Investment company review 31/07/20 The Law Debenture Corporation Investment trusts Investment company review 26/02/21 The MISSION Group Media Update 20/01/21 The Scottish Investment Trust Investment trusts Investment company review 23/03/21 Thin Film Electronics Technology Flash 22/04/21 Thrace Plastics General industrials Update 18/12/20 Tinexta Professional services Update 06/04/21 Town Centre Securities Real estate Update 27/01/20 Trackwise Designs Tech hardware & equipment Update 25/01/21 TR European Growth Trust Investment trusts Investment company review 22/03/21 Treatt Basic industries Update 12/04/21 Triple Point Social Housing REIT Real estate Update 25/03/21 Tungsten Corporation e-invoicer & invoice financier Outlook 11/02/21 TXT e-solutions Technology Update 17/03/21 Tyman Construction & materials Update 29/03/21 UIL Investment companies Investment company review 22/04/21 Utilico Emerging Markets Trust Investment companies Investment company review 24/03/21 VEF Investment companies Initiation 06/11/20 Vietnam Enterprise Investments Investment companies Investment company review 22/01/21 VietNam Holding Investment companies Investment company review 15/12/20 VinaCapital Vietnam Opportunity Fund Investment companies Investment company review 18/12/20 VivoPower International General industrials Initiation 29/03/21 Volta Finance Investment companies Investment company review 22/01/21 WANdisco Technology Update 11/03/21 Wheaton Precious Metals Metals & mining Update 31/03/21 Witan Investment Trust Investment companies Investment company review 11/03/21 Worldwide Healthcare Trust Investment companies Investment company review 05/01/21 XP Power Electronic & electrical equipment Update 13/04/21 YouGov Media Update 25/03/21
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