EDISON INSIGHT Strategic perspective | Company profiles
July 2021
Published by Edison Investment Research
Contents
Global perspectives 2 Company profiles 8 Edison dividend list 67 Stock coverage 68
Prices at 23 July 2021 Published 29 July 2021 US$/£ exchange rate: 0.7243 NOK/£ exchange rate: 0.0828 €/£ exchange rate: 0.8568 CHF/£ exchange rate: 0.7879 C$/£ exchange rate: 0.5794 ZAR/£ exchange rate: 0.0500 A$/£ exchange rate: 0.5391 HUF/£ exchange rate: 0.0024 NZ$/£ exchange rate: 0.5062 KZT/£ exchange rate: 0017 SEK/£ exchange rate: 0.0840 JPY/£ exchange rate: 0.0066
Welcome to the July edition of Edison Insight. We now have c 400 companies under coverage, of which
117 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 volatility has risen as
investors baulk at high equity valuations. Global equities are now trading at a 15-year high forward price/book, suggesting that only modest returns are on offer for long-term investors. This is not necessarily irrational in the context of very low yields available in other asset classes. However, the recent market sensitivity to above-consensus inflation data and slowing US survey data suggests that markets may struggle to make further progress until investors have more visibility on 2021 profits growth. 2021 earnings forecasts have resumed their upward trajectory during July. We note that while sectors exposed to rising input prices may now be under margin pressure, commodity and energy
sectors are still benefiting from upgrades. The UK may have brought ‘delta’ under control after a worrying period of escalation. Initial fears of an explosion of cases of the highly infectious COVID-19 variant have given way to relief as case numbers have fallen to one-half of peak levels while hospital admissions remain low. This may be a helpful precedent for other regions. We remain neutral on equities. The outlook is balanced between a degree of overvaluation for developed markets in aggregate against the prospect of another year of very low interest rates and ongoing positive earnings momentum. However, we believe that investors should take the opportunity to realise profits in currently overvalued sectors, while investor sentiment remains strong. This month we have added Foxtons Group 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 July 2021 1
Global perspectives: Valuations in the ointment Analyst Volatility rises as investors baulk at high equity valuations. Global equities are Alastair George now trading at a 15-year high forward price/book, suggesting that only modest +44 (0)20 3077 5700 returns are on offer for long-term investors. This is not necessarily irrational in the [email protected] context of very low yields available in other asset classes. However, the recent market sensitivity to above-consensus inflation data and slowing US survey data suggests that markets may struggle to make further progress until investors have more visibility on 2021 profits growth.
Consensus earnings forecasts continue to offer support for global markets in the near-term. 2021 earnings forecasts have resumed their upward trajectory during July. We note that while sectors exposed to rising input prices may now be under margin pressure, commodity and energy sectors are still benefiting from upgrades.
The UK may have brought ‘delta’ under control after a worrying period of escalation. Initial fears of an explosion of cases of the highly infectious COVID-19 variant have given way to relief as case numbers have fallen to one-half of peak levels while hospital admissions remain low. This may be a helpful precedent for other regions.
We remain neutral on equities. The outlook is balanced between a degree of overvaluation for developed markets in aggregate against the prospect of another year of very low interest rates and ongoing positive earnings momentum. However, we believe that investors should take the opportunity to realise profits in currently overvalued sectors, while investor sentiment remains strong.
Edison Insight | 29 July 2021 2
Valuations in the ointment
Despite the arrival of ‘freedom day’ in the UK and the strength of other developed market economic recoveries, global equity market progress has been relatively muted in recent months. During July volatility has been rising while global government bond yields have fallen. With global equities now trading at historically elevated valuations investors seem to have become shy of chasing equities ever higher, absent actual delivery of promised profits growth for 2021 and beyond.
We believe investors are aware of their limited investment choices at present however and it is not an era which could be defined as one of extreme bullishness. Low bond yields, low corporate credit spreads and the anticipation of an extended period of accommodative monetary policy into 2022 are in our view the drivers of relatively high equity valuations – and it is not necessarily irrational.
In the event 2021 profits match current expectations, we would expect markets to tread water as earnings catch up and push valuations closer to long-term averages over time. In fact, the expectation of a continued period of low interest rates and rapid profits growth has been the basis for our neutral view on equities for much of 2021.
On the other hand, the risk of a correction in equity prices is clearly present given that global equities are trading close to a 15-year record forward price/book multiple, Exhibit 1. It is generally difficult to identify the trigger for a correction ahead of time. We would highlight instead that the distribution of returns may have an unusually negative skew as positive surprises are likely to lead to a more muted market reaction compared to negative surprises.
Furthermore, the apparent overvaluation of the market is not an artefact of a few large-cap companies skewing the aggregate. On an equal-weighted basis forward price/book multiples are also at a 15-year record, according to our calculations. Based on historical evidence, currently high valuations suggest a relatively modest rate of return for global equities over the longer term.
Exhibit 1: Global equities close to 15-year record price/book
3
2.5
2
1.5 P/Book 1
0.5
0 2004 2006 2008 2010 2012 2014 2016 2018 2020
FY1 P/Book Average
Source: Refinitiv, Edison calculations as of 30 June 2021 Near term, the risks to the outlook have grown modestly. Economic growth has slowed and US inflation has risen above expectations. Equities trading close to their 15-year record forward price/book levels are offering a limited cushion for any unforeseen risks which we believe contributed to the uptick in market volatility in recent weeks.
We observe that on a sector basis equity overvaluation is also relatively widespread, Exhibit 2. Global sector valuations are almost universally above average except insurance, banking and telecoms, possibly interesting sectors to look for specific company opportunities, given their current status as consensus underperformers.
Edison Insight | 29 July 2021 3
Nearly one-half of global sectors are more than 40% above their long-run forward price/book multiple at present. On a country perspective, US markets are significantly above their long-run average while European markets are only modestly above fair value on this measure.
In terms of the portfolio response to this data, when markets decline even relatively low valuations provide very little protection from capital losses in the short term. Unloved sectors struggling to attract the marginal investment dollar are even less likely to do so at a time when investors are seeking to reduce portfolio risk rather than add to it.
However, following the vaccine-led recovery of the past eight months we believe prudent investors should now be looking to take profits in sectors that have outperformed and are currently richly valued, whether in technology franchises or in value names that have performed well this year.
Until recently, for most of 2021 investors have enjoyed relatively low volatility as the benefits from previously announced monetary and fiscal policy have flowed into financial markets and later into corporate profitability. The less attractive investment features of the recovery from COVID-19, such as the inevitable H221 growth slowdown from the heady rates of H121, the surge in global inflation and the possibility of more transmissible COVID-19 variants have now come to the fore.
While we remain neutral on global equities, from the preceding comments we are clearly closer to cautious than overweight on valuation grounds. We believe long-term investors should remain focused on sectors and geographies which are not so clearly overvalued and are likely to offer better returns over the medium-term.
Exhibit 2: Premium to average price/book by sector
Technology equipment Paper Cyclical consumer goods Retail Industrial goods Software Healthcare services Household & pers care Transport Pharma Chemicals Autos Food/drug retailing Food & Beverage Consumer goods Cyclical consumer servs. Industrial/commercial services Real Estate Utilities Mining Energy Telecoms services Insurance Banking -20% 0% 20% 40% 60% 80% 100% 120% Axis Title
Source: Refinitiv, Edison calculations
Edison Insight | 29 July 2021 4
Growth wobble unnerves markets – but UK keeps delta in check Last month the fear was excessively high inflation but during July growth fears have returned. A weaker than expected non-manufacturing PMI in the United States has triggered a sharp decline in global government bond yields. The US 10-year government bond yield has now fallen to 1.26%, down from 1.71% in April. We believe equity investors should have expected a slowdown in the rapid pace of economic growth as comparisons lap the Q120 lockdown period. Globally, consensus earnings estimates for 2021 are now above those prevailing pre COVID-19.
Exhibit 3: US 10-year TIPS (real) government bond yield close to lows despite economic recovery
3.5 3 2.5 2 1.5 1
Yield % 0.5 0 -0.5 -1 -1.5 2003 2006 2009 2012 2015 2018 2021
Source: Refinitiv Nevertheless, despite the signals from the bond market where US real yields are close to record lows at -1.05%, Exhibit 3, consensus earnings forecasts continue to rise during July. Although a number of companies exposed to margin pressure from rapidly inflating input costs have delivered disappointing Q2 results, for many cyclical names rising commodity prices are a boon and the mining and energy sectors continue to benefit from upgrades.
Exhibit 4: 2021 global consensus earnings continue to march higher
110 105 100 95 Index 90 85 80 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21
Weighted Index Unweighted Index
Source: Refinitiv, Edison calculations
Early data from UK delta wave are encouraging as a global precedent In terms of the risks from COVID-19, the UK government appears to have been vindicated in its determination to proceed with the removal of COVID restrictions as case numbers have halved since peaking at 50,000 per day earlier in July. The UK government came under significant criticism from international scientists for opening up the economy and removing COVID-19 restrictions.
However, while this unusual intervention may have been high profile, we note the focus of the scientific criticism was on mask wearing and adequate ventilation rather than any prescription for a more severe lockdown. We suspect many in England will not alter their mask-wearing behaviour significantly until cases have declined considerably, out of personal self-interest.
Edison Insight | 29 July 2021 5
The delta COVID-19 variant has spread rapidly in the UK, accounting for almost all the increase in case numbers. However, the economic impact may be different this time. According to our preliminary estimates the UK’s vaccination programme may have cut COVID-19 related hospital admissions by a factor of five, which means the surge in cases seems less likely to translate into an economy-wide lockdown in the autumn.
The UK’s COVID-19 policy is clearly on the aggressive end of the COVID-19 policy spectrum, compared to nations such as Australia. Nevertheless, the early data from the delta variant wave of infections offers hope that hospitalisations will be well below earlier rates due to the effectiveness of the UK’s vaccination programme.
Exhibit 5: COVID-19 hospitalisations per infection tracking at 20% of second wave
70000 45000 60000 40000 35000 50000 30000 40000 25000 30000 20000 15000 Daily Cases Daily 20000 Patients Hospital 10000 10000 5000 0 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 May-21 Jun-21
Daily New Cases Hospital Admissions (actual) Hospital admissions (2nd wave model)
Source: UK government statistics, Edison calculations The key question economically speaking is whether the anticipated increase in case numbers will pressure the health service, which in the past has been the critical factor in triggering national lockdowns. We have therefore modelled hospitalisation rates from the second wave using an autoregressive method. This simple model provides an excellent fit to the actual hospitalisation data, which lags case numbers by several weeks.
As the second wave occurred when vaccination rates were much lower, we can apply this model to more recent data to assess the relative efficacy of the vaccination programme in preventing serious disease. Our preliminary estimates suggest a five-fold reduction in hospital patients in the ‘delta’ wave. We would attribute this result not only to vaccination but also to the changing demographics of the pandemic, towards younger unvaccinated patients who are less likely to suffer serious infections.
It remains too early to be sure, and the relaxation of social restrictions is certainly not without risk, but the data to date is therefore suggestive that as case numbers are now falling rapidly, an uncontrollable surge in hospital admissions appears to be an increasingly pessimistic scenario.
Conclusion
Global equity markets on a valuation basis appear fully up with events as consensus earnings forecasts are higher than pre COVID-19 levels and P/E multiples have expanded. The recent weaker than expected US Institute for Supply Management (ISM) data suggest that we have passed the peak in growth momentum in the United States.
However, in the absence of any known trigger for a reversal in market sentiment, and still very low government bond yields, we believe we believe markets are likely to remain in a trading range over the summer. With relatively tight credit market spreads providing private equity with the ammunition to explore deals, further debt-financed M&A activity is also likely to support equity investor sentiment.
Edison Insight | 29 July 2021 6
For now, the UK’s vaccination programme appears to be effective in dramatically lowering hospital admissions, but it is preliminary data and investors should be on guard for further mutations of the virus.
We remain neutral on equities, balancing a degree of overvaluation for developed markets in aggregate against the prospect of another year of very low interest rates and ongoing positive earnings momentum.
However, on balance risks to the outlook are increasing. Investors are having to digest higher than expected inflation and slowing economic growth, even if consensus forecasts are still rising modestly. Furthermore, we expect the drumbeat of monetary tightening will continue to grow in intensity during the autumn. During the summer, investors would appear to have an opportunity to consider realising profits in currently overvalued sectors, while investor sentiment remains strong.
Edison Insight | 29 July 2021 7
Sector: Technology 1Spatial (SPA) Price: 38.0p Market cap: £42m INVESTMENT SUMMARY Market AIM 1Spatial’s recent AGM statement (23 June) highlighted that orders for new sales are up year-on-year so far and refers to a ‘strong and growing pipeline in all regions’, suggesting Share price graph (p) momentum was sustained in May and most of June. As management is expecting growth and our forecasts include a rise in sales in FY22, we make no changes at this point. However, we continue to see scope for an increase in forecasts if momentum continues. In July 1Spatial announced that it has completed technical integration of 3D data capability into its flagship 1Integrate platform.
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 (10.6) (14.6) 72.7 2020 23.4 3.2 0.8 0.58 65.5 73.2 Relative* (10.3) (15.9) 47.7 2021 24.6 3.6 0.3 0.18 211.1 10.9 * % Relative to local index Analyst 2022e 25.6 3.7 0.4 0.26 146.2 8.6 Dan Gardiner 2023e 27.2 4.2 0.8 0.53 71.7 8.3
Sector: Technology 4iG (4IG) Price: HUF660.00 Market cap: HUF65477m INVESTMENT SUMMARY Market Budapest stock exchange 4iG has announced a series of acquisitions that will transform the group, focused on three pillars: IT services; telecoms services; and space and defence. This has culminated in the Share price graph (HUF) announced acquisition of DIGI Group (a leading Hungarian telecoms services provider) and Spacecom (a listed Israeli satellite operator), both set to close in H221. On a pro forma basis, these businesses look set to generate run-rate EBITDA of HUF88bn (c US$300m). Both DIGI Group and Spacecom are transformational deals for 4iG, that are not yet reflected in our forecasts. We will update our estimates once the deals complete.
INDUSTRY OUTLOOK
Management anticipates continuing consolidation-driven growth, with organic growth supplemented by market share gains and accelerating market consolidation. It is positioning Company description the group to benefit from high-demand new technologies including digitalisation, blockchain, 4iG is one of the leading IT services deep learning, artificial intelligence, industry 4.0, cyber security and fintech. and systems integrators in Hungary, working with public sector clients, large corporates and SMEs. Management is focused on becoming the market leader in Hungary by FY22 as well as targeting expansion in Central and Eastern Europe. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (HUFbn) (HUFbn) (HUFbn) (HUF) (x) (x) % 1m 3m 12m Actual 4.8 4.9 5.8 2019 41.1 4.1 3.3 31.54 20.9 N/A Relative* 7.3 (5.5) (20.8) 2020 57.3 5.0 4.2 37.17 17.8 N/A * % Relative to local index Analyst 2021e 82.7 8.9 7.3 59.16 11.2 N/A Richard Williamson 2022e 93.0 9.9 8.9 72.41 9.1 N/A
Edison Insight | 29 July 2021 8 Sector: Media 4imprint Group (FOUR) Price: 2565.0p Market cap: £720m INVESTMENT SUMMARY Market LSE 4imprint’s May AGM statement indicated improving order intake momentum as the US economy reopens. At that stage, we raised our FY21 revenue projection from $645m to Share price graph (p) $700m and our FY22e revenue by 6% to $765m. The operating margin is also on a recovering trend. In FY21, we expect the group to put further funds into marketing spend to benefit from a strengthening trading backdrop, constraining the recovery in operating margin. Thereafter we anticipate margins reverting towards historical levels. The balance sheet remains strong, with end April net cash of $44m. Interim results are scheduled for 11 August.
INDUSTRY OUTLOOK
The Advertising Specialty Institute (ASI), 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$6bn of PPE sales, without which sales would have fallen by 43% year-on-year. FY20, 98% of revenues were 4imprint has dipped from the top of the table but had negligible PPE sales. generated in the United States and Canada.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (11.3) 10.8 10.6 2019 860.8 59.1 55.6 157.2 22.5 17.6 Relative* (10.9) 9.2 (5.5) 2020 560.0 8.4 5.0 13.8 256.6 135.4 * % Relative to local index Analyst 2021e 700.0 24.9 21.1 58.5 60.5 43.3 Fiona Orford-Williams 2022e 765.0 35.1 31.4 86.9 40.8 32.3
Sector: General industrials AAC Clyde Space (AAC) Price: SEK3.03 Market cap: SEK565m 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 surpassed by growing services revenue. Management is navigating the growth phase and targeting opportunities in New Space to extend AAC's reach, capabilities and technologies. Recent deals enhance profit and cash generation and support the SEK500m 2024 revenue goal. Order backlog strengthened further in July with the largest Satellite Data as a Service contract to date, SEK100m for the Canadian company Wyvern.
INDUSTRY OUTLOOK
AAC Clyde Space has a strong space heritage in small and nanosatellites. Over the next Company description five years around 3,000 nanosatellites should be launched as technology development AAC Clyde Space specialises in small extends the applications for low earth orbit (LEO) constellations, especially for satellite technologies and services that enable businesses, governments and communications. Its growing capabilities bring together three divisions: Space Data as a educational organisations to access Service, Space missions and Space products & components. AAC Clyde Space aims to high-quality, timely data from space. The group’s main operations are in become a world leader in commercial small satellites and services from space. Sweden, the UK, the Netherlands and the US, with partner networks in Japan and South Korea. 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 14.3 18.4 (8.6) 2019 66.4 (27.3) (38.2) (44.55) N/A N/A Relative* 4.8 8.8 (35.5) 2020 98.4 (17.5) (26.7) (25.79) N/A N/A * % Relative to local index Analyst 2021e 217.8 7.2 (3.8) (2.00) N/A 156.2 Andy Chambers 2022e 293.0 25.6 16.5 8.00 37.9 22.3
Edison Insight | 29 July 2021 9 Sector: General industrials Accsys Technologies (AXS) Price: 167.5p Market cap: £322m INVESTMENT SUMMARY Market LSE FY21 results included group revenue of c €100m (+10%) with Accoya wood volumes up 4.5% (to c 60,500m3) feeding into a 44% EBITDA uplift to €10.1m and positive EBIT and Share price graph (p) PBT contributions for the year after some COVID-19 disruption in Q1. The Arnhem facility operated at capacity and generated a manufacturing margin of 33.5%, c 200bp above the prior year. The addition of a fourth reactor is on track for completion by the end of FY22 and a US JV with Eastman Chemicals is moving through the front-end process to evaluate a new greenfield Accoya facility with a decision expected this summer. Flagged delays at the new Hull/Tricoya facility are such that the construction/commissioning contract with Engie Fabricom is now considered to be formally terminated and a full project status review underway. 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 (2.6) 12.5 92.7 2019 75.2 0.9 (6.2) (0.38) N/A N/A Relative* (2.3) 10.9 64.8 2020 90.9 7.0 (2.2) (0.08) N/A 117.2 * % Relative to local index Analyst 2021e N/A N/A N/A N/A N/A N/A Toby Thorrington 2022e N/A N/A N/A N/A N/A N/A
Sector: Mining Alkane Resources (ALK) Price: A$1.11 Market cap: A$664m INVESTMENT SUMMARY Market ASX Alkane exceeded its (already twice increased) production guidance of 50–55koz for FY21 by 1,958oz, at an AISC of A$1,320/oz (cf guidance of A$1,400–1,550/oz). At the same time, Share price graph (A$) Alkane has delineated material new resources at Tomingley's San Antonio and Roswell extensions leading to an extension of the mine's life from CY23 until at least CY31 at higher levels of production (eg up to 115koz pa) and lower levels of cost (eg AISC of A$1,350–1,450/oz) than currently.
INDUSTRY OUTLOOK
In the light of its mine life extension, our most recent valuation of Alkane attributes 32c/share in value to Tomingley plus net cash (cf 18c previously). To this may then be added a further 5c for the eventual development of the Roswell underground extension and Company description 13c given the current level of the gold price. To this total of 50c, an additional 4c may be Alkane Resources is an Australian added for residual resources, 3c for ongoing exploration success, 8c for ALK's investments production and development company. It previously produced 70,000oz of in Calidus and Genesis and up to 60c for exploration conducted to date at Boda. gold per year from the open-pit operations at its Tomingley gold mine, but is transitioning to underground operations and expects to produce c 52,500oz in FY21. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual 0.5 47.7 (10.1) 2019 94.0 33.0 25.4 4.57 24.3 15.4 Relative* (1.1) 40.9 (27.2) 2020 72.5 29.4 20.6 2.56 43.4 21.6 * % Relative to local index Analyst 2021e 131.7 65.5 44.6 5.17 21.5 12.7 Charles Gibson 2022e 133.2 51.8 28.0 3.30 33.6 13.0
Edison Insight | 29 July 2021 10 Sector: Technology Allied Minds (ALM) Price: 20.0p Market cap: £48m INVESTMENT SUMMARY Market LSE Following the April capital markets day, OcuTerra subsequently confirmed a successful US$24m Series B round (adding c 2p to NAV/share), but in June Spin Memory (which we Share price graph (p) had already written down to zero) confirmed that it would embark on an 'assignment for the benefit of creditors' – a liquidation process. In parallel, Allied Minds announced a share buyback programme to run to 15 October 2021. In a narrowing portfolio, FY21 funding rounds are still anticipated for Federated Wireless and BridgeComm. Given limited cash resources (FY20: US$22.3m parent net cash), management will need to be cautious about its level of support for future rounds.
INDUSTRY OUTLOOK
COVID-19 fears have largely abated, with sustained tech valuations and amidst a robust Company description funding environment. Investors have preferred stocks that demonstrate portfolio progress Allied Minds is a technology and offer the opportunity for meaningful exits in a realistic timeframe and upside potential. investment company with a concentrated portfolio focused on early-stage spin-outs from US federal government laboratories and universities.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (1.5) (10.7) (46.7) 2019 2.7 (47.2) 49.5 20.97 1.3 N/A Relative* (1.1) (12.0) (54.4) 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$0.75 Market cap: C$894m INVESTMENT SUMMARY Market JSE , TSX-V Alphamin offers rare exposure to a metal that both Rio Tinto and MIT regard as being the most likely to benefit from the electrification of the world economy. Moreover, its Bisie mine Share price graph (C$) in the 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 potentially make distributions to shareholders from as early as next year. Q221 production was temporarily affected by lower mined tin grades. Nevertheless, EBITDA for the quarter remains almost three times last year's levels on account of the strong tin price.
INDUSTRY OUTLOOK
At a tin price of US$29,815/t, we estimate a value for Alphamin of US$0.615 (or C$0.743) per share. At a long-term tin price of US$23,425/t, we estimate a value for Alphamin of Company description US$0.424 (C$0.512) per share. However, this rises to as high as C$1.162/share in the Alphamin Resources owns (84.14%) event that exploration successfully expands and/or extends the life of operations (see recent and operates the Mpama North tin mine in the North Kivu province of the exploration updates). DRC with a grade of c 4.5% Sn (the world’s highest). Accounting for c 4% of the world’s mined supply, it is the second largest tin mine in the world outside China and Indonesia. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 10.3 31.6 294.7 2019 27.2 8.5 (5.8) 0.8 75.0 N/A Relative* 10.2 24.5 213.2 2020 187.4 58.3 15.7 (1.1) N/A 35.1 * % Relative to local index Analyst 2021e 318.0 180.7 148.6 8.9 6.7 6.5 Charles Gibson 2022e 271.0 140.9 114.9 7.4 8.1 6.0
Edison Insight | 29 July 2021 11 Sector: Technology Applied Graphene Materials (AGM) Price: 27.0p Market cap: £17m 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 nanoplatelets 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
UK-based Tru-Tension has recently launched a bike detailing spray enhanced with AGM's Company description graphene nanoplatelet technology. Following a programme of in-house research and Applied Graphene Materials (AGM) testing, Tru-Tension states that its new spray offers a high gloss finish that acts as a develops graphene dispersions that customers use to enhance the protective layer to leave paintwork glistening and reduces dirt build-up to make future properties of coatings, composites and cleaning easier. This latest product launch represents another example of how the functional materials. It also manufactures high-purity graphene incorporation of AGM's unique graphene dispersion technology can transform customers' nanoplatelets using a proprietary process based on sustainable, readily products and help manufacturers to stand out in the car and bike care market. 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 (11.5) (27.0) 38.5 2019 0.1 (4.6) (4.8) (7.9) N/A N/A Relative* (11.2) (28.1) 18.4 2020 0.1 (3.1) (3.5) (6.1) N/A N/A * % Relative to local index Analyst 2021e N/A N/A N/A N/A N/A N/A Anne Margaret Crow 2022e N/A N/A N/A N/A N/A N/A
Sector: Financials Appreciate Group (APP) Price: 27.2p Market cap: £51m INVESTMENT SUMMARY Market AIM FY21 results remained positive despite a significantly negative impact from the pandemic and business transformation, with the usual strong seasonal rebound to profitability in H2. Share price graph (p) PBT of £1.3m included exceptional costs of c £1.1m and c £1.9m net of non-recurring losses in respect of discontinued business as part of the strategic repositioning programme. Excluding these, adjusted PBT was c 4.2m. H221 underlying billings increased 5.7% y-o-y (vs a 28.8% y-o-y decline in H121) with December a record month, and including exceptionally strong growth in higher margin digital product. For the seasonally less significant Q122, billings were well ahead of Q121 but c 9% down on Q120. Management expects a pick-up as corporate customers focus once more on employee engagement and customer acquisition and as consumers return to the shops. With the Christmas savers orders for the current year already in place, pandemic-restricted agent activity is the main Company description contributor to a c 14% y-o-y order book decline. 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 P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (28.4) (32.9) (10.5) 2020 112.7 11.6 11.4 4.9 5.6 N/A Relative* (28.2) (33.9) (23.5) 2021 106.8 3.3 4.2 2.0 13.6 N/A * % Relative to local index Analyst 2022e 97.4 8.5 6.5 2.8 9.7 N/A Martyn King 2023e 106.7 11.1 9.1 3.9 7.0 N/A
Edison Insight | 29 July 2021 12 Sector: General industrials ArborGen Holdings (ARB) Price: NZ$0.31 Market cap: NZ$157m INVESTMENT SUMMARY Market NZSX ArborGen’s FY21 results were US$1m ahead of our expectations at the US GAAP EBITDA level (at US$8.1m after central costs, which was above FY20’s US$7.7m comparable) but Share price graph (NZ$) slightly lower at the PBT level including lower R&D and other adjustments. The United States in particular – and South America to a lesser extent – showed some revenue impact from the COVID-19 pandemic but underlying operations are strengthening through investment, self-help actions and growing availability of higher value seeds which are expected to facilitate a ramp up in seedling sales and revenue growth in future periods.
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 46.5 85.3 93.3 2020 56.9 7.7 6.0 1.4 15.5 22.5 Relative* 45.0 84.9 81.5 2021 52.7 8.1 8.9 1.9 11.4 10.9 * % Relative to local index Analyst 2022e 62.1 12.0 12.1 2.4 9.0 8.3 Toby Thorrington 2023e 69.3 13.4 12.9 2.6 8.3 8.2
Sector: Travel & leisure Aspire Global (ASPIRE) Price: SEK62.00 Market cap: SEK2882m INVESTMENT SUMMARY Market Nasdaq FN Premier Aspire Global’s Q121 results highlighted strong broad-based organic revenue growth (+35.6% y-o-y) complemented by improving sequential growth from recent M&A, which led Share price graph (SEK) to an impressive expansion in EBITDA margin (+230bp y-o-y to 17.8%). Through Q121, AG’s enhanced and more integrated offering enabled it to execute well on its strategy of expanding to more regulated markets, attracting new customers and growing sales to existing partners. We upgraded our FY21 and FY22 revenue and EBITDA forecasts by 4%.
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 United States, 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 3.0 (8.8) 117.5 2019 131.4 21.7 17.9 32.7 18.6 62.1 Relative* (5.6) (16.2) 53.5 2020 161.9 27.1 18.4 32.6 18.6 9.5 * % Relative to local index Analyst 2021e 195.6 34.1 30.1 55.3 11.0 8.1 Russell Pointon 2022e 220.4 40.1 33.2 63.7 9.5 7.2
Edison Insight | 29 July 2021 13 Sector: Financials Attica Bank (TATT) Price: €0.15 Market cap: €67m INVESTMENT SUMMARY Market Athens Stock Exchange Attica Bank is now at an important point in its transformation phase. It is planning three securitisations over the next months that will take its NPE from 44% to just 1% of loans and Share price graph (€) remove about €1bn in RWAs. Its capital plan then calls for raising about €300m in equity over the next two to three years and targets a 10% CET1 by the end of 2023 (currently 3.7% statutory, estimated -1.0% fully loaded).
INDUSTRY OUTLOOK
Attica has a market cap of €79m and although the shares do reflect the ongoing restructuring risk, we believe there is a risk of much shareholder dilution. However, if the securitisations and capital raisings are successful, Attica will likely have a healthy balance sheet that would allow it to pursue its strategy of doubling the loan book in three years by Company description focusing on the energy, green and infrastructure business loan segments. We are Attica Bank is the fifth-largest bank in suspending our forecasts and valuation until there is greater clarity on the outcomes of Greece, with assets of €3.6bn and 55 branches centred around Athens. It these capital actions. has a 2% market share of business banking and around 2% market share of most retail banking products.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (13.1) (34.1) (23.2) 2019 71.6 N/A (23.6) 1.08 13.9 N/A Relative* (8.5) (31.4) (43.1) 2020 69.2 N/A (284.7) (66.18) N/A N/A * % Relative to local index Analyst 2021e N/A N/A N/A N/A N/A N/A Pedro Fonseca 2022e N/A N/A N/A N/A N/A N/A
Sector: Mining Auriant Mining (AUR) Price: SEK4.60 Market cap: SEK454m INVESTMENT SUMMARY Market NASDAQ OMX First North Relative to its earlier heap leach operation, Auriant's new Tardan CIL plant has increased metallurgical recoveries by c 40pp and reduced cash costs by c 25% (to c US$700/oz) to Share price graph (SEK) result in a c 4x increase in EBITDA and a c 3x increase in operational cash flows in FY20 cf FY19. Currently, it is in the process of 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. Confirmatory drilling is also underway with a view to accelerating the development of Solcocon.
INDUSTRY OUTLOOK
Q121 pre-tax profit was 3.5% above our prior forecast and Auriant has now repaid all of its high cost debt. Assuming that it raises US$20m in equity (NB Subject to the gold price, cash Company description flows etc and could be less) at SEK4.70/share, we value the company at US$1.72/share. In Auriant Mining is a Swedish junior gold the meantime, plant throughput and grade were ahead of our forecasts in Q2 with financial mining company focused on Russia. It has two producing mines (Tardan and results scheduled to be released on 30 August. Solcocon), one advanced exploration property (Kara-Beldyr) and one early stage exploration property (Uzhunzhul).
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 4.6 1.0 (23.1) 2019 29.8 7.2 (2.2) (1.3) N/A 5.7 Relative* (4.2) (7.2) (45.7) 2020 53.4 31.2 16.6 13.7 3.9 2.0 * % Relative to local index Analyst 2021e 52.7 26.8 15.8 13.4 4.0 2.2 Charles Gibson 2022e 55.6 35.0 23.8 13.5 4.0 2.1
Edison Insight | 29 July 2021 14 Sector: Aerospace & defence Avon Protection (AVON) Price: 2656.0p Market cap: £824m INVESTMENT SUMMARY Market LSE The renamed Avon Protection reflects the increased focus of the group which is delivering on its growth strategy focused on organically growing its core, supported by selective Share price graph (p) product development and value-enhancing M&A. The US acquisitions in 2020 extended the product portfolio and deepened customer engagement. Despite lockdowns, adverse FX and ballistic protection contract delays, H121 revenues grew 41%. Military (+17%) and First Responder (+19%) were driven by respiratory products and Team Wendy added $20.5m. Order intake was strong and H121 net debt was just $13m. Management expects to meet FY21 analyst consensus and we maintain our estimates for FY21 and FY22.
INDUSTRY OUTLOOK
Avon's long-standing, multi-level relationship with the US DoD is important to the group and Company description the end market backdrop is supportive. The focus on higher-price sophisticated mask Avon Protection designs, develops and systems is proving successful, with M50 mask system replenishment and the addition of manufactures personal protection products for Military and First helmets and body armour provides further opportunities. We believe that Avon has the Responder markets. Its main market position, product portfolio and strategic ambition to continue its growth through customers are national security agencies such as the US DOD and c organic and inorganic means. 90% of sales are from the United States. Y/E Sep Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 0.2 (23.6) (22.3) 2019 162.0 36.2 28.3 84.9 43.2 127.1 Relative* 0.6 (24.7) (33.6) 2020 213.6 52.3 36.0 96.2 38.1 N/A * % Relative to local index Analyst 2021e 284.9 63.2 48.1 125.6 29.2 33.2 Andy Chambers 2022e 362.0 88.2 69.4 181.1 20.2 13.4
Sector: Travel & leisure bet-at-home (ACXX) Price: €30.75 Market cap: €216m INVESTMENT SUMMARY Market Xetra bet-at-home’s (BAH’s) reduced FY21 financial guidance, at the mid-point revenue down by c 6% (to €100–110m from €106–118m previously) and EBITDA by 55% (to €8–10m from Share price graph (€) €18–22m), reflects likely temporary effects (in Germany and Poland), more permanent effects (Germany) and litigation in Austria where the outlook is uncertain. As the temporary issues are resolved, FY22 should see improving operational momentum in Germany and potential new licences in the Netherlands and Poland (H122) may improve growth. We no longer provide estimates for BAH.
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 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 (21.2) (31.2) (18.3) 2019 143.3 35.2 33.1 425.53 7.2 7.2 Relative* (22.2) (32.9) (31.7) 2020 126.9 30.9 28.8 331.92 9.3 11.9 * % 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
Edison Insight | 29 July 2021 15 Sector: Technology BluGlass (BLG) Price: A$0.03 Market cap: A$30m INVESTMENT SUMMARY Market ASX BluGlass has pivoted its innovative compound semiconductor manufacturing technology onto the development of high performance laser diodes which it intends to start shipping at Share price graph (A$) scale over the coming year. Entering the laser diode market represents a route for BluGlass to grow revenues much more rapidly. Based on industry sources, management estimates that the global laser diode market will grow from A$369m in CY21 to A$849m in CY26, driven by demand for lasers in industrial, display, biotech, scientific and lighting markets. Management’s goal is to capture 8% of the laser diode market by calendar year 2026, potentially generating almost A$75m revenues annually.
INDUSTRY OUTLOOK
BluGlass has raised $8.4m (gross) through an oversubscribed Entitlement Offer to existing Company description shareholders raising $5.9m at $0.03/share and $2.5m through placements, also at BluGlass is an Australian technology $0.03/share. The funds will be used to expedite laser diode development through to first company that is developing and commercialising a breakthrough commercial orders. compound semiconductor technology for the production of high efficiency devices such as laser diodes, light emitting diodes (LEDs) and micro-LEDs. Y/E Jun Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual (20.3) (59.7) (49.9) 2019 0.4 (5.1) (5.1) (1.21) N/A N/A Relative* (21.5) (61.5) (59.4) 2020 0.7 (3.6) (4.8) (1.01) 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: Technology Boku (BOKU) Price: 184.5p Market cap: £545m INVESTMENT SUMMARY Market AIM The high level of demand for digital content and online transactions has continued in H121, driving organic revenue growth of 21% y-o-y. Management is confident it will beat Share price graph (p) consensus revenue and adjusted EBITDA forecasts for FY21 and we have raised our estimates accordingly. Boku plans to increase investment in its product suite and sales and marketing to take advantage of the opportunities to help its international merchant base access consumers using a range of mobile-based payment methods.
INDUSTRY OUTLOOK
Direct carrier billing (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, Company description Spotify and Netflix, and is expanding into alternative payment methods such as digital Boku operates a billing and identity wallets. Boku's identity verification service enables merchants to sign up and transact with verification platform that connects merchants with mobile network users while meeting regulatory requirements and avoiding fraud. operators in more than 80 countries. It has c 300 employees, with its main offices in the United States, the UK, Estonia, Germany and India.
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 13.5 2.2 118.3 2019 50.1 10.7 4.1 1.3 195.9 69.9 Relative* 13.9 0.7 86.7 2020 56.4 15.3 11.0 3.2 79.6 22.3 * % Relative to local index Analyst 2021e 68.9 19.6 14.1 3.9 65.3 38.4 Katherine Thompson 2022e 79.0 22.0 16.0 4.3 59.2 29.4
Edison Insight | 29 July 2021 16 Sector: Travel & leisure Borussia Dortmund (BVB) Price: €6.07 Market cap: €558m INVESTMENT SUMMARY Market FRA Borussia Dortmund’s Q321 results reflected ongoing cost control, while COVID-19 continued to affect attendance-related revenues. The team’s late surge to finish third in the Share price graph (€) Bundesliga, and more silverware by winning the DFB-Pokal, ensured a pleasing end to a challenging year. Subsequent to the results release, management finessed its financial guidance for FY21, incorporating unbudgeted success in the DFB-Pokal and better performance (quarter finalists) in the Champions League versus FY20 (Round of 16). Guidance is EBITDA of €33m (€25–30m previously) and a net loss of €75m (€70–75m). We increased our FY22 EBITDA forecast by 33% to reflect a more positive outlook for attendance at matches given the roll-out of COVID vaccines.
INDUSTRY OUTLOOK
Company description Unsustainable spend on wages and transfers is increasingly being penalised by UEFA The group operates Borussia Financial Fair Play requirements. A 'break-even requirement' obliges clubs to spend no Dortmund, a leading football club, placed third in the Bundesliga in more than they generate over a rolling three-year period. Sanctions vary from a warning to a 2020/21, DFB Super Cup winners in ban from UEFA competition, fines and a cap on wages and squad size. 2019/20, and DFB-Pokal winners in 2020/21. The club has qualified for the Champions League in nine 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 (1.4) 7.1 6.0 2019 370.3 116.0 101.5 87.95 6.9 18.5 Relative* (2.7) 4.4 (11.3) 2020 370.2 63.0 45.6 46.77 13.0 188.4 * % Relative to local index Analyst 2021e 335.2 32.3 16.1 17.50 34.7 126.7 Russell Pointon 2022e 369.9 80.8 63.9 62.47 9.7 28.1
Sector: Oil & gas Brooge Energy (BROG) Price: US$8.69 Market cap: US$952m INVESTMENT SUMMARY Market NASDAQ Brooge Energy (BROG) is an independent oil and refined oil products storage and service provider located in the Port of Fujairah, in the UAE. The company is initially developing its Share price graph (US$) 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 will start in H221 (waiting for regulatory approval). The company is preparing to raise equity capital for its Phase III, which will increase oil storage capacity by 3.5x once operational (2023). In Q221 BROG renewed contracts for 58% of its Phase I storage capacity at a 70% premium to the starting fixed lease storage price of H120 contracts, benefitting from high oil storage demand. Our valuation currently stands at $10.3/share.
INDUSTRY OUTLOOK Company description Brooge Energy is an oil storage and The COVID-19 pandemic highlighted the importance of oil storage infrastructure and the service provider strategically located in the Port of Fujairah in the United Arab vital role the business plays in the logistics and trading of crude oil and refined oil products. Emirates (UAE). Current storage capacity stands at 399,324m3 and will be increased by 602,064m3 once Phase II is completed.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (4.0) (5.0) (11.3) 2019 44.0 37.0 (75.0) (85.5) N/A 14.4 Relative* (7.7) (10.0) (35.0) 2020 42.0 29.0 17.0 19.5 44.6 20.7 * % Relative to local index Analyst 2021e 68.0 54.0 29.0 26.4 32.9 24.4 Marta Szudzichowska 2022e 130.0 112.0 88.0 80.0 10.9 9.3
Edison Insight | 29 July 2021 17 Sector: Oil & gas Canacol Energy (CNE) Price: C$3.17 Market cap: C$566m INVESTMENT SUMMARY Market TSX Canacol offers investors a pure play on the Colombian natural gas market where it holds a c 20% market share of national demand. With gas export capacity now in place, it is focusing Share price graph (C$) on converting its 5.7tcf of net unrisked prospective resource into reserves (up 1tcf vs 2019), with its 2021 exploration capex the largest in its history. In 2020, Canacol replaced 61.9bcf of production with 75bcf of reserves (a reserves replacement ratio (RRR) of 122%). It is targeting a RRR of 200% in 2021. Up to 12 wells are planned this year at an estimated cost of c $66m, along with a substantial 655km2 3D seismic programme. The most recent well, Aguas Vivas 1, encountered the thickest net pay yet of 412ft. 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 Canacol’s existing cash and cash generation. We currently value Canacol at a core NAV of C$3.62/share and a RENAV of C$5.87/share. Company description INDUSTRY OUTLOOK Canacol Energy is a natural gas exploration and production company primarily focused on Colombia. The Colombian, Caribbean Coast gas market is expected to move into gas deficit in the absence of LNG imports, incremental piped gas or the development of recent deepwater discoveries. Canacol sells gas under long-term, fixed-price gas contracts, typically of five to 10 years’ duration with inflation clauses to protect cash flows. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (5.4) (9.2) (18.3) 2019 219.5 162.8 64.7 19.21 13.2 4.2 Relative* (5.5) (14.1) (35.2) 2020 246.8 184.6 79.8 (1.27) N/A 3.0 * % Relative to local index Analyst 2021e 228.4 187.2 85.7 29.92 8.5 2.9 Ian McLelland 2022e N/A N/A N/A N/A N/A N/A
Sector: General industrials Carr's Group (CARR) Price: 155.0p Market cap: £145m INVESTMENT SUMMARY Market LSE Carr’s Group has provided an update for the 20-week period ended 17 July 2021, which notes that FY21 performance is expected to be moderately ahead of management Share price graph (p) expectations. We have raised our FY21 adjusted PBT estimate by 4.5%, leaving FY22 and FY23 estimates unchanged.
INDUSTRY OUTLOOK
Strong performances from both the Speciality Agriculture and Agricultural Supplies divisions have continued into H221, supported by buoyant livestock and milk prices and an improvement in UK farmer confidence generally as the prospect of a no-deal Brexit disappeared. The H221 Engineering divisional recovery that management expected has been realised, supported by contracts from the nuclear and defence markets, a recovery in Company description the oil & gas market, and reduced overhead costs resulting from minor restructuring Carr's Group's Agriculture divisions programmes at the end of FY20 and during H121 following the appointment of new CEO serve farmers in the North of England, South Wales, the Welsh Borders and Hugh Pelham. 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 13.1 4.7 24.0 2019 403.9 23.8 18.0 14.2 10.9 10.4 Relative* 13.5 3.2 6.0 2020 395.6 23.4 14.9 11.8 13.1 7.3 * % Relative to local index Analyst 2021e 440.0 24.2 16.1 11.4 13.6 6.2 Anne Margaret Crow 2022e 447.0 24.7 16.5 12.7 12.2 8.4
Edison Insight | 29 July 2021 18 Sector: Financials Cenkos Securities (CNKS) Price: 78.5p Market cap: £45m INVESTMENT SUMMARY Market AIM In its 12 May AGM statement Cenkos confirmed that it had continued to trade well and in line with its own expectations. This followed 2020 when its revenue increased 23% to Share price graph (p) £31.9m and it raised £0.9bn (vs £0.7bn) for clients, including four IPOs. New CEO Julian Morse and executive board member Jeremy Osler (co-head of corporate finance) took up their positions following the AGM. The group’s strategy is to focus on entrepreneurial growth companies and investment trusts, forming deep, long-term relationships with clients.
INDUSTRY OUTLOOK
On outlook, the company noted that its pipeline provides confidence for the rest of the year, subject to the market background. With approaching 100 corporate clients and a strong balance sheet (end-2020 cash £32.7m and surplus capital over pillar 1 of £14.5m) it is well Company description placed to deliver on its strategy. Cenkos is a leading UK securities business, which acts as nominated advisor, sponsor, broker and financial adviser to companies, focusing on 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 (4.3) (10.8) 63.5 2019 25.9 0.4 0.1 0.1 785.0 N/A Relative* (3.9) (12.1) 39.8 2020 31.9 2.6 2.3 3.3 23.8 7.1 * % 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: 46.0p Market cap: £68m INVESTMENT SUMMARY Market LSE Centaur Media’s H121 results show revenue and EBITDA margin picking up strongly, with the group on track to meet its FY23 targets, as set out in January in its MAP23 strategy. Share price graph (p) This envisages group revenue of £45m, with a 23% EBITDA margin. The Flagship 4 brands are leading the way, posting 26% revenue growth over H120. Econsultancy’s blended learning is achieving good traction, while events across the group are benefiting from attractive digital propositions. We have edged our revenue forecast up by £1m in both FY21e and FY22e, retaining earlier expectations on adjusted EBITDA. The H121 cash performance was particularly strong, and we now expect year-end net cash of £11.0m (was £8.3m).
INDUSTRY OUTLOOK
Company description The pandemic-accelerated disruption to the marketing sector should provide a fertile Centaur Media is an international backdrop for demand for B2B market intelligence, with a greater propensity for clients to provider of business information, training and specialist consultancy for adopt digital solutions, albeit on a slower sales conversion cycle, provided they deliver the marketing and legal professions. greater efficiencies. Forecasts from the major commentators for FY21 global ad spend Its Xeim and The Lawyer business units serve the marketing and legal growth are being revised upwards, further supporting the trading environment. 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 12.2 15.0 91.7 2019 39.6 4.0 (1.5) (1.4) N/A 14.0 Relative* 12.6 13.3 63.9 2020 32.4 3.8 (0.3) 0.2 230.0 31.5 * % Relative to local index Analyst 2021e 37.2 5.1 1.2 0.6 76.7 8.9 Fiona Orford-Williams 2022e 42.5 7.6 3.6 2.0 23.0 8.6
Edison Insight | 29 July 2021 19 Sector: Technology CentralNic Group (CNIC) Price: 89.0p Market cap: £224m INVESTMENT SUMMARY Market AIM In its trading update, management confirmed that CentralNic continued to trade strongly in H121. Benefiting from its FY20 investment programme, the company delivered 25% organic Share price graph (p) growth in Q221, with all business lines contributing. Management expects to deliver FY21 revenue ‘well ahead’ of market expectations, with profits ‘in line’. As investment normalises, management expects future periods (we interpret this to mean FY22 and beyond) to benefit from increasing operational leverage. CentralNic’s shares trade on an undemanding rating, in our view, not reflecting its prospects. We intend to review our estimates with the H121 results due on 31 August 2021.
INDUSTRY OUTLOOK
CentralNic supplies the tools needed for businesses to develop their online presence, Company description providing domain names, hosting, websites, email, security certification, brand protection CentralNic is a leading provider of and marketing. It delivers services to c 40m domains, with cross-selling and upselling global domain name services, operating through three divisions: important drivers of future growth – organic growth is supported by M&A. 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 6.0 4.7 11.6 2019 109.2 17.9 16.1 9.24 13.3 N/A Relative* 6.3 3.2 (4.6) 2020 241.2 30.6 19.8 10.57 11.6 N/A * % Relative to local index Analyst 2021e 323.4 39.5 26.7 9.93 12.4 N/A Richard Williamson 2022e 350.0 43.7 30.1 10.94 11.2 N/A
Sector: Technology Checkit (CKT) Price: 58.0p Market cap: £36m INVESTMENT SUMMARY Market AIM At its recent capital markets day, Checkit outlined the opportunity to supply its intelligent operations management software to the deskless worker market, a currently underserved Share price graph (p) market for productivity software. The product development roadmap features supporting iOS devices, increasing integration with other systems and enhancing the platform’s data analytics capabilities. Management is focused on driving adoption of its end-to-end solution in Europe and increasingly in the United States.
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 working environment. Only a small proportion of the current enterprise software market is Company description designed for this group of workers. Checkit’s sweet spot is supporting workers who perform Checkit optimises the performance of a combination of routine tasks and infrequent but important tasks where the volume and people, processes and physical assets with connected digital solutions. It is variety of tasks is such that it is difficult to build a targeted application. headquartered in Cambridge, UK and 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 (2.5) 0.0 54.7 2020 9.8 (4.9) (6.4) (4.0) N/A N/A Relative* (2.2) (1.5) 32.2 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 July 2021 20 Sector: Financials Civitas Social Housing (CSH) Price: 116.0p Market cap: £722m INVESTMENT SUMMARY Market LSE FY21 results provided the detail on Civitas Social Housing’s resilient performance through the pandemic, operationally and financially, delivering consistent positive returns. EPRA Share price graph (p) earnings and EPRA EPS grew c 6% and, with rents collected in full, underlying operational cash flow grew c 10%. Aggregate FY21 DPS of 5.4p was in line with the target, fully covered on an annualised run-rate basis at end-FY21 by EPRA earnings. The company targets a 2.8% increase to 5.55p in the current (FY22) year. End-FY21 IFRS NAV/share was 108.3p (end-FY20: 107.9p) and including DPS paid the FY21 NAV total return was 5.4%. Gearing is in place for further accretive growth including plans to address the need for accommodation and support for the homeless.
INDUSTRY OUTLOOK
Company description Private capital is crucial in meeting the current and future needs for care based social Civitas is the leading listed UK social housing which is widely recognised to improve lives in a cost-effective manner compared housing REIT. Its investment objective is to provide an attractive level of with the alternatives of residential care or hospitals. income, with the potential for capital growth, from investing in a diversified portfolio of fully developed social homes, particularly specialist supported housing 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 (1.4) 2.5 1.8 2019 35.7 26.1 19.9 3.6 32.2 21.1 Relative* (1.0) 1.0 (13.0) 2020 45.9 36.0 37.7 4.6 25.2 21.9 * % Relative to local index Analyst 2021e 48.5 38.7 36.3 4.9 23.7 16.3 Martyn King 2022e 54.2 44.6 51.4 5.6 20.7 16.0
Sector: Technology Claranova (CLA) Price: €7.21 Market cap: €287m INVESTMENT SUMMARY Market Euronext Paris Claranova reported 31% y-o-y revenue growth for Q321 (30% organic, constant currency (cc)). PlanetArt saw growth accelerate to 45% helped by the successful integration of Share price graph (€) Personal Creations and subsequent launch of FreePrints Gifts in the US. Avanquest returned to growth having completed the transition to subscription licensing. In July, PlanetArt acquired certain assets of I See Me!, which publishes more than 60 personalised children’s books as well as other products for children, customisable via its website with information such as a child’s name and birthday. Financial details were not disclosed.
INDUSTRY OUTLOOK
PlanetArt is evolving from a digital photo printing business into a personalised e-commerce business and is focused on expanding its product offering geographically. Avanquest, the Company description consumer software business, is focused on developing and marketing software in three key Claranova consists of three product areas: PDF, photo editing and security/privacy. The IoT business's myDevices businesses focused on mobile and internet technologies: PlanetArt (digital platform provides a simple and effective way for SMEs and corporates to deploy IoT photo printing; personalised gifts), applications. Avanquest (consumer software) and myDevices (internet of things (IoT)).
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 7.4 (4.5) 31.4 2019 262.3 16.0 12.0 25.1 28.7 93.7 Relative* 7.1 (8.6) 1.6 2020 409.1 20.6 11.3 20.4 35.3 9.4 * % Relative to local index Analyst 2021e 483.4 40.1 29.6 47.4 15.2 9.9 Katherine Thompson 2022e 569.9 45.5 35.9 54.3 13.3 6.7
Edison Insight | 29 July 2021 21 Sector: Aerospace & defence Cohort (CHRT) Price: 505.0p Market cap: £207m INVESTMENT SUMMARY Market AIM Cohort's defence and security orientation has proven resilient during the pandemic. In FY21 it delivered record sales, adjusted EBIT, adjusted PBT and order backlog. All were Share price graph (p) achieved with the benefit of an initial five-month contribution from ELAC, but there was modest like-for-like growth in orders and sales. The pandemic led to some order deferral to FY22 and FY23. EID is worst affected with FY22 sales to drop by a third with lower margins. Strong group order intake continues with £50m won since April. The £242m FY21 backlog provides 64% cover of FY22 consensus sales, where our estimate is broadly unchanged as the other divisions including ELAC compensate for EID. As a result our FY22 adjusted PBT is marginally above FY21.
INDUSTRY OUTLOOK
Company description Cohort is heavily influenced by activities in defence and security (94% of FY21 sales). Cohort is an AIM-listed defence and These markets require highly differentiated technologies and services with high barriers to security company operating across six divisions: MASS (28% of FY21 sales), entry based on customer relationships, regulation and high-level security clearances. SEA (20%), MCL (13%), 80%-owned Defence is generally quite resilient in periods of significant economic disruption. The recent EID (15%), 81%-owned Chess Technologies(20%) and recently UK Strategic Defence and Security Review focuses on some of Cohort's key strengths and acquired ELAC SONAR (6%). was followed by a 10% increase in spending plans until 2025. Y/E Apr Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (14.6) (18.7) (14.6) 2020 131.1 20.9 17.5 37.1 13.6 15.8 Relative* (14.3) (19.9) (26.9) 2021 143.3 22.1 17.9 33.6 15.0 9.8 * % Relative to local index Analyst 2022e 156.1 22.0 18.0 34.3 14.7 20.8 Andy Chambers 2023e 168.0 23.7 19.5 37.4 13.5 9.6
Sector: Property Custodian REIT (CREI) Price: 102.2p Market cap: £430m INVESTMENT SUMMARY Market LSE Q122 NAV per share showed a strong 4.2% increase to 101.7p (Q421: 97.6p). Including DPS paid the quarterly NAV total return was 6.0%. The Q122 DPS of 1.25p, fully covered Share price graph (p) by cash earnings, is in line with the board’s target of a minimum FY22 DPS of 5.0p, based on rent collection remaining in line with expectations. 95% of Q222 rent has been collected, net of agreed deferrals, a similar level to H221. We continue to forecast aggregate FY22 DPS of 5.6p, supported by improving rent collection and occupancy through the year. NAV benefitted from a £19.0m aggregate property valuation increase in the period (3.4% of the portfolio value), including £1.4m from asset management initiatives (EPRA occupancy improved to 92.4% from 91.5%) and continued strong gains on industrial valuations, slightly offset by valuation decreases in other sectors.
INDUSTRY OUTLOOK Company description CREI is a London Main Market-listed The commercial property market is cyclical, historically exhibiting substantial swings in REIT focused on commercial property in the UK outside London. It is capital values through cycles while income returns have been more stable. While the income-focused, with a commitment to pandemic has created significant economic and market uncertainty, the rebound in GDP, pay a high but sustainable and covered dividend. continuing low interest rates, and lockdown easing are supporting a broadening of positive commercial property returns, still led by the industrial sector. Y/E Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 2.2 4.7 17.2 2020 38.1 33.4 28.7 7.0 14.6 13.5 Relative* 2.6 3.2 0.2 2021 33.1 28.5 23.7 5.6 18.3 18.0 * % Relative to local index Analyst 2022e 35.6 30.9 25.8 6.1 16.8 14.4 Martyn King 2023e 37.2 32.4 27.3 6.5 15.7 13.3
Edison Insight | 29 July 2021 22 Sector: Technology Datatec (DTCJ) Price: ZAR24.80 Market cap: ZAR5039m INVESTMENT SUMMARY Market JSE Datatec delivered a strong operational performance across all divisions in FY21, with revenues of US$4.1bn down 0.7% in constant currency terms and adjusted EBITDA of Share price graph (ZAR) US$141m. Company underlying EPS was up 37% to 13.6 USc per share and the group announced a c 7 USc dividend per share, offering a 3.4% yield. Net debt fell from US$139.9m to US$60.9m. After the results, in June 2021, Datatec’s IT services arm, Logicalis, acquired Siticom, a German engineering consultancy. With its expertise in 5G systems integration, Siticom will form the basis for a European hub for advanced networking integration around 5G and cloud-based network interoperability.
INDUSTRY OUTLOOK
As the global economy recovers, with robust European and Asian demand, we expect Company description Datatec to continue to benefit from the streamlining of its operations and cost base, with Datatec is a South Africa-listed progressive margin improvement at Logicalis and improving profitability at Westcon. multinational ICT business, serving clients globally, predominantly in the Semiconductor supply remains a supply chain concern for the entire technology sector. networking and telecoms sectors. The group operates through three main divisions: Westcon International (distribution); Logicalis (IT services); and Analysys Mason (consulting). Y/E Feb Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (8.2) (11.7) 3.3 2020 4214.4 158.7 79.1 10.59 16.2 2.0 Relative* (11.2) (12.7) (15.0) 2021 4109.5 118.6 73.1 6.75 25.4 2.0 * % Relative to local index Analyst 2022e 4316.5 163.1 79.1 16.61 10.3 3.6 Richard Williamson 2023e 4548.5 185.3 101.6 25.19 6.8 3.4
Sector: Media Dentsu Group (4324) Price: ¥3805.00 Market cap: ¥1097399m INVESTMENT SUMMARY Market TSE Dentsu’s Q1 update showed a third successive quarter of improvement (a reducing decline in organic revenue), with Dentsu Japan down 0.9% on Q120 and Dentsu International 3.5% Share price graph (¥) below the prior year. Operating margins were considerably stronger in both segments as the transformation plan has kicked in. Q221 started very strongly, and we left our FY21 and FY22 revenue and margin estimates unchanged, but note that if trading continues to improve, there may be scope to move numbers later in the year, subject to the commercial success of the Olympics. FY22 should be a stronger year of margin growth as permanent cost reductions contribute. The group has recently joined the World Business Council for Sustainable Development.
INDUSTRY OUTLOOK
Company description Dentsu has lifted its global ad spend forecast to +10.4% in FY21 and +7.2% for FY22. Dentsu Group is a holding company Digital spend is set to increase by 15.6%. The Japanese ad market still lags the digital with two operational networks: Dentsu Japan Network and Dentsu transition curve, with TV prominent, but faster growth in digital will improve digital’s share of International. Operating in over 145 spend to 38.1% in FY21, still well below the 50% global share. The FY20 postponement of countries, Dentsu Group provides a wide range of client-centric integrated the Tokyo Olympics contributed to a y-o-y ad spend decline of 16.6% in Japan. Forecast communications, media and digital services. recovery is 4.4% in FY21 and +4.2% in FY22. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (¥m) (¥m) (¥m) (¥) (x) (x) % 1m 3m 12m Actual (3.2) 16.0 48.9 2019 1047881.0 160279.0 101340.0 271.0 14.0 13.4 Relative* (0.9) 16.7 23.0 2020 939243.0 90061.0 123470.0 249.0 15.3 18.5 * % Relative to local index Analyst 2021e 954424.0 65966.0 124710.0 269.0 14.1 5.9 Fiona Orford-Williams 2022e 1010255.0 159866.0 149710.0 335.0 11.4 31.4
Edison Insight | 29 July 2021 23 Sector: Electronics & elec eqpt discoverIE Group (DSCV) Price: 950.0p Market cap: £850m INVESTMENT SUMMARY Market LSE discoverIE’s FY21 results confirmed that measures taken to manage the business through the pandemic minimised the impact on profitability and reduced gearing significantly. The Share price graph (p) company beat our recently upgraded forecasts for FY21, with underlying operating profit and EPS ahead by 3.9% and 6.9% respectively due to higher-than-expected gross margin, and lower-than-expected finance costs and tax. Strong order intake in H221 has returned the business to organic growth and the company continues to make higher-margin acquisitions in the Design & Manufacturing business. We lift our underlying EPS forecast by 5.3% for FY22.
INDUSTRY OUTLOOK
discoverIE Group is a designer, manufacturer and supplier of customised electronics to Company description industry with operations throughout Europe and increasingly outside Europe. The company discoverIE is a leading international is focused on growing the percentage of higher-margin specialist product through organic designer, manufacturer and supplier of customised electronics to industry, growth and acquisition. Its key markets (more than two-thirds of sales) are medical, supplying customer-specific electronic renewables, transportation and industrial connectivity, all of which are good growth markets. 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 2.6 16.9 55.7 2020 466.4 50.9 34.6 31.8 29.9 N/A Relative* 3.0 15.1 33.2 2021 454.3 48.4 32.6 27.0 35.2 N/A * % Relative to local index Analyst 2022e 498.0 52.1 35.3 28.6 33.2 N/A Katherine Thompson 2023e 513.0 54.2 37.2 29.7 32.0 N/A
Sector: Technology Doctor Care Anywhere Group (DOC) Price: A$0.85 Market cap: A$271m INVESTMENT SUMMARY Market ASX Doctor Care Anywhere Group's (DOC) Q221 update highlights that underlying revenue has continued to increase, driven by its expanding internet hospital and subsequent growth in Share price graph (A$) diagnostic referrals. Management remains confident that FY21 revenue will be at least 100% above FY20 levels, implying total revenue of at least £23.2m. Its balance sheet remains strong with net cash of £31.5m. The expected Q421 launch of its digitally integrated virtual and in-person primary care service with Nuffield Health will be a UK first.
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. Enhanced consumer confidence, along with the benefits of increased efficiency and Company description convenience, should continue to provide long-term tailwinds as pandemic-related Doctor Care Anywhere is a restrictions ease. Areas like secondary care should also benefit from the end of restrictions, fast-growing telehealth company focused on delivering high-quality care as indicated by DOC’s latest data. IPO activity within the industry is showing continuing to its patients, while reducing the cost momentum, as highlighted by Babylon, which announced its planned listing on Nasdaq for of providing healthcare for health insurers and healthcare providers. an equity valuation of c $4.2bn in H221.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (1.2) (17.5) N/A 2019 5.7 (3.8) (4.4) (3.71) N/A N/A Relative* (2.7) (21.2) 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 Katherine Thompson 2022e 37.4 (11.4) (9.0) (2.80) N/A N/A
Edison Insight | 29 July 2021 24 Sector: Technology Draper Esprit (GROW) Price: 985.0p Market cap: £1507m INVESTMENT SUMMARY Market LSE It has been a busy few months. Following its FY21 results (57% rise in NAV to £1.03bn, a record £206m of realisations and exits), management completed a £111m placing at 800p Share price graph (p) per share, an 8% premium to its 743p FY21 NAV per share. In July, Revolut announced an US$800m Series E funding round from Softbank and Tiger Global, valuing it at US$33bn (a six times uplift in 18 months). Based on the round, Draper Esprit’s stake is valued at c £119m (78p per share), an uplift of £99m from the latest FY21 year end valuation, a rise of 65p per share (before carry deductions). Draper Esprit completed its move to the main market on 23 July 2021.
INDUSTRY OUTLOOK
Technology valuations have had a very strong run as COVID-19 fears have eased, with Company description sustained valuations amidst a robust funding environment. Investors have preferred stocks Draper Esprit is a London-based with embedded value that offer the potential for meaningful exits and upside in a realistic venture capital (VC) firm that invests in the European technology sector. timeframe. 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 (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 5.4 18.1 93.1 2020 52.0 N/A 41.4 33.7 29.2 27.7 Relative* 5.7 16.4 65.1 2021 288.8 N/A 268.9 207.3 4.8 4.6 * % Relative to local index Analyst 2022e N/A N/A N/A N/A N/A N/A Richard Williamson 2023e N/A N/A N/A N/A N/A N/A
Sector: Media Ebiquity (EBQ) Price: 55.5p Market cap: £44m INVESTMENT SUMMARY Market AIM Ebiquity’s period-end trading update indicated a good first half performance, with revenues of £32m, up 19% on the prior period. The group has also posted an operating profit – Share price graph (p) undisclosed but ahead of the £1.0m delivered in H220. The progress is a result of a mix of factors, including new business wins (notably in digital), with some benefit from work deferred from FY20. We leave our forecasts unchanged for now, noting that any revisions at the interims in September are more likely to be on the upside. The share price performance year-to-date has been strong (up 195%), but the valuation remains at a sizeable discount to peers.
INDUSTRY OUTLOOK
Ebiquity’s reconfigured Digital Innovation Centre, built on Digital Decisions, looks to be Company description achieving its goal of providing a more comprehensive and integrated digital media offering. Ebiquity is a leading, tech-enabled, Although Google’s withdrawal of support for third-party cookies has been pushed back to independent marketing and media consultancy. It helps the world's FY23, the direction of travel remains the same and the need for advertisers to optimise and biggest brands leverage data and benchmark their digital media spend in a complex ecosystem is unlikely to diminish. analytics to drive greater transparency in the marketing ecosystem, to create 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 11.0 19.4 98.2 2019 68.1 8.6 4.7 2.9 19.1 12.3 Relative* 11.4 17.6 69.5 2020 55.9 1.8 (1.3) (1.9) N/A 126.5 * % Relative to local index Analyst 2021e 61.0 5.0 2.6 2.5 22.2 12.9 Fiona Orford-Williams 2022e 68.3 7.4 5.0 4.7 11.8 11.3
Edison Insight | 29 July 2021 25 Sector: Technology EMIS Group (EMIS) Price: 1240.0p Market cap: £785m INVESTMENT SUMMARY Market AIM EMIS has reported that H121 trading was slightly ahead of board expectations. Management noted it saw a return to business as usual in H121, despite the ongoing Share price graph (p) pandemic, and trading was slightly ahead of board expectations. Revenue and adjusted operating profit for H121 were ahead of both H120 and H119. The mix of business is returning to pre-COVID-19 levels and the company continues to focus on investing in its technology roadmap. While H121 performance was positive, we maintain our forecasts for FY21–23 pending H121 results, which are scheduled for 9 September.
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 7.8 (0.2) 17.0 2019 159.5 55.6 41.0 53.5 23.2 15.6 Relative* 8.2 (1.7) 0.0 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$3.81 Market cap: A$1379m INVESTMENT SUMMARY Market ASX EML Payments’ Q321 trading update confirmed that revenue for the first nine months of 2021 was 65% higher y-o-y and EBITDA was 62% higher (margin 30.5%). The company Share price graph (A$) also gave an update on the regulatory issue in Ireland, confirming ongoing dialogue with the regulator. We have updated our forecasts to reflect one-off costs relating to this issue and revised the mix of revenue for FY21 based on Q321 performance, reducing our NPATA forecasts for FY22/23. The FCA recently approved the Sentenial acquisition; the approval process is ongoing for the French regulator (ACPR).
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 2.7 (31.5) 16.2 2019 97.2 29.7 25.6 7.8 48.8 N/A Relative* 1.1 (34.6) (5.9) 2020 121.0 32.5 21.6 5.5 69.3 N/A * % Relative to local index Analyst 2021e 182.7 50.1 34.7 7.5 50.8 N/A Katherine Thompson 2022e 243.2 67.8 47.2 9.9 38.5 N/A
Edison Insight | 29 July 2021 26 Sector: Mining Endeavour Mining (EDV) Price: C$28.30 Market cap: C$7076m INVESTMENT SUMMARY Market Toronto Endeavour's acquisitions of SEMAFO and Teranga have projected it into the top 10 gold producing companies globally with output of c 1.5Moz pa and a targeted AISC of Share price graph (C$) US$900/oz with c US$100m in annual synergies. It has now listed in London (hence eligible for inclusion in FTSE indices) and is on the cusp of being net debt free. Production and adjusted EPS in Q121 were materially ahead of our prior forecasts (and AISC lower). Q2 results are scheduled for 4 August.
INDUSTRY OUTLOOK
Exploration has yielded 84% of a five-year target of 10–15Moz Au after four years, which has already increased medium-term production levels at Ity and Hounde to 0.5Moz pa (combined) until 2028. It is hedge-free, has announced a progressive minimum dividend Company description policy, added US$342m in value (100% basis) to Fekekro and Kalana via updated PFSs Following its acquisitions of SEMAFO and also announced a share buyback programme. In the aftermath of the Teranga and Teranga, Endeavour has become one of the top 10 major gold producers acquisition, we value Endeavour at US$35.88 (£25.42) per share and potentially as high as globally, with seven mines in Côte US$56.96/share. d’Ivoire, Burkina Faso and Senegal plus a portfolio of development projects, all in the West African Birimian greenstone belt. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 3.6 (0.7) (15.6) 2019 1362.1 618.4 220.4 56.95 39.8 5.7 Relative* 3.5 (6.0) (33.0) 2020 1847.9 910.3 501.2 181.51 12.5 3.5 * % Relative to local index Analyst 2021e 2758.1 1386.6 788.1 184.54 12.3 5.0 Charles Gibson 2022e 2495.1 1417.3 930.2 252.85 9.0 4.1
Sector: Technology Ensurge Micropower (ENSU) Price: NOK0.67 Market cap: NOK841m INVESTMENT SUMMARY Market Oslo Ensurge formally completed its first product design in January and has manufactured its first prototype cells. It recently announced its first customer agreement with a global leader in Share price graph (NOK) the hearables market under which it will deliver customised solid-state microbatteries based on the Ensurge Microbattery Product Platform. This agreement, which addresses the medical hearables market, follows the announcement in May of a customer agreement with a Fortune Global 500 company addressing the broader wearables market. The company looks on track to deliver initial product revenues in late 2021.
INDUSTRY OUTLOOK
Ensurge is continuing its programme to transfer process technology from a sheet-based Company description production line to the much higher-volume roll-to-roll line ahead of volume ramp-up by end Ensurge Micropower's (previously Thin FY21. Film Electronics') solid-state 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 (3.3) (17.1) 105.0 2019 1.2 (30.6) (35.9) (61.23) N/A N/A Relative* (2.4) (20.5) 59.5 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
Edison Insight | 29 July 2021 27 Sector: Construction & blding mat Epwin Group (EPWN) Price: 105.0p Market cap: £152m 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. The second half performance was more comparable to H219 (slightly higher in revenue terms, slightly lower at the EBIT level). Good market momentum appears to have continued into the early months of 2021, with revenue in both divisions ahead of Q1 levels seen in both FY19 and FY20.
INDUSTRY OUTLOOK
Company description Epwin is exposed to both RMI (c 70% revenue) and newbuild (c 30%) in the UK housing Epwin supplies functional market. RMI activity is currently stronger that other sectors which are also recovering low-maintenance exterior building products (including windows, doors, gradually. There is some caution associated with potential impacts of rising unemployment roofline and rainwater goods) into a on consumer confidence. 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 (3.2) (0.5) 47.9 2019 282.1 38.2 15.0 8.5 12.4 4.3 Relative* (2.9) (2.0) 26.5 2020 241.0 28.6 5.0 4.0 26.3 6.3 * % Relative to local index Analyst 2021e 301.7 35.7 10.0 5.6 18.8 4.6 Toby Thorrington 2022e 306.8 39.1 13.3 7.5 14.0 4.0
Sector: Technology EQS Group (EQS) Price: €39.80 Market cap: €337m INVESTMENT SUMMARY Market Scale The acquisition of Business Keeper consolidates EQS's position as market leader in whistleblowing provision in Europe ahead of the full implementation of the regulation. It Share price graph (€) brings with it around 300 customers, extending the pipeline of warm leads for other group services, as well as additional trained and operational sales resource for the short-term push. The €97m purchase price is being met from a mix of cash, debt and equity (0.59m new shares have been placed at €38), limiting dilution. The FY25 revenue target rises from €100m to €130m, with an (unchanged) EBITDA margin aspiration of 30%. We will update our forecasts on completion, likely to be in August.
INDUSTRY OUTLOOK
While this EU whistleblowing regulation is now active, the deadline for implementation in Company description national laws is two years, which will be in December 2021. We would therefore expect the EQS is a leading international provider benefit to be heavily skewed to H221 and into H122, amplified further by the Business of regulatory technology in the fields of corporate compliance and investor Keeper acquisition, while the additional sales cost will be in place for most of H121. The relations. Its products enable corporate pandemic has provided fertile territory for selling online communications solutions, and we clients to fulfil complex national and international disclosure obligations, would expect a proportion off this to be retained once physical meetings resume in greater minimise risks and communicate transparently with stakeholders. numbers. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 4.2 22.1 111.7 2019 35.4 2.6 (0.3) (7.41) N/A N/A Relative* 2.8 19.1 77.0 2020 37.6 4.8 0.4 4.12 966.0 N/A * % Relative to local index Analyst 2021e 45.5 1.1 (3.2) (28.56) N/A N/A Fiona Orford-Williams 2022e 53.2 4.3 (0.1) (2.12) N/A N/A
Edison Insight | 29 July 2021 28 Sector: Technology Esker (ALESK) Price: €253.00 Market cap: €1467m INVESTMENT SUMMARY Market Euronext Growth Esker’s Q2 revenue update confirmed that trading accelerated over the quarter, with revenue 28% higher against a weak comparative, but also 8% higher q-o-q. Cloud solutions Share price graph (€) grew 37% y-o-y in Q221 versus 16% growth in Q121, making up 93% of group revenue. Implementation services increased 13% y-o-y, reflecting bookings received earlier this year. Order intake has been strong so far this year, providing the basis for continued growth, and management has raised revenue guidance for FY21. We have upgraded our FY21 EPS forecast by 3.6%.
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 Company description each business process and consist of business process outsourcers and specialist DPA Esker provides end-to-end software companies. Customers move to using DPA software to reduce paper-related costs SaaS-based document automation solutions supporting order-to-cash and and errors in processing, to speed up the cash conversion cycle, to improve process procure-to-pay processes. In FY20, visibility within the enterprise and to improve customer service. 56% of revenues were from Europe, 38% from the United States 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 1.4 10.2 82.0 2019 104.2 20.1 13.6 179.0 141.3 N/A Relative* 1.1 5.5 40.7 2020 112.3 21.9 14.5 195.0 129.7 N/A * % Relative to local index Analyst 2021e 131.6 26.5 18.3 240.0 105.4 N/A Katherine Thompson 2022e 154.5 34.2 25.5 329.0 76.9 N/A
Sector: Food & drink Evolva (EVE) Price: CHF0.18 Market cap: CHF168m INVESTMENT SUMMARY Market Swiss Stock Exchange Evolva's overall geographical and product footprint continues to expand and the pipeline remains robust. The company's aim remains to reach cash break-even by FY23. Due to Share price graph (CHF) 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 and it subsequently announced it has secured up to CHF20m of funding via convertible notes from investment firm Nice & Green. H1 results are due on 26 August.
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 1.9 (6.4) (34.7) 2019 11.6 (12.3) (15.6) (2.0) N/A N/A Relative* 0.0 (13.6) (44.1) 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
Edison Insight | 29 July 2021 29 Sector: Technology Expert.ai (EXSY) Price: €2.81 Market cap: €144m INVESTMENT SUMMARY Market Borsa Italiana In March, expert.ai made its new SaaS platform available via an early adopters' programme, in line with the timetable laid out in its Path to Lead five-year plan. In June, the company Share price graph (€) announced the general availability of the platform which supports the design, development, testing, deployment and monitoring of scalable natural language solutions. It uses an exclusive hybrid AI approach combining symbolic AI and machine learning techniques to ensure the best possible accuracy for each individual use case with the transparency of explainable AI.
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.ai has developed and patented offered by Expert.ai. ResearchAndMarkets estimates that the global text analytics market an AI-based technology platform that extracts useful information from was worth $4bn in 2018 and is forecast to grow at a CAGR of 17.3% to 2023. 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 (2.1) (10.7) (0.5) 2019 33.7 5.5 (0.5) (1.6) N/A 43.8 Relative* (2.3) (13.6) (19.7) 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
Sector: Technology Filtronic (FTC) Price: 11.0p Market cap: £24m INVESTMENT SUMMARY Market LSE Filtronic’s post-close trading update notes that demand for critical communications products to the US public safety market recovered during Q421 as COVID-19-related delays to new Share price graph (p) installations and system upgrades started to ease. Management expects improved trading during H221 to result in FY21 revenues of c £15.6m, in line with our previous estimate. It expects a favourable sales mix at higher margins to generate c £1.8m EBITDA, which is slightly ahead of our previous estimate.
INDUSTRY OUTLOOK
While we will not be introducing FY22 estimates until the FY21 results are announced in August, we note that demand for Filtronic’s products appears robust in each of the three sectors served: public safety communications, aerospace and defence and mobile Company description communications backhaul links. However, Filtronic’s products are used in customer projects Filtronic is a designer and deploying sub-systems from multiple vendors. If any of these suppliers is directly affected by manufacturer of advanced RF communications products supplying a component shortages, this may have an indirect impact on Filtronic because its customers number of market sectors including may experience delays in completing projects. mobile telecommunications infrastructure, public safety, defence and aerospace.
Y/E May Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (1.1) 33.3 4.8 2019 15.9 0.7 0.1 0.05 220.0 N/A Relative* (0.8) 31.4 (10.4) 2020 17.2 1.2 0.1 0.05 220.0 N/A * % Relative to local index Analyst 2021e 15.6 1.8 0.2 0.07 157.1 N/A Anne Margaret Crow 2022e N/A N/A N/A N/A N/A N/A
Edison Insight | 29 July 2021 30 Sector: Industrial support services Forward Industries (FORD) Price: US$2.58 Market cap: US$26m INVESTMENT SUMMARY Market NASDAQ One of the group's product design activities, Intelligent Product Solutions, has launched an IT services division to serve the needs of small and medium businesses in the metropolitan Share price graph (US$) New York City region. The division will draw on the in-depth expertise of its team to help companies manage their IT networks, desktop support, server management, infrastructure analysis, web hosting and cybersecurity as they adjust to the new hybrid-remote workplace.
INDUSTRY OUTLOOK
The group has also announced an agreement with Chipolo to distribute its tracker products in the United States through exclusive distribution agreements with select big box stores and other retailers. The agreement builds on the distribution division's initiative to establish retail channels in the United States through which it has started to sell smart lighting and Company description sound products and smart furniture for third parties including UK-based Justwise. Forward Industries provides outsourced design, manufacturing, sourcing and distribution services. It creates innovative products based on 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 (14.3) (4.4) 104.8 2019 37.4 (0.2) (0.7) (7.06) N/A N/A Relative* (17.6) (9.5) 50.2 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: Financials Foxtons Group (FOXT) Price: 49.7p Market cap: £161m INVESTMENT SUMMARY Market LSE Foxtons is at an inflexion point, in terms of both its underlying markets, which are recovering, and the next stage of its development. Revenues grew c 50% in Q1 and are Share price graph (p) forecast to grow at a CAGR of 15% pa for the next three years, as sales are strong, lettings are picking up and Foxtons has been active with M&A. These positives are likely to be boosted by further M&A in lettings, as well as growth in BTR and regional expansion. While our base case estimates imply a valuation below the current price, we value the shares at up to 129p based on our bull case scenario. Foxtons confirmed recently that it is considering strategic options for its mortgage broking division (which may include a sale).
INDUSTRY OUTLOOK
Foxtons is almost entirely focused on the London market where both the lettings and sales Company description markets are recovering as London, and rest of the UK, head towards a ‘new normal’. Foxtons Group is London’s leading Foxtons’ Greater London region contains 13% of the UK population, and by value accounts and most widely recognised estate agency. It operates from a network of for 33% of sales and 38% of UK lettings. 57 inter-connected branches offering a range of residential related services which break down into three separate revenue streams; sales, lettings and mortgage broking. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (12.4) (20.4) 29.1 2019 106.9 13.5 (1.9) (0.3) N/A 13.9 Relative* (12.0) (21.5) 10.4 2020 93.6 15.7 1.6 (0.1) N/A 10.6 * % Relative to local index Analyst 2021e 130.1 23.4 9.5 2.5 19.9 8.2 Andy Murphy 2022e 137.7 25.5 12.5 3.3 15.1 7.2
Edison Insight | 29 July 2021 31 Sector: Consumer support services Games Workshop Group (GAW) Price: 11940.0p Market cap: £3914m INVESTMENT SUMMARY Market LSE The year-end trading update highlighted higher revenue and a more significant increase in operating profit and licensing income, versus our expectations. FY21 has been very strong Share price graph (p) despite COVID-19 restrictions on Retail, likely incremental costs due to Brexit, and recent currency headwinds. Management’s new estimates for FY21 of sales not less than £350m and PBT not less than £150m, imply y-o-y growth for revenue and PBT of at least c 30% and c 68% respectively and limited underlying cost growth of c 4%. The strong performance has led to higher year-on-year rewards for staff (profit-related pay increased fivefold) and shareholders (total dividend of 235p vs 145p).
INDUSTRY OUTLOOK
Games Workshop is the global leader for tabletop miniature gaming, a market it created. Company description Tabletop miniature gaming is the fastest-growing segment of the global non-digital games Games Workshop is a leading market, which is expected to grow at a CAGR of 9% between 2017 and 2023 and reach a international specialist designer, manufacturer and multi-channel value exceeding $12bn. 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 6.7 10.9 38.8 2019 256.6 97.1 81.3 200.8 59.5 53.9 Relative* 7.1 9.2 18.7 2020 269.7 115.6 89.4 217.8 54.8 37.5 * % Relative to local index Analyst 2021e 350.5 179.9 152.1 367.6 32.5 29.5 Russell Pointon 2022e 375.5 187.1 158.1 380.9 31.3 25.9
Sector: Travel & leisure Gamesys Group (GYS) Price: 1845.0p Market cap: £2024m 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 (0.2) (5.0) 100.3 2019 565.3 158.9 119.5 100.4 18.4 25.7 Relative* 0.1 (6.4) 71.3 2020 727.7 206.2 163.1 142.4 13.0 8.9 * % 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
Edison Insight | 29 July 2021 32 Sector: Technology GB Group (GBG) Price: 847.0p Market cap: £1663m INVESTMENT SUMMARY Market AIM GB Group (GBG) reported FY21 results substantially in line with our recently upgraded forecasts. In a difficult year, GBG managed to grow revenue by 9% (12% on an organic Share price graph (p) basis) and EPS by 21% while repaying all debt. The company announced a final dividend of 3.4p, taking the full year dividend to 6.4p. Management has returned to a growth footing, investing in product development and sales capacity while continuing to seek acquisitions that could expand product or market coverage. We have upgraded our normalised diluted EPS forecasts by 3.1% for FY22 and 2.0% for FY23 and introduce a forecast for EPS growth of 9.3% in FY24.
INDUSTRY OUTLOOK
Globalisation and the growth in internet trading have also resulted in the need for higher Company description compliance standards in light of the rising scope and financial impact of cybercrime. This, in GB Group specialises in identity data turn, is driving the demand for more complex and comprehensive solutions for the intelligence. Its products/services enable customers to understand and verification of personal data. verify clients and employees in fraud, risk management, compliance and customer on-boarding services. With headquarters in the UK, it operates across 16 countries. Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 0.7 (6.8) 26.0 2020 199.1 51.7 45.7 17.9 47.3 N/A Relative* 1.1 (8.2) 7.8 2021 217.7 61.4 56.7 21.7 39.0 N/A * % Relative to local index Analyst 2022e 209.6 50.8 46.5 17.7 47.9 N/A Katherine Thompson 2023e 233.0 56.6 52.1 19.6 43.2 N/A
Sector: Mining Gemfields Group (GML) Price: ZAR2.10 Market cap: ZAR2454m 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 23.5 26.5 41.9 2019 216.2 80.9 55.9 1.3 11.2 5.0 Relative* 19.5 25.1 16.9 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 4.5 Alison Turner 2022e 240.3 80.8 52.2 1.5 9.7 2.9
Edison Insight | 29 July 2021 33 Sector: General industrials Genuit Group (GEN) Price: 638.0p Market cap: £1580m INVESTMENT SUMMARY Market LSE Good trading momentum seen at the end of FY20 has continued into Genuit’s new financial year and, compared to pre-pandemic FY19, like-for-like revenues (for the first four months Share price graph (p) to end April) were ahead by 13.5%. Headline revenues (+31.7%) have been further boosted by acquisitions made earlier in the year – with both divisions benefitting - and the largest of which (Adey) is performing ahead of expectations. Challenges in the polymer input market have been effectively managed to date with no business disruption. While flagging some market uncertainties for H2, management retains its expectation of strong progress for the year.
INDUSTRY OUTLOOK
The Construction Products Association estimates that sector activity contracted by c 14% Company description overall in 2020 and expects this to be followed by a similar percentage rise in output in Genuit is a leading supplier of largely 2021, followed by almost 5% in 2022. plastic building products and systems. Operations in the UK (c 90% of 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 1.6 10.6 48.5 2019 447.6 99.1 70.8 29.2 21.8 14.2 Relative* 2.0 8.9 27.0 2020 398.6 63.4 35.7 13.3 48.0 22.6 * % Relative to local index Analyst 2021e 534.6 113.0 81.0 26.9 23.7 15.6 Toby Thorrington 2022e 568.7 120.1 87.8 29.1 21.9 13.4
Sector: Food & drink Greggs (GRG) Price: 2683.0p Market cap: £2732m INVESTMENT SUMMARY Market LSE Greggs’ Q221 trading update surprised on the upside, with positive two-year like-for-like (lfl) sales growth continuing through the end of the period, having previously reported a return to Share price graph (p) growth earlier than expected. We upgraded our revenue forecasts for FY21, assuming a positive lfl outturn for the rest of the year, versus negative previously, leading to PBT upgrades for FY21 and FY22 of 18%. The strength of the recovery also led us to increase our dividend forecast for FY21 by more than 150%.
INDUSTRY OUTLOOK
Greggs enjoys an expanding market. The Project Café2017UK report (Allegra World Coffee portal) valued the UK coffee shop market in 2016 at £8.9bn, +12% y-o-y, with branded outlets accounting for £3.7bn. Allegra estimates it could reach £16bn by 2025. The Company description squeezed consumer is a potential concern, although Greggs is well placed for the value With 2,101 shops, and eight switch after widespread refurbishments and extended customer options as it moves to manufacturing and distribution centres, Greggs is the leading UK widen its market. ‘food-on-the-go’ retailer. It uses vertical integration to offer differentiated products at competitive prices.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 6.1 16.6 78.0 2019 1167.9 231.9 114.2 89.7 29.9 11.0 Relative* 6.5 14.9 52.2 2020 811.3 115.4 (12.9) (12.1) N/A 44.0 * % Relative to local index Analyst 2021e 1203.9 246.9 126.1 100.9 26.6 9.0 Russell Pointon 2022e 1307.9 263.0 140.4 115.1 23.3 10.0
Edison Insight | 29 July 2021 34 Sector: Oil & gas Hellenic Petroleum (ELPE) Price: €5.73 Market cap: €1751m INVESTMENT SUMMARY Market Athens Stock Exchange Hellenic has introduced a transformational capital investment plan (€3.5–4bn by 2030) to upgrade its core refining business through energy-efficiency projects, transitioning to Share price graph (€) cleaner fuels and adopting blue/green hydrogen technologies. It also plans to boost its renewable energy sources aiming for 600MW by 2025 and 2GW by 2030, committing half of the proposed spend to clean energy. These investments should support the planned 50% reduction in Hellenic’s carbon footprint by 2030. While Q121 results were negatively affected by lower domestic oil demand amid the COVID-19 pandemic-driven lockdown, we expect Hellenic will benefit from an increase in demand for transport fuels as the restrictions are gradually lifted in Q221 and with Greece opening for tourists in May. Our valuation stands at €6.91/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 344kbod. It has sizeable and refinery systems elsewhere (Asia/United States) hold structural advantages. To offset marketing (domestic and international) this, changing regulations should put complex, middle distillate-orientated refineries such as and petrochemicals divisions. Hellenic'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 (8.8) (2.2) (1.2) 2019 8857.0 570.0 205.0 60.6 9.5 3.6 Relative* (3.9) 1.8 (26.8) 2020 5782.0 333.0 5.0 1.8 318.3 3.9 * % Relative to local index Analyst 2021e 7087.0 487.0 167.0 42.6 13.5 4.1 Marta Szudzichowska 2022e 7261.0 626.0 304.0 74.5 7.7 3.2
Sector: Property Impact Healthcare REIT (IHR) Price: 115.2p Market cap: £404m INVESTMENT SUMMARY Market LSE With the portfolio continuing to perform as expected, unaudited Q121 NAV per share increased to 110.48p (end-FY20: 109.58p) and including DPS paid the quarterly NAV total Share price graph (p) return was 2.3%. A Q121 DPS of 1.6025p was declared, in line with the FY21 target of 6.41p (+1.9%). Rents and capital values continue to benefit from RPI-linked rent reviews and rents continue to be received in full as they fall due. Rent cover for the tenant operators remains stable at just under 1.8x. Acquisitions continued in the quarter with the group committing to two properties, a high-quality operational home and a forward funding arrangement, both let/pre-let to a new (13th) tenant. With a low LTV of c 14% including the £35m proceeds of the April equity issue, and a strong and growing pipeline of acquisition opportunities, we expect further accretive growth.
INDUSTRY OUTLOOK Company description Impact Healthcare REIT invests in a Care home demand is driven by demographics and care needs with a shortage of quality diversified portfolio of UK healthcare assets, particularly residential and care homes suggesting strong investment demand in years to come. The pandemic nursing care homes, let on long leases presents a significant near-term challenge to the sector but does not change the underlying to high-quality operators. It aims to provide shareholders with attractive demographic-driven fundamentals while highlighting its critical role in supporting the NHS and sustainable returns, primarily in the form of dividends, underpinned by and the importance of long-term investment. structural growth in demand for care. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 3.8 1.1 12.9 2019 24.0 19.4 17.6 6.9 16.7 19.6 Relative* 4.2 (0.5) (3.4) 2020 30.8 25.6 23.1 7.3 15.8 17.5 * % Relative to local index Analyst 2021e 37.1 31.3 28.0 8.7 13.2 14.4 Martyn King 2022e 43.1 37.1 33.3 9.5 12.1 13.1
Edison Insight | 29 July 2021 35 Sector: Technology IQE (IQE) Price: 48.6p Market cap: £390m INVESTMENT SUMMARY Market AIM IQE notes that H121 trading was in line with management expectations. The company expects H121 revenue will be c £79m on a reported basis. This is consistent with the Share price graph (p) guidance management issued in March that H121 revenue and EBITDA would be similar to H120 levels on a constant currency basis because H121 revenue is equivalent to c £87m (constant currency), which is close to the £89.9m revenues reported in H120. Management also expects adjusted EBITDA to be similar to the prior year at constant currency (c £16m versus £16.4m in H120). We have left our estimates, which depend on an H2 recovery in infrastructure revenues, unchanged.
INDUSTRY OUTLOOK
During H121 continued strong growth in wireless products for 5G handsets and Wi-Fi 6 Company description routers offset a year-on-year reduction in wireless products for 5G infrastructure. While IQE is the leading supplier of epitaxial management did not comment explicitly on the photonics activity, we believe it is likely that compound semiconductor wafers globally. The principal applications demand for epitaxy from IQE’s major VCSEL customer, which we have previously inferred include radio frequency is involved in the Apple supply chain, has been steady. semiconductors, devices for optical networks, vertical cavity surface emitting lasers (VCSEL) 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 3.5 (18.4) (3.5) 2019 140.0 16.2 (7.0) (2.46) N/A 42.8 Relative* 3.9 (19.6) (17.5) 2020 178.0 29.9 3.2 0.29 167.6 10.9 * % Relative to local index Analyst 2021e 175.0 30.3 2.5 0.21 231.4 13.8 Anne Margaret Crow 2022e 185.4 39.0 6.8 0.63 77.1 11.2
Sector: Investment companies John Laing Group (JLG) Price: 399.2p Market cap: £1972m INVESTMENT SUMMARY Market LSE Following JLG’s announcement on 6 May that it was in discussions with KKR, on 19 May it announced a cash offer at 403p per share which has been unanimously recommended by Share price graph (p) the JLG board. The offer price represents a 35% premium to the December 2020 net asset value of 299p (adjusted for the recently paid dividend).
INDUSTRY OUTLOOK
For the purposes of the Takeover Code, Edison is deemed to be connected with John Laing 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) Company description by an offeror or the offeree company (as appropriate) in accordance with the requirements John Laing is an international of the Code. Consequently we have removed our estimates until the offer period ends. originator, active investor and manager of infrastructure projects.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (0.2) 30.5 30.0 2019 179.0 111.0 100.0 20.2 19.8 N/A Relative* 0.2 28.5 11.2 2020 25.0 (24.0) (65.0) (13.3) N/A N/A * % Relative to local index Analyst 2021e N/A N/A N/A N/A N/A N/A Dan Gardiner 2022e N/A N/A N/A N/A N/A N/A
Edison Insight | 29 July 2021 36 Sector: Mining KEFI Gold and Copper (KEFI) Price: 1.7p Market cap: £36m INVESTMENT SUMMARY Market LSE KEFI is in the process of finalising the specifics of the remaining funding sources for Tulu Kapi ahead of the project's launch in mid-FY21 and commissioning in late-FY22. The Share price graph (p) Ethiopian central bank has already approved the project's debt financing structure and community resettlement has been authorised in an environment in which the government is keen to encourage investment and generate tax and export earnings.
INDUSTRY OUTLOOK
In the aftermath of the recent general election in Ethiopia, we are valuing KEFI at 4.35p/share on the basis of its enhanced (75%) interest in Tulu Kapi and our forecast that it is able to generate c £66m in free cash flow pa. However, this valuation excludes Hawiah (19.3Mt at 1.57% CuE), on which KEFI has completed a recent preliminary economic Company description assessment showing a post-tax NPV(8%) of US$96m (1.07p/share attributable) and on KEFI Gold and Copper is an which it is now conducting a PFS and the value of its other tier 2 assets, which we estimate exploration and development company focused on gold and copper deposits could add a further 1.40-6.33p/share to its valuation. 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 (16.7) (12.5) 2.6 2019 0.0 (2.4) (3.5) (0.6) N/A N/A Relative* (16.4) (13.8) (12.3) 2020 0.0 (2.7) (2.8) (0.2) N/A N/A * % Relative to local index Analyst 2021e 0.0 (1.4) (5.8) (0.2) N/A 46.9 Charles Gibson 2022e 0.0 (1.4) (8.0) (0.3) N/A N/A
Sector: General industrials Kendrion (KENDR) Price: €21.75 Market cap: €325m 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. The company will benefit Share price graph (€) from long-term disruptive trends such as autonomous driving, electrification, emission reduction and industrial automation. We value Kendrion at €28 per share, the average of historical multiples, DCF and a peer comparison.
INDUSTRY OUTLOOK
For both Automotive and Industrial a market recovery is expected in 2021–22. In Q121, Kendrion reported organic revenue growth of 6% and an increase in EBITDA of 18%. Kendrion's targets for 2025 are for organic revenue growth of at least 5% on average per year and an EBITDA margin of at least 15%. In Automotive, Kendrion focuses on the car of Company description the future (fully electric and autonomous), with existing but particularly with relatively new Kendrion develops, manufactures and products. 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 (4.0) (6.3) 85.3 2019 412.4 43.8 11.0 93.57 23.2 N/A Relative* (7.1) (10.5) 42.6 2020 396.4 44.6 5.7 79.25 27.4 N/A * % Relative to local index Analyst 2021e 438.1 54.1 19.7 109.51 19.9 N/A Johan van den Hooven 2022e 477.5 62.9 29.1 151.89 14.3 N/A
Edison Insight | 29 July 2021 37 Sector: Technology Keywords Studios (KWS) Price: 2824.0p Market cap: £2132m INVESTMENT SUMMARY Market AIM In June, after 12 years as CEO of Keywords, Andrew Day confirmed that he would take early retirement for health reasons. In a parallel trading update, the group reported 25% l-f-l Share price graph (p) revenue growth and overall revenue growth of 36% y-o-y for the first four months of FY21, with ‘good margin delivery’. The comparator period was relatively weak due to the onset of COVID-19, but with good trading momentum and a strong M&A pipeline, the board is confident it can meet FY21 market expectations. An H121 trading update is expected in early August.
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 14.6 (5.7) 45.3 2019 326.5 57.6 40.9 47.2 69.8 46.6 Relative* 15.0 (7.2) 24.2 2020 373.5 74.2 55.0 57.7 57.1 28.9 * % Relative to local index Analyst 2021e 491.5 94.7 72.9 75.3 43.8 28.8 Richard Williamson 2022e 563.9 106.1 83.1 85.4 38.6 24.2
Sector: Mining Kopy Goldfields (KOPY) Price: SEK1.98 Market cap: SEK1754m 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 (2.0) (10.6) 17.2 2019 70.1 27.3 14.0 1.47 15.6 N/A Relative* (10.1) (17.8) (17.4) 2020 98.8 45.6 27.6 2.7 8.5 N/A * % Relative to local index Analyst 2021e 112.3 44.3 30.5 2.7 8.5 N/A Alison Turner 2022e 150.3 72.6 53.4 4.7 4.9 N/A
Edison Insight | 29 July 2021 38 Sector: Food & drink La Doria (LD) Price: €17.48 Market cap: €542m INVESTMENT SUMMARY Market Borsa Italiana FY20 benefitted significantly from increased at-home consumption caused by the pandemic and we expect volumes to normalise in FY21. That said, we believe there will be a structural Share price graph (€) 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 - albeit lower volumes - and a more positive industry backdrop. Q1 results confirmed this and the board maintained its outlook. H1 results are due on 10 September.
INDUSTRY OUTLOOK
La Doria's strategic objectives, published as part of its three-year plan, are broadly Company description unchanged: the priority is to expand the higher margin and less volatile parts of the La Doria is the leading manufacturer of business to reduce the dependence on the more unpredictable ‘red line’. private-label preserved vegetables and fruit for the Italian (17% of revenues) 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 (2.0) 4.4 60.4 2019 717.7 56.0 32.7 64.0 27.3 14.0 Relative* (2.2) 1.0 29.4 2020 848.1 83.1 63.3 182.8 9.6 9.9 * % Relative to local index Analyst 2021e 805.7 83.8 61.8 153.5 11.4 7.9 Sara Welford 2022e 813.8 89.5 66.5 164.1 10.7 7.7
Sector: Mining Lepidico (LPD) Price: A$0.02 Market cap: A$105m INVESTMENT SUMMARY Market ASX Lepidico's patented technologies produce lithium hydroxide plus a range of by-products in an eco-friendly fashion from less contested minerals such as lepidolite. Technically, its Share price graph (A$) project has been de-risked by a successful pilot plant campaign and, in May 2020, it announced the results of a definitive feasibility study (DFS) to produce c 4,900t of battery grade lithium hydroxide monohydrate pa (7,800tpa LiOH equivalent) over 14 years.
INDUSTRY OUTLOOK
The DFS calculated a project NPV(8%) of US$221m 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 offtake agreements and (effectively) completing the permitting and approvals process. After raising A$12.5m in equity recently, Company description we valued the shares at 4.96c/share plus a potential 0.61–1.53c/share for a risk-adjusted Via its Karibib project in Namibia and 20,000tpa LCE Phase 2 plant. In the meantime, the US DFC is evaluating the project for unique IP, Lepidico is a vertically integrated lithium development potential preferential debt financing. business that has produced both lithium carbonate and lithium hydroxide from non-traditional hard rock lithium-bearing minerals using its registered L-Max and LOH-Max processes. Y/E Jun Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual 70.0 (19.0) 142.9 2019 0.0 (4.0) (5.1) 0.0 N/A N/A Relative* 67.4 (22.7) 96.7 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 38.1 Charles Gibson 2022e 0.0 (25.6) (26.7) 0.0 N/A N/A
Edison Insight | 29 July 2021 39 Sector: Financials London Stock Exchange Group (LSEG) Price: 7624.0p Market cap: £38583m INVESTMENT SUMMARY Market LSE LSEG's transformational acquisition of Refinitiv completed in 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 a 2 July investor education event LSEG set out how the Data & Analytics division plans to grow revenues by 4–6% over the medium term by focusing on execution, customer experience, synergies and targeted investments.
INDUSTRY OUTLOOK Company description London Stock Exchange Group Post-Refinitiv transaction financial targets include: year-five revenue and cost synergies of (LSEG) is a diversified global financial markets infrastructure and data >£225m (3.4%) and >£350m (7.1%), respectively, a three-year post deal revenue CAGR of business. Its core areas of activity are: 5–7% and a medium-term EBITDA margin of 50%. The group has signalled increased data and analytics (including indices), capital markets and post trade. investment in capex and operating expenses to provide for growth and separation of Borsa 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 (5.9) (1.3) (8.6) 2019 2314.0 1265.0 994.0 200.3 38.1 N/A Relative* (5.5) (2.8) (21.9) 2020 2444.0 1329.0 1061.0 209.7 36.4 N/A * % 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: General retailers Lookers (LOOK) Price: 64.1p Market cap: £250m INVESTMENT SUMMARY Market LSE Lookers is the second largest UK new car retailer. In COVID-affected FY20, a £36.1m H120 underlying PBT loss was followed by strong H220 trading producing a £14m profit for FY20. Share price graph (p) At end of May adjusted net cash (ex leases) was around £18m (FY20 adjusted net debt £40.7m). Disruption and uncertainties for car retailers continue although trading in lockdown 3 was healthier than expected and improved strongly as more normal trading resumed in Q221, as indicated by the trading update on 28 June. Management expectations for FY21 adjusted PBT were increased again and consensus for FY21 adjusted PBT is now over £50m. The AGM will be held on 12 August 2021.
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 155 franchises, representing 32 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 (7.6) (7.2) 205.2 2018 4828.3 117.1 42.8 8.41 7.6 2.1 Relative* (7.3) (8.6) 161.0 2019 4787.2 90.9 4.2 0.84 76.3 1.9 * % 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 July 2021 40 Sector: Financials LXi REIT (LXI) Price: 144.4p Market cap: £1011m INVESTMENT SUMMARY Market LSE LXi raised c £100m (gross) from its upscaled (from c £75m) share placing, and a further c £4.0m from the PrimaryBid offer. The offer price of 133p was above the unaudited 1 June Share price graph (p) 2021 NAV per share of 130p which was 3.4% up on the 31 March valuation, reflecting gains across all sectors, but mostly industrial, and a 9% gain on assets acquired since 31 March. The proceeds of the issue will be directed towards assets from a significant identified pipeline of sale and leaseback and other long income, forward funding opportunities. The pipeline assets have mainly been sourced off-market and are diversified across a range of defensive and structurally supported sub-sectors and let to high-quality tenant covenants. LXi expects these to be accretive and further strengthen and diversify the portfolio.
INDUSTRY OUTLOOK
Company description The pandemic and Brexit contribute to a highly uncertain UK economic outlook. Long LXi REIT is an externally managed UK upwards-only, mostly index-linked or fixed uplift leases (95%) provide significant income REIT investing in high-quality, smaller lot size (£5–15m) assets, let on long protection against inflation and should mitigate the cyclical volatility in capital values index-linked leases to strong financial historically exhibited by the commercial property market. covenants across a range of sectors with defensive characteristics.
Y/E Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 0.0 9.9 33.8 2020 38.5 31.9 30.5 6.3 22.9 29.2 Relative* 0.4 8.3 14.4 2021 42.8 36.9 39.2 7.5 19.3 31.1 * % Relative to local index Analyst 2022e 57.6 49.8 47.8 7.7 18.8 18.7 Martyn King 2023e 59.4 51.4 50.1 8.1 17.8 21.6
Sector: General retailers Marshall Motor Holdings (MMH) Price: 215.0p Market cap: £168m 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. Challenges remain for 2021 (eg supply chain issues), but the pre-close trading update indicated an expected strong H121 performance. Volume outperformance continued for both new and used segments with a exceptionally strong margin performance in the latter. Management increased its FY21 expectations for adjusted PBT again to now be well ahead of the group's historic record result despite repaying £4m of government support received this year. The balance sheet remains healthy and dividends should resume at the half year.
INDUSTRY OUTLOOK
Company description Market dynamics favour larger motor dealership groups against smaller independent Marshall Motor is the seventh largest groups, which still command c 60% of the franchise market. The large rating discount to the UK motor retailer, operating 113 franchises across 22 brands. It is one General Retailers Index is generally a reflection of concerns about economic recession. of six UK dealership groups that Shocks like the current COVID-19 pandemic are more challenging, but may throw up represent each of the top five volume and premium brands and has a strong opportunities in the future. 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 12.6 22.5 72.0 2019 2276.1 52.0 22.1 22.9 9.4 3.9 Relative* 13.0 20.7 47.1 2020 2154.4 53.4 20.9 21.1 10.2 1.9 * % Relative to local index Analyst 2021e 2296.6 56.0 26.1 26.2 8.2 6.0 Andy Chambers 2022e 2368.4 52.8 22.8 22.9 9.4 4.8
Edison Insight | 29 July 2021 41 Sector: Industrial support services MedservRegis (MDS) Price: €0.75 Market cap: €40m INVESTMENT SUMMARY Market Maltese Stock Exchange MedservRegis’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 growth in the medium and longer term. The two major shareholders’ intentions to find a strategic investor led to the reverse takeover by Regis Holdings of Mauritius, which underpins the balance sheet and expands operations into sub-Saharan Africa. The transaction completed on 25 June 2021 after all conditions were met.
INDUSTRY OUTLOOK
MedservRegis operates in the upstream oil and gas segment, providing onshore bases in the Mediterranean, the Middle East, sub-Saharan Africa and the Americas for onshore and Company description offshore exploration and production customers. The METS business added onshore OCTG MedservRegis is a Malta-based services to the historical integrated offshore services offered on an increasingly global provider of integrated offshore logistics and services in support of drilling basis. As new territories are brought on stream the potential for future revenue growth operations in the Mediterranean, remains, which the Regis deal should augment further. MENA, and South America. The METS companies provide OCTG services in the Middle East and beyond, and Regis adds base management and logistics operation in sub-Saharan Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Africa. Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 0.0 (9.6) 7.1 2018 36.2 6.3 (3.4) (6.76) N/A 6.1 Relative* (0.2) (5.9) 9.0 2019 68.7 11.5 1.1 1.2 62.5 5.9 * % 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: 34.5p Market cap: £152m INVESTMENT SUMMARY Market AIM FY21 was the year Mercia’s business model as a specialist asset manager matured. Mercia has built a structurally profitable, cash-generative business, with high levels (90%+) of Share price graph (p) contracted revenue and the potential for super-returns from its mature direct portfolio. In FY21, management largely achieved its FY22 strategic goals a year early (c £1bn AUM, evergreen balance sheet, sustainably profitable), with NAV per share climbing 24% to 40p and AUM rising 18% to £940m at year end. Management’s new three year plan aims for 20% average annual growth in AUM and average PBT of £20m between FY22-FY24. Mercia still trades at a discount to NAV, even before considering the embedded value of the third-party fund management business (c 6.9p/share at 4% of AUM).
INDUSTRY OUTLOOK
Company description COVID-19 fears have largely abated and technology and life sciences sector valuations Mercia Asset Management is a remain strong. Growth in AUM and profitability, supported by realisations and exits are the regionally focused specialist asset manager. Its stated intent is to become 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 4.1 1.5 76.9 2020 12.7 0.3 (15.5) (4.55) N/A 269.2 Relative* 4.4 0.0 51.3 2021 23.4 7.1 36.9 8.38 4.1 26.4 * % Relative to local index Analyst 2022e N/A N/A N/A N/A N/A N/A Richard Williamson 2023e N/A N/A N/A N/A N/A N/A
Edison Insight | 29 July 2021 42 Sector: Mining Monarch Mining Corporation (GBAR) Price: C$0.86 Market cap: C$67m 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 mine and the Beacon mill is planned to re-start production by June FY22 with minimal capex. Once in production, its cash flows plus existing cash 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. A C$6.7m private placement of units and excellent drilling results on Beaufor will increase its measured, indicated and inferred (MI&I) resources when updated in August 2021 and likely improve its valuation.
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 1.2 4.9 N/A 2019 N/A N/A N/A N/A N/A N/A Relative* 1.1 (0.8) N/A 2020 N/A N/A N/A N/A N/A N/A * % Relative to local index Analyst 2021e 0.0 (3.8) (4.0) (5.9) N/A N/A Rene Hochreiter 2022e 21.0 (2.8) (3.2) (4.6) N/A N/A
Sector: Consumer support services Mondo TV (MTVI) Price: €1.40 Market cap: €61m INVESTMENT SUMMARY Market Milan Stock Exchange Mondo TV Group has had a strong start to the year, with continuing deals on its key properties, including MeteoHeroes, Grisù, Agent 203 and Invention Story. New contracts Share price graph (€) include a first to develop, produce and distribute a video game based on MeteoHeroes for Sony from the group’s upgraded studio subsidiary in the Canary Islands. The funding round from Atlas, completed in Q121, has put the group on a sound financial footing. With its extensive library and a strong front list, Mondo TV is in a good position to benefit from the continued appetite for content from broadcasters and streamers.
INDUSTRY OUTLOOK
Structural changes to the market mean strong demand in the short to medium term. The rapid take-up of video on demand (VoD) and streaming VoD (SVoD) globally has fuelled a Company description well-documented thirst for content from the major players, with new entrants continuing. Mondo TV is a global media group Consolidation among the larger US and global players highlights the need for quality focused on the production, acquisition and exploitation of animated children’s content for regional broadcasters and streamers. High-quality animated series can drive television series. It owns the rights to new subscriptions and stimulate viewer loyalty. Children’s content is a key element of the >1,600 TV episodes and films, which it distributes across 75 markets. various providers’ offerings.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (9.4) (2.6) (27.7) 2019 23.1 16.4 6.2 11.3 12.4 9.6 Relative* (9.6) (5.8) (41.7) 2020 24.7 18.8 6.4 13.2 10.6 4.4 * % Relative to local index Analyst 2021e 29.2 24.6 10.5 15.0 9.3 3.7 Fiona Orford-Williams 2022e 31.3 27.4 12.8 17.3 8.1 2.9
Edison Insight | 29 July 2021 43 Sector: General industrials Mytilineos (MYTI) Price: €14.10 Market cap: €2015m INVESTMENT SUMMARY Market Athens Stock Exchange Mytilineos is a leading industrial company with international presence in all five continents. Mytilineos’s FY20 results showed a strong H2 turnaround. This not only demonstrates that Share price graph (€) 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; recently published Q121 results show group earnings in line with Q120. Strong maturing pipelines of renewables and sustainable engineering projects should drive growth in these businesses. In July, it announced an agreement with Public Power Corp (PPC) for electricity supply to the Metallurgy business unit until end-2023, after which Metallurgy will shift to renewable power sourcing. In addition, it announced a new long-term agreement with Glencore for the sale of alumina and aluminium worth >$1.5bn.
INDUSTRY OUTLOOK Company description Mytilineos is a leading industrial Mytilineos possesses a portfolio of assets that enjoy low costs. CCGTs benefit from access company with international presence in all five continents. The company is to cheap natural gas and low production costs for both alumina/aluminium allow the active in Metallurgy, Power & Gas, metallurgy business to be strongly cash flow generative. 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 (9.0) (7.2) 86.9 2019 2256.0 313.0 180.0 103.0 13.7 8.3 Relative* (4.2) (3.5) 38.4 2020 1899.0 315.0 N/A 91.0 15.5 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: 19.4p Market cap: £59m INVESTMENT SUMMARY Market LSE Nanoco has announced the details of the non-dilutive loan note facility of £3.15m (gross) being provided by major shareholders. This facility supports the cash runway for organic Share price graph (p) business activities past calendar H222, at which point there should be good visibility of potential production orders. The initial IPR judgement and verdict from the trial in the patent litigation against Samsung are both expected during calendar 2022, so the loan notes preserve both potential sources of value for shareholders.
INDUSTRY OUTLOOK
Nanoco has successfully petitioned the judge in Texas to delay the court trial until after the US Patent Trial and Appeal Board has completed inter partes reviews (IPRs) of the five patents in the case, which examine the validity of the patents themselves. The change in Company description sequence improves the likelihood of a positive outcome for Nanoco, but potentially extends Nanoco is a global leader in the the timescales for receiving the initial IPR judgement and trial verdict by around six months development and manufacture of cadmium-free quantum dots and other to late calendar 2022. nanomaterials. Its platform includes c 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 (21.5) (28.2) 10.9 2019 7.1 (3.8) (5.0) (1.34) N/A N/A Relative* (21.2) (29.2) (5.2) 2020 3.9 (2.9) (4.9) (1.38) N/A N/A * % Relative to local index Analyst 2021e 1.9 (2.6) (3.9) (0.99) N/A N/A Anne Margaret Crow 2022e 2.0 (2.2) (3.6) (0.97) N/A N/A
Edison Insight | 29 July 2021 44 Sector: Mining Newmont Corporation (NEM) Price: US$60.11 Market cap: US$48035m INVESTMENT SUMMARY Market New York Stock Exchange Newmont is the world’s largest gold mining company with forecast production of 6.5Moz in FY21 plus a further 1.3Moz AuE of co- and by-products (+/-5%) out of attributable Share price graph (US$) (end-FY20) 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 market 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 (Tanami Company description Expansion 2, Ahafo North and Yanacocha Sulphides) that we forecast will result in a c 50% Newmont Corporation is the world’s increase in pre-financing cash flows at NEM by FY25, supporting our absolute valuation of leading gold company with a world-class portfolio of assets in North the company of US$78.08/share. Both Q1 and Q221 results were materially ahead of our and South America, Australia and expectations. Africa. It is the only gold producer in the S&P 500 Index and is widely recognised for its ESG practices and as a leader in value creation, safety and mine execution. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (4.1) (8.5) (8.6) 2019 9740.0 3734.0 3693.0 131.6 45.7 15.4 Relative* (7.8) (13.3) (33.0) 2020 11497.0 5537.0 3143.0 265.5 22.6 9.9 * % Relative to local index Analyst 2021e 12160.0 5880.0 3098.0 269.0 22.3 10.9 Charles Gibson 2022e 12374.0 6042.0 3437.0 264.4 22.7 10.2
Sector: General industrials Norcros (NXR) Price: 301.0p Market cap: £243m INVESTMENT SUMMARY Market LSE Norcros reported FY21 results in line with guidance raised in its pre-close statement. In a COVID-19 affected year underlying PBT of £30.6m exceeded the £28.8m attained in FY20. Share price graph (p) While not quite back to FY19 levels, this is a significant achievement backed by moving into a net cash position at the year end and the declaration of an 8.2p dividend for the year (all as a final DPS, having passed the interim) which was stronger than we anticipated. UK EBIT was above both FY20 & FY19 with an improved margin of 12.2% (FY20: 10.8%, FY19: 11.6%) while South African profitability was down marginally in underlying local FX (slightly more so in sterling). Cash generation for the year was in excess of £40m, resulting in a £10m end FY21 net cash position (from £36m net debt twelve months earlier). Our estimates are under review.
INDUSTRY OUTLOOK Company description Norcros is a leading supplier of RMI has been a stronger sub-sector during/exiting the UK COVID-19 lockdown phase while showers, enclosures and trays, tiles, taps and related fittings and new residential new-build gathered momentum more gradually. The South African economy accessories for bathrooms, kitchens, has faced a number of challenges; wider distribution of wealth and an emerging middle washrooms and other commercial environments. It has operations in the class should benefit consumer spending over time. Management's 2025 financial targets UK and South Africa, with some export activity from both countries. targeted £600m revenue with a balanced UK/overseas split with sustained 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 (1.6) (0.3) 93.0 2019 331.0 42.2 30.9 29.6 10.2 N/A Relative* (1.3) (1.8) 65.0 2020 342.0 38.8 27.1 26.1 11.5 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 July 2021 45 Sector: Financials Numis Corporation (NUM) Price: 360.0p Market cap: £388m INVESTMENT SUMMARY Market LSE Numis reported a strong Q321 with revenue of over £50m, only slightly below the H121 run rate. In addition to favourable market conditions, Numis is seeing benefits across Share price graph (p) Investment Banking and Equities activities from its investment in staff and focus on enhancing the quality of its client base. IPOs made a strong contribution but the group also notes that its M&A advisory and private markets businesses are making a significant contribution and have good longer-term potential to expand. Equities have seen some easing in activity levels following a very strong Q221 but the business has continued to gain market share and the trading book performance has been positive.
INDUSTRY OUTLOOK
Numis indicates that the transaction pipeline for the rest of FY21 and into next year is very Company description strong although it expects Q421 to be seasonally quieter. Market fluctuations and Numis is one of the UK's leading seasonality will influence near-term revenue trends but moves to develop its advisory and independent investment banking groups, offering a full range of private markets activities and offer equity capital markets services outside the UK, should research, execution, equity capital diversify revenues and help support longer-term growth. We have increased our revenue markets, corporate broking and advisory services. It employs c 290 estimate for FY21 by nearly 6% and EPS by 13%. 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 (1.9) (5.3) 18.0 2019 111.6 15.3 12.4 8.1 44.4 N/A Relative* (1.6) (6.7) 0.9 2020 154.9 39.6 37.1 26.7 13.5 6.4 * % Relative to local index Analyst 2021e 208.1 67.3 62.0 41.8 8.6 20.9 Andrew Mitchell 2022e N/A N/A N/A N/A N/A N/A
Sector: Investment companies Ocean Wilsons Holdings (OCN) Price: 1025.0p Market cap: £362m INVESTMENT SUMMARY Market LSE The COVID-19 pandemic has been tough on Brazil but OCN has weathered it well with a respectable 5.1% ROE in 2020 and maintained its 70c (4.3%) dividend. Business volumes Share price graph (p) fell in Wilson Sons (WSON), its Brazilian maritime services company, but prices firmed up and allowed WSON to post a 4.3% ROE. OCN’s international investment portfolio (OWIL) had a good year in 2020 with favourable if choppy markets. Business is now picking up in WSON’s key container terminals and tugboat business and a recovery seems underway. We forecast OCN’s PBT to rise by 44% in FY21 and by 20% in FY22 as business recovers to normal. OCN is currently trading on a 35% discount to look-through value despite having risen 27% since 1 April. Its stake in listed WSON alone is worth 99% of its market cap.
INDUSTRY OUTLOOK
Company description While WSON’s business volumes were affected by the pandemic, prices and margins Ocean Wilsons Holdings is an actually improved due to better competitive dynamics in its key towage and container ports investment company based in Bermuda. It has a controlling businesses. Currently, volumes are picking up in these two divisions, while higher oil prices shareholding in Wilson Sons, a quoted are supportive of a future recovery in WSON’s lagging oil and gas platform service maritime services company in Brazil, and holds a portfolio of international operations. 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 (6.8) 12.0 47.5 2019 406.1 147.9 95.6 169.3 8.4 3.2 Relative* (6.5) 10.4 26.1 2020 352.8 135.7 74.6 109.5 12.9 3.5 * % Relative to local index Analyst 2021e 388.4 167.1 107.8 178.2 7.9 3.0 Pedro Fonseca 2022e 409.4 183.8 129.8 200.1 7.1 2.8
Edison Insight | 29 July 2021 46 Sector: Travel & leisure OPAP (OPAP) Price: €11.50 Market cap: €3926m INVESTMENT SUMMARY Market Athens Stock Exchange OPAP has exclusive licences across a number of its gaming products; the earliest is due to expire in 2026 and the latest in 2036. The strategy is to grow revenue by enhancing its Share price graph (€) products while accelerating the move online. In Q121 revenue declined by 47% y-o-y and EBITDA declined by 26%, due to COVID-related store closures. We downgraded our FY21 EBITDA forecast by 13% due to more COVID-related closures of the land-based locations than previously expected in our December 2020 update. For FY21 and FY22 we look for a strong recovery post COVID, which is helped by underlying growth as well as the contribution from Stoiximan, which is now fully consolidated.
INDUSTRY OUTLOOK
The Hellenic Gaming Commission estimates that the total legal Greek gaming market Company description amounted to €1.6bn gross gaming revenue (GGR) in 2020, -27% y-o-y due to COVID, of OPAP was founded in 1958 as the which OPAP land-based games comprised €0.9bn GGR. Regulation of the online gaming Greek national lottery and it is the exclusive licensed operator of all market is in progress; HGC has granted online licences to OPAP and Stoiximan. numerical lotteries, sports betting and horse racing. OPAP listed in 2001 and was fully privatised in 2013. Sazka Group has a 44.1% 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 (10.7) (5.7) 35.6 2019 1619.9 411.2 286.6 68.0 16.9 12.0 Relative* (6.0) (1.9) 0.5 2020 1129.8 263.6 133.4 32.0 35.9 17.3 * % Relative to local index Analyst 2021e 1581.6 575.0 408.0 86.0 13.4 8.9 Russell Pointon 2022e 2074.6 772.4 609.6 129.0 8.9 6.2
Sector: Technology Osirium Technologies (OSI) Price: 21.0p Market cap: £6m INVESTMENT SUMMARY Market AIM Osirium reported revenue growth of 22.5% for FY20 and, as a result of cost-control measures taken to manage the business during the pandemic, reduced the EBITDA loss Share price graph (p) from £2.15m in FY19 to £1.36m in FY20. Bookings declined 14% y-o-y, although the company achieved record intake in Q120 and Q420 and has seen positive momentum so far this year, particularly in the healthcare sector. We have revised our forecasts to reflect lower operating costs and the recent fund raise, reducing our EBITDA loss forecast from £1.8m to £1.4m for FY21.
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 (16.0) (12.5) 2.4 2019 1.2 (2.2) (3.5) (19.45) N/A N/A Relative* (15.7) (13.8) (12.4) 2020 1.4 (1.4) (3.1) (12.85) N/A N/A * % Relative to local index Analyst 2021e 1.7 (1.4) (3.4) (11.19) N/A N/A Katherine Thompson 2022e 2.0 (1.2) (3.4) (9.79) N/A N/A
Edison Insight | 29 July 2021 47 Sector: Financials OTC Markets Group (OTCM) Price: US$46.00 Market cap: US$541m INVESTMENT SUMMARY Market OTC QX In May OTCM reported a very strong first quarter with gross revenues of $26.1m, up 57% compared with Q120. Segmentally this was led by OTC Link (+210%), which benefited from Share price graph (US$) elevated US equity trading levels, but Market Data Licensing (+17%) and Corporate Services (+21%) were also strong. Expenses, including redistribution and transaction-based costs, were up 46%. This left pre-tax profit up 87% and, after a higher tax charge, diluted EPS increased by 78%. A maintained second quarter dividend of $0.15 was announced.
INDUSTRY OUTLOOK
Following Q1 there are signs that the level of US equities trading activity may be beginning to normalise, and we have assumed that this continues while acknowledging that it is not possible to forecast this with any confidence. This affected our estimates for OTC Link and Company description to some extent Market Data Licensing. The positive trend in corporate clients joining OTC Markets Group operates the OTCQX and OTCQB is likely to have longer-lasting benefits and work developing new data OTCQX, OTCQB and Pink financial markets for over 11,000 US and global products and offering new functionality to OTC Link clients should also be helpful through securities. OTC Link LLC, a member of market cycles. Our 2021 estimated EPS increased by 23%, while, reflecting our FINRA, operates OTC Link ATS and OTC Link ECN, both SEC-registered assumptions about normalisation, the 2022 estimate only rose slightly (+2%). Q2 results are Alternative Trading Systems. In FY20 c 82% of revenues were of a due to be released in early August. subscription-based recurring nature Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF and 63% in Q121. Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (6.6) 14.3 55.6 2019 62.8 19.4 18.0 124.7 36.9 23.4 Relative* (10.2) 8.3 14.1 2020 71.2 23.2 21.4 153.4 30.0 18.2 * % Relative to local index Analyst 2021e 85.9 30.3 28.6 193.2 23.8 19.2 Andrew Mitchell 2022e 77.7 27.4 25.6 172.6 26.7 17.0
Sector: Property Palace Capital (PCA) Price: 263.5p Market cap: £122m INVESTMENT SUMMARY Market LSE FY21 results were robust, with a clear improvement in H221. Adjusted PBT of £7.5m included a £0.9m receivables provision, with H221 improving to £4.5m versus £3.1m in Share price graph (p) H121. EPRA NTA per share was 350p (end-FY20: 364p) but also improved in H221 (from 347p at end-H121). With a good level of rent collection continuing, Q421 DPS was increased by 20% to a level that management hopes to at least maintain through FY22. Sales have now completed/been agreed on 57 of the 127 residential units at Hudson Quarter (HQ), completed in April, with a value of c £18m. Also, £9.4m of non-core assets have been sold ytd, as part of the £30m disposal programme. The proceeds of residential sales and non-core disposals provide a significant opportunity for accretive reinvestment and debt reduction.
INDUSTRY OUTLOOK Company description Palace Capital is a UK property The commercial property market is cyclical, historically exhibiting substantial swings in investment company. It is not sector-specific and looks for capital values through cycles while income returns have been more stable. While the opportunities where it can enhance pandemic has created significant economic and market uncertainty, the rebound in GDP, long-term income and capital value through asset management and continuing low interest rates, and lockdown easing are supporting a broadening of positive strategic capital development in locations outside London. commercial property returns, still led by the industrial sector. Y/E Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (2.4) 10.7 36.0 2020 21.1 14.6 8.0 17.5 15.1 7.7 Relative* (2.1) 9.1 16.3 2021 17.3 10.6 7.5 16.4 16.1 10.7 * % Relative to local index Analyst 2022e 16.7 9.8 6.6 14.3 18.4 14.0 Martyn King 2023e 17.4 10.6 7.5 16.4 16.1 11.5
Edison Insight | 29 July 2021 48 Sector: Mining Pan African Resources (PAF) Price: 15.7p Market cap: £303m INVESTMENT SUMMARY Market AIM 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 more than Share price graph (p) 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 after production of 98.4koz in a record H121 with a further 103.2koz in output in H221 (cf our prior forecast of 95.8koz). Senior net debt declined another 45.5% to US$33.8m.
INDUSTRY OUTLOOK
We value PAF at 38.76c (28.04p) per share plus the 5.08cps upside potential from the development of Mintails/Mogale and the value of 19.2m underground Witwatersrand ounces (estimated 0.22-5.24c/share). Near-term development opportunities include Egoli Company description (ZAR2.01bn NPV and 50.1% IRR), the Evander 8 Shaft Phase 1 (ZAR126.1m NPV) & 2 Pan African Resources has three projects, Mintails (ZAR1.47bn NPV and 42.8% IRR), the Prince Consort shaft pillar, the major producing precious metals assets in South Africa: Barberton Fairview sub-vertical shaft (7–10koz pa) and the Royal Sheba project (c 30koz pa). (target output 95koz Au pa), the Barberton Tailings Retreatment Project (20koz) and Elikhulu (55koz), now incorporating the Evander Tailings Retreatment Project (10koz). Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (9.7) (11.4) (33.5) 2019 218.8 65.5 37.1 1.64 13.2 7.0 Relative* (9.4) (12.7) (43.1) 2020 274.1 115.2 80.8 3.78 5.7 5.7 * % Relative to local index Analyst 2021e 369.0 157.3 122.4 4.24 5.1 3.2 Charles Gibson 2022e 340.9 170.1 144.0 5.18 4.2 2.5
Sector: General industrials paragon (PGN) Price: €10.30 Market cap: €47m INVESTMENT SUMMARY Market Xetra Recovery is strengthening following the COVID-19 disruptions in FY20 while the sale process of its remaining stake in Voltabox continues but has yet to be finalised. In FY20 Share price graph (€) paragon Automotive revenues were €127.2m and the EBITDA margin was 10.8%, both ahead of management expectations following a record H220 performance. It benefited from management actions taken to sustain earnings and improve cost efficiency. Q121 revenues were €39.2m, 33% up on Q120 and 29% ahead of Q119. Q221 should also exceed Q220. The 15.4% Q121 EBITDA margin is ahead of FY21 guidance of 12–15%. Management has indicated sales for Automotive should be €145m in FY21 and FCF of c €12m.
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 (5.9) (6.4) 0.0 2018 187.4 30.3 14.8 144.58 7.1 N/A Relative* (7.2) (8.7) (16.4) 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 July 2021 49 Sector: Property Phoenix Spree Deutschland (PSDL) Price: 410.0p Market cap: £389m INVESTMENT SUMMARY Market LSE With the Berlin rent-cap ruled unconstitutional PSD is able to resume its reversionary rental strategy to drive income and capital growth, at the same time crystallising a part of this Share price graph (p) value through selected condominium sales at a premium to book value. Despite the market disruption caused by the rent cap 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 five-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 was 8.8%. Sector M&A highlights the positive prospects for the Berlin residential property market, a view shared by PSD. Seeking to ensure that the share price better reflects the intrinsic value of the company’s portfolio and future prospects PSD continues to actively repurchase shares Company description at an accretive discount. Phoenix Spree Deutschland is a long-term investor in mid-market INDUSTRY OUTLOOK residential property in Berlin, targeting reliable income and capital growth. Its With strong demand for housing in Berlin driven by net migration and a relative lack of core strategy is to acquire unmodernised apartment blocks that supply, free market rents and capital values have steadily increased, while the rise in may be improved to the benefit of tenants, generating attractive returns condominium prices appears to be continuing. for shareholders. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 4.1 10.8 45.9 2019 22.6 44.6 28.6 21.8 22.0 N/A Relative* 4.4 9.2 24.8 2020 23.9 48.3 37.9 30.1 15.9 N/A * % Relative to local index Analyst 2021e 28.2 51.5 44.3 37.1 12.9 N/A Martyn King 2022e 28.1 51.6 44.4 36.8 13.0 N/A
Sector: Financials Picton Property Income (PCTN) Price: 90.1p Market cap: £493m INVESTMENT SUMMARY Market LSE Q122 NAV total return was a strong 4.0% and, supported by a continuing good level of rent collection, the quarterly rate of DPS was increased by 6.3% to 0.85p or an annualised 3.4p, Share price graph (p) just slightly below the pre-pandemic level (3.5p). EPRA dividend cover was 121%. EPRA NTA per share increased 3.2% to 99.9p, including a 2.9% average like-for-like increase in portfolio valuations, led by a 4.8% gain on industrial assets, while office assets showed a slight gain (0.2%) and retail & leisure assets gained 2.3% led by retail warehouses. Lettings and lease renewals added to annual rent with occupancy maintained at 91%. There is significant reversionary potential within the portfolio while low gearing (20.6%) and £50m of undrawn debt provide scope for accretive acquisitions.
INDUSTRY OUTLOOK
Company description The commercial property market is cyclical, historically exhibiting substantial swings in Picton Property Income is an internally capital values through cycles while income returns have been more stable. While the managed UK REIT that invests in a diversified portfolio of commercial pandemic has created significant economic and market uncertainty, the rebound in GDP, property across the UK. It is total continuing low interest rates, and lockdown easing are supporting a broadening of positive return driven with a strong income focus and aims to generate attractive commercial property returns, still led by the industrial sector. returns through proactive management of the portfolio. Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 3.3 (0.8) 32.1 2020 33.6 28.1 22.4 3.66 24.6 23.0 Relative* 3.7 (2.3) 13.0 2021 33.5 28.1 33.8 3.68 24.5 18.9 * % Relative to local index Analyst 2022e 33.9 28.2 42.0 3.74 24.1 16.7 Martyn King 2023e 35.2 29.2 40.2 3.93 22.9 15.9
Edison Insight | 29 July 2021 50 Sector: General industrials PIERER Mobility (PMAG) Price: €71.00 Market cap: €1600m 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, and has formed a joint venture with its Bulgarian supplier that will add capacity of 350k e-bikes by 2023. Following a strong FY20 despite the pandemic, strong global demand for motorcycles and e-bikes continued in Q121 with revenues of €509m. Guidance for FY21 sales was 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 (2.7) (1.8) 43.2 2019 1520.0 241.0 118.0 241.8 29.4 6.2 Relative* (2.3) (7.8) (0.6) 2020 1530.0 239.0 91.0 155.1 45.8 5.1 * % Relative to local index Analyst 2021e 1829.0 306.0 143.0 262.1 27.1 8.1 Andy Chambers 2022e 2014.0 335.0 168.0 312.9 22.7 5.8
Sector: Property Primary Health Properties (PHP) Price: 161.5p Market cap: £2148m INVESTMENT SUMMARY Market LSE Including the first benefits from internalisation of the group management structure, expected to deliver immediate cost savings of c £4.0m pa, H121 recurring earnings progressed as Share price graph (p) expected. While a highly competitive investment market held back acquisitions, it was also reflected in strong portfolio revaluation gains and NAV growth. Meanwhile, progress continued with rent reviews and asset management projects, forward-funded developments and the recently acquired direct development pipeline. Robust rent collection underpins quarterly DPS payments with an annual target of a fully covered 6.2p (+5.1% vs FY20), a 25th year of DPS growth. With significant funding headroom and a strong pipeline of opportunities we expect investment to pick-up in H2.
INDUSTRY OUTLOOK
Company description The sector enjoys strong income visibility, with long leases and upwards-only rents, 90% Primary Health Properties is a backed directly or indirectly by government bodies, with little exposure to the economic long-term investor in primary healthcare property in the UK and the cycle, or fluctuations in occupancy. Healthcare planning, with broad political support, Republic of Ireland. Assets are mainly already suggests strong underlying demand for modern healthcare properties in both the long-let to GPs and the NHS or the HSE, organisations backed by the UK UK and the Republic of Ireland while the pandemic highlights existing pressures and may and Irish governments, respectively. well lead to increased healthcare spending over the longer term. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 3.3 7.5 7.4 2019 115.7 103.4 59.7 5.5 29.4 18.8 Relative* 3.7 5.9 (8.2) 2020 131.2 118.0 73.1 5.8 27.8 17.2 * % Relative to local index Analyst 2021e 137.4 127.8 82.8 6.3 25.6 16.9 Martyn King 2022e 142.4 132.7 86.6 6.5 24.8 16.3
Edison Insight | 29 July 2021 51 Sector: Financials ProCredit (PCZ) Price: €7.98 Market cap: €470m INVESTMENT SUMMARY Market Xetra 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 streamlined its business in recent years, including a digital direct bank strategy for private clients and a reduced branch network and headcount. As macro conditions normalise further and PCB continues to grow its business, we expect it to realise its scaling potential and gradually reach its mid-term ROE target of 10%.
INDUSTRY OUTLOOK
While the SEE and EE region benefitted from secular GDP growth of 3–5% pa in the five years prior to COVID-19, the pandemic triggered a recession in 2020 with a GDP decline of 2.0% in Emerging and Developing Europe, according to IMF data. The IMF forecasts a Company description return to growth in 2021 with GDP up 4.9%. PCB’s in-depth, impact-oriented relationships ProCredit Holding is a Germany-based with SME borrowers (94% of loan book at end March 2021), prudent credit risk group operating regional banks across Southeastern and Eastern Europe, as management and solid capital base (CET-1 ratio of 13.2% at end March 2021) should help well as in Ecuador. The banks focus reduce the impact of macro headwinds. Longer term, PCB’s business should be assisted by on small and mid-size enterprises (SMEs) and private middle-income and the low banking sector penetration in the region (loan book to GDP of 40–45% on average high earners. At end-2020, the group’s total assets stood at €7.3bn. vs >70% in Western Europe). Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (1.2) (10.7) 27.7 2019 252.6 N/A 76.9 89.0 9.0 N/A Relative* (2.6) (13.0) 6.8 2020 223.5 N/A 52.1 70.0 11.4 N/A * % Relative to local index Analyst 2021e 242.9 N/A 66.2 91.6 8.7 N/A Milosz Papst 2022e 279.9 N/A 93.2 130.0 6.1 N/A
Sector: General industrials Quadrise Fuels International (QFI) Price: 3.2p Market cap: £45m INVESTMENT SUMMARY Market AIM Preparatory work for the LONO trials with MSC Shipmanagement is taking longer than management had expected, resulting in a couple of months delay in commencing the trial Share price graph (p) programme, which is now likely to begin very early in CY22. This means the start of the commercial roll-out across MSC’s global fleet has slipped slightly, from CY Q222 to mid-2022, subject to successful completion of the LONO trials. While the larger scale industrial trial in Morocco has slipped from CY H121 to CY Q321 because of COVID-19-related issues and the commercial trial scale to later in CY H221, management still expects that successful conclusion of these trials could potentially result in the first commercial shipments of MSAR to the customer early in CY22.
INDUSTRY OUTLOOK
Company description Greenfield Energy has experienced significant problems in starting heavy oil extraction at Quadrise Fuels International is the the Petroteq Oil Sands plant in Utah, so has only recently been able to take samples for innovator, supplier and global licensor of disruptive residual oil technology Quadrise to test, even though management had expected to receive the samples by the end that produces a synthetic, enhanced of December 2020. heavy fuel oil called MSAR. The technology enables refiners to produce MSAR for use as a low-cost substitute for heavy fuel oil. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (16.6) (21.4) 70.3 2019 0.0 (2.8) (3.0) (0.32) N/A N/A Relative* (16.3) (22.6) 45.6 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
Edison Insight | 29 July 2021 52 Sector: Property Raven Property Group (RAV) Price: 27.5p Market cap: £156m 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%), at a significant premium to interest rates (despite a 2.25% ant-inflationary increase to 6.5% ytd), and construction costs increasing, rent growth should increasingly drive capital growth. The repurchase of ordinary and preference shares from Invesco funds, in part through a new JV between the company and management, and the 1.25p per share FY20 final distribution via a tender offer repurchase have both recently completed. Company description INDUSTRY OUTLOOK Raven Property Group (formerly Raven Russia) invests mainly in Class A warehouses in Russia. It also owns The Russian Economics Ministry has increased its 2021 GDP growth forecast to 3.8% as three office buildings in St Petersburg, the economy recovers from the impacts of the pandemic. Strong demand for space, a third-party logistics company in Russia and a residential development especially driven by e-commerce activity, combined with low vacancy, a lack of new supply, company in the UK. and increased construction costs are positive indicators for increased rents and valuations. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (5.7) (7.4) (16.5) 2019 127.0 N/A 54.0 6.4 4.3 N/A Relative* (5.3) (8.8) (28.6) 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 6.7 N/A Martyn King 2022e 102.0 N/A 22.0 2.5 11.0 N/A
Sector: Financials Record (REC) Price: 92.4p Market cap: £184m INVESTMENT SUMMARY Market LSE Record’s AUME continued to grow in Q122, increasing 5% to $84.5bn. There was a net inflow of $1.8bn (2%) split evenly between passive hedging and currency for return. The Share price graph (p) latter included the Record EM Sustainable Finance Fund which launched with UBS Wealth Mgt at end June with a size of approximately $0.75bn. The fund is a first step in the group’s strategy to create new products in collaboration with clients to grow and diversify revenue. It also provides an entry point to sustainable investment as an area for development and commands a significantly higher fee margin than existing products. Market and other movements added $2.6bn (3%). Average fee rates were broadly stable and no performance fees were earned in the period.
INDUSTRY OUTLOOK
Company description The continuation of growth in AUME creates a strong base for FY22. The diversity of Record is a specialist independent revenue has increased and there is potential for this trend to continue as further new currency manager. It provides a number of products and services, products are launched. Work continues on introducing new software and technology to including passive and dynamic facilitate this and enhance efficiency and scalability. 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 (0.7) 9.9 158.5 2020 25.6 8.5 7.7 3.26 28.3 27.8 Relative* (0.3) 8.2 121.0 2021 25.4 7.0 6.2 2.73 33.8 26.7 * % Relative to local index Analyst 2022e 33.0 13.1 12.2 5.05 18.3 18.8 Andrew Mitchell 2023e N/A N/A N/A N/A N/A N/A
Edison Insight | 29 July 2021 53 Sector: Property Regional REIT (RGL) Price: 90.6p Market cap: £391m INVESTMENT SUMMARY Market LSE RGL has completed or agreed the sale of more than 70% of its industrial assets ytd, including the agreed sale of a £45m portfolio at a 7.5% premium to book value and Share price graph (p) reflecting a 6.75% net initial yield. It expects sales proceeds to be promptly recycled into a strong pipeline of higher yielding office investments, the focus of investment going forward. The existing office portfolio contains significant reversionary income potential (c £12m or more than 20% of gross contracted rents at end-FY20) and engagement with potential occupiers has increased as pandemic restrictions have relaxed. Supported by continuing strong rent collection, Q121 DPS of 1.6p was 7% up versus Q120 (1.5p). Our FY21 forecast is 6.6p (vs 6.4p in FY20) comprising three quarterly payments of 1.6p and an increased Q4 DPS of 1.8p, consistent with the company’s normal pattern.
INDUSTRY OUTLOOK Company description Regional REIT owns a highly The commercial property market is cyclical, historically exhibiting substantial swings in diversified commercial property portfolio of predominantly offices capital values through cycles while income returns have been more stable. While the located in the regional centres of the pandemic has created significant economic and market uncertainty, the rebound in GDP, UK. It is actively managed and targets a total shareholder return of at least continuing low interest rates, and lockdown easing are supporting a broadening of positive 10% with a strong focus on income. commercial property returns, still led by the industrial sector. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 6.2 9.8 34.8 2019 55.0 44.1 30.6 7.8 11.6 N/A Relative* 6.6 8.2 15.3 2020 53.3 42.0 27.7 6.5 13.9 N/A * % Relative to local index Analyst 2021e 53.6 42.8 28.9 6.7 13.5 N/A Martyn King 2022e 55.3 44.5 30.4 7.0 12.9 N/A
Sector: General industrials Renewi (RWI) Price: 548.0p Market cap: £439m INVESTMENT SUMMARY Market LSE A confident AGM statement referenced a good start to FY22 with all three reporting divisions performing well and as expected in Q1. Accompanying comments included Share price graph (p) confirmed investment plans to support the innovation pipeline, a further €20m reduction in core net debt (to below 2x EBITDA) and confirmation that the latest green bonds issuance has been successfully completed. The AGM also approved a one for 10 share consolidation, with trading in the new ordinary shares commencing on 19 July.
INDUSTRY OUTLOOK
The Dutch waste market, accounting for the largest single business within Renewi, was growing as the economy recovered from cyclical lows ahead of the coronavirus outbreak.
Company description 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 P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 0.7 9.0 110.8 2020 1775.4 167.1 54.3 5.4 118.4 30.3 Relative* 1.1 7.3 80.2 2021 1693.6 159.8 47.1 4.5 142.1 19.7 * % Relative to local index Analyst 2022e 1800.9 171.1 55.8 5.2 123.0 31.1 Toby Thorrington 2023e 1847.9 189.0 72.2 6.8 94.1 27.7
Edison Insight | 29 July 2021 54 Sector: Technology Riber (ALRIB) Price: €1.42 Market cap: €30m INVESTMENT SUMMARY Market Euronext Paris Riber has recently received an order from an established opto-electronic device manufacturer in Asia for an MBE system suitable for pilot production. The MBE machine will Share price graph (€) be used to grow wafers based on antimonides, an area for which its MBE systems are attracting significant interest worldwide. The new pilot machine will be used to prepare epitaxial device structures for applications including car driver assistance, medical diagnostics and smart building sensors.
INDUSTRY OUTLOOK
At end-March 2021 the order book totaled €17.3m. This included orders for four MBE systems totalling €9.6m, all of which are scheduled for delivery in FY21. The total excludes an additional order for a production system priced at several million euros announced in Company description April and the recent order for a pilot production system. Riber designs and produces molecular beam epitaxy (MBE) systems and evaporator sources and cells for the semiconductor industry. This equipment is essential for the manufacturing of compound semiconductor materials that are used in numerous high-growth applications. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (11.7) (23.9) (6.5) 2019 33.5 1.7 0.9 3.07 46.3 N/A Relative* (12.0) (27.1) (27.8) 2020 30.2 2.1 0.7 2.49 57.0 N/A * % Relative to local index Analyst 2021e 29.1 2.4 0.9 3.03 46.9 N/A Anne Margaret Crow 2022e 32.8 3.4 1.8 6.48 21.9 N/A
Sector: Financials S&U (SUS) Price: 2700.0p Market cap: £328m INVESTMENT SUMMARY Market LSE S&U’s update for the February-May period indicated that the group is continuing a strong recovery as motor and housing markets revive. Profitability for both Advantage motor Share price graph (p) finance and Aspen property bridging were ahead of group projections. Advantage saw a smaller than expected bounce in transactions in April following the opening of dealerships but advances have accelerated with good new business loan quality. The group is optimistic that Advantage will reach its advances and profit-growth targets for the year. Aspen is benefitting from its participation in CBILS lending and its net receivables stand at over £50m (£34.1m at end January). Aspen profitability reached a record level in Q122.
INDUSTRY OUTLOOK
At the last trading update in May, trends for both businesses were encouraging but Company description developments in the pandemic and macroeconomic background remain sensitivities for the S&U’s Advantage motor finance group. Underpinning the longer-term outlook for Advantage is continued work to adapt and business lends on a simple HP basis to lower- and middle-income groups improve the business. Aspen also looks to be on track to make a material contribution to who may have impaired credit records group profits. S&U's Q2 update is due 10 August. restricting access to mainstream products. It has c 63,000 customers. 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 3.5 8.0 70.4 2020 89.9 40.4 35.1 239.4 11.3 66.1 Relative* 3.8 6.4 45.7 2021 83.8 22.2 18.1 120.7 22.4 9.9 * % Relative to local index Analyst 2022e 88.6 28.7 23.9 159.2 17.0 N/A Andrew Mitchell 2023e 94.5 38.2 31.8 211.9 12.7 N/A
Edison Insight | 29 July 2021 55 Sector: General retailers SandpiperCI Group (SANDPI) Price: 87.0p Market cap: £87m 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. It owns a high-quality freehold property portfolio, valued at £64m in January 2021, which provides a barrier to entry for the competition. 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. The FY21 results demonstrated the group’s resilience: in spite of lockdown-related store closures and significant extra pandemic-related costs such as PPE and social distancing measures, gross revenues were up 6% and trading EBITDA was up by 3%. 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 2020 188.5 11.0 4.5 3.56 24.4 30.1 Relative* N/A N/A N/A 2021 200.4 11.3 5.1 4.09 21.3 9.3 * % Relative to local index Analyst 2022e 205.2 11.8 5.3 4.25 20.5 9.6 Sara Welford 2023e 210.4 12.1 5.3 4.27 20.4 8.6
Sector: General industrials Schaltbau Holding (SLT) Price: €38.80 Market cap: €372m 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
Q121 results were strong with revenues +4% and EBIT +59%. 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 Company description (2–3% in FY20). Higher growth will come from the Components division with exposure to Schaltbau Holding specialises in high growth markets such as new energy (wind and solar) and e-mobility. Growth in these products for rail infrastructure and rolling stock and also road vehicles segments is estimated at >20% per annum. 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 3.2 16.3 45.9 2019 513.7 45.1 10.5 104.85 37.0 N/A Relative* 1.8 13.4 22.0 2020 502.3 43.1 14.5 146.53 26.5 N/A * % Relative to local index Analyst 2021e 531.0 47.7 22.9 147.31 26.3 N/A Johan van den Hooven 2022e 568.0 56.9 30.7 192.14 20.2 N/A
Edison Insight | 29 July 2021 56 Sector: Financials Secure Trust Bank (STB) Price: 1215.0p Market cap: £226m INVESTMENT SUMMARY Market LSE STB's upbeat pre-close interims update noted that positive trends in Q1, especially asset quality, have continued into Q221. The board is now expecting FY21e PBT to be ‘materially’ Share price graph (p) ahead of company collected consensus of £29.5m (we forecast £27.4m) and above the top end of the range at £36.8m. STB reports interims on 5 August and we are likely to review our forecasts. The adjustment in impairments will probably be lower in FY22 than in FY21, with STB's guidance along similar lines. We currently see impairment dropping to 1.5% by 2022, which should help drive ROE to 11.1%. STB's solid capital base (CET1 14.2) supports management’s strategy of seeking growth opportunities both organically and through possible M&A. Our fair value remains at 2,163p per share.
INDUSTRY OUTLOOK
Company description There is naturally some uncertainty regarding job furlough schemes and other support Secure Trust Bank is a measures, but we expect the government to take a pragmatic approach to tapering them off. well-established specialist bank addressing niche markets within As such, we do not envisage a cliff-edge scenario despite the clear risk to forecasts. We consumer and commercial banking. believe that STB’s relatively short duration book and proven nimbleness helps it adjust to lending conditions. The forecast drop in impairments, along with balance sheet expansion, will help drive earnings growth. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 16.8 4.7 89.8 2019 165.5 N/A 41.1 180.2 6.7 N/A Relative* 17.2 3.2 62.3 2020 166.1 N/A 20.1 85.2 14.3 N/A * % Relative to local index Analyst 2021e 165.7 N/A 27.4 115.2 10.5 N/A Pedro Fonseca 2022e 190.8 N/A 41.5 175.0 6.9 N/A
Sector: Engineering Severfield (SFR) Price: 78.6p Market cap: £242m INVESTMENT SUMMARY Market LSE FY21 results were slightly better than we had anticipated in most respects. Revenue and reported EBIT were 2.5% and 4.8% above our estimates respectively – and a 7% operating Share price graph (p) margin achieved – with slightly lower interest costs and loss from JV/associates slightly lower. Dividends were in line (ie 1.8p final making an unchanged 2.9p for the year as a whole). Year-end net cash was as expected at c £4m and strong cash collection was a feature throughout the year. The underlying UK/Europe order book is stable and enhanced by DAM making £301m in total while the Indian JV equivalent has swollen to a record £140m. Management referred to positive momentum across the group and an expectation of progress in FY22. 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. steelwork projects for the local market and is currently being expanded.
Y/E Dec / Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (0.5) (1.3) 31.0 2019 274.9 29.0 24.7 6.66 11.8 13.2 Relative* (0.2) (2.7) 12.0 2020 327.4 33.2 28.6 7.75 10.1 8.6 * % Relative to local index Analyst 2021e 354.5 29.6 22.9 6.03 13.0 8.7 Toby Thorrington 2022e 365.3 34.6 27.5 7.29 10.8 8.8
Edison Insight | 29 July 2021 57 Sector: General industrials Stern Groep (STRN) Price: €13.60 Market cap: €81m INVESTMENT SUMMARY Market AMS In 2020, Stern restructured its balance sheet and further streamlined operations. This puts it in a good position to cope with the uncertain car market, as was evident in Q1. In 2021, Share price graph (€) opportunities relating to the company’s financial position, as well as its participation in Bovemij and M&A, could start to materialise. We expect profitability to increase in the next few years, driven by the restructured organisation, digitisation efforts, a focus on margin over volume and an improving market environment. The valuation is undemanding, at c 7.0x 2022e P/E.
INDUSTRY OUTLOOK
Automotive retail already had to deal with structural change and COVID-19 has presented another big challenge. After a drop in new car sales in 2020 by 20% to 356,051 in the Company description Netherlands, sector organisations Aumacon and RAI/Bovag expect a rebound of 12–17% in With 61 dealer and Stern Point car 2021. Stern should start to see the effects of optimising its dealer network, focusing on repair locations and revenues of almost €900m, Stern Groep is the third omnichannnel, moving out of unattractive car brands and executing cost controls. largest car retailer group in the Netherlands. The company has more than 1,557 employees.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (2.2) 0.0 46.6 2019 876.8 26.4 (1.4) 29.13 46.7 N/A Relative* (5.3) (4.5) 12.8 2020 751.1 27.8 0.8 (85.41) N/A N/A * % Relative to local index Analyst 2021e 819.8 18.4 9.7 148.63 9.2 N/A Edwin De Jong 2022e 846.7 21.7 12.8 191.43 7.1 N/A
Sector: General retailers Studio Retail Group (STU) Price: 286.0p Market cap: £248m INVESTMENT SUMMARY Market LSE Studio Retail Group’s (SRG) exceptional FY21 results were due to strong customer growth and spend per customer, reflecting product appeal and convenience, helped by positive Share price graph (p) effects from the COVID-19 pandemic. After the sale of Education, SRG represents a pure play on the growth of online value retail. At the capital markets day, management reiterated its ambition to grow revenue to £1bn within four to six years, a minimum CAGR of 9.5%. The key drivers are expected to be growth of the customer base, enhancing spend per customer and providing more flexible payment options. These play to SRG’s strengths, as evidenced in recent years. Our forecasts are under review.
INDUSTRY OUTLOOK
Against a challenging macroeconomic backdrop, Studio is outperforming much of the retail Company description market through its unique digital-first value proposition, combined with the backing of Studio Retail Group is a leading online flexible, and increasingly tailored, responsible consumer credit solutions. value retailer with an integrated financial services offer. The growth 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 4.0 (1.4) 31.2 2020 434.9 35.0 27.3 12.1 23.6 57.7 Relative* 4.4 (2.9) 12.2 2021 578.6 73.0 48.8 44.9 6.4 14.2 * % Relative to local index Analyst 2022e N/A N/A N/A N/A N/A N/A Russell Pointon 2023e N/A N/A N/A N/A N/A N/A
Edison Insight | 29 July 2021 58 Sector: Financials Supermarket Income REIT (SUPR) Price: 117.8p Market cap: £955m INVESTMENT SUMMARY Market LSE SUPR has invested c £240m since the close of the H121 results, including a c £58m increase in its economic interest in the Sainsbury Reversion Portfolio. With a strong pipeline Share price graph (p) of investment opportunities that meet the strict investment criteria, and available capital from the well-received March capital raise, we anticipate further significant investment activity. Although already overtaken by these events, the H121 results provided evidence of both the financial benefits of increased scale and the key role of omnichannel stores in supermarket distribution strategies. Recent changes to the management advisory agreement have introduced a new, lower tier of fees on assets above £2.0bn, increasing the benefit of further growth for shareholders.
INDUSTRY OUTLOOK
Company description Supermarket property has a long record of positive total returns underpinned by stable Supermarket Income REIT, listed on income returns in part due to long-leases, a strong occupier covenant, and the non-cyclical the special funds segment of the LSE, invests in supermarket property, let to nature of grocery retailing. Supermarkets have been net beneficiary of the pandemic which leading UK supermarket operators, on has boosted sales, particularly online and fulfilled by omnichannel stores. long, RPI-linked leases. The investment objective is to provide an 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 (0.6) 3.3 7.8 2019 16.9 21.2 9.9 5.0 23.6 16.8 Relative* (0.3) 1.8 (7.9) 2020 25.5 38.9 16.8 5.0 23.6 14.6 * % Relative to local index Analyst 2021e 45.8 59.2 40.5 6.2 19.0 18.6 Martyn King 2022e 66.3 61.5 58.3 7.2 16.4 16.4
Sector: Property Target Healthcare REIT (THRL) Price: 120.0p Market cap: £614m INVESTMENT SUMMARY Market LSE Consistent positive returns continued in Q321 with a 0.8% increase in EPRA NAV per share to 109.1p and NAV total return of 2.5% (including DPS paid). Returns are underpinned by Share price graph (p) inflation-indexed rent growth and robust rent collection, with progress on the small number of underperforming homes. With the care home vaccination programme completed, COVID cases within Target-owned homes are now negligible; occupancy of the homes has stabilised and strong enquiries are a positive indicator for recovery. The entire £60m (gross) proceeds of the March equity raise have been allocated to board approved acquisitions that are in advanced stages of due diligence, part of which includes the announced acquisitions of a luxury operational care home in Scotland and a land site/forward funding commitment in Buckinghamshire with an aggregate completed value of £33m (including costs).
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 4.7 2.4 13.4 2019 34.3 N/A 20.1 5.45 22.0 24.6 Relative* 5.1 0.9 (3.0) 2020 44.3 N/A 23.2 5.27 22.8 25.2 * % Relative to local index Analyst 2021e 49.8 N/A 26.1 5.55 21.6 21.7 Martyn King 2022e 56.4 N/A 33.6 6.57 18.3 17.1
Edison Insight | 29 July 2021 59 Sector: Technology Technicolor (TCH) Price: €3.02 Market cap: €713m INVESTMENT SUMMARY Market Euronext Paris Technicolor’s Q121 figures showed (constant currency) revenue up 3.6% on prior year, buoyed by continued strong demand in Connected Home. The outlook for Technicolor Share price graph (€) Creative Studios (was Production Services) is considerably improved as filming gets underway and projects are greenlit. The animation activities have been consolidated under the Mikros Animation brand. Group FY21 and FY22 earnings guidance is maintained, with margins set to improve after earlier streamlining and ongoing cost control. Following FY20’s financial restructure, the equity proportion of Technicolor’s enterprise value is no longer greatly overshadowed by the debt. With improving cash flow, a revaluation of the equity seems underway. Interim figures are due on 29 July.
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 Technicolor organised in three business segments, Creative Studios, the live content industry continues to re-emerge, while animation demand Production Services, DVD Services and Connected Home. remains strong. Fresh, high-quality content is crucial to reinforce the attractiveness of VoD platforms to subscribers and advertisers in a competitive market. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (6.4) 16.6 15.9 2019 3800.0 325.0 (73.0) (492.18) N/A 0.6 Relative* (6.6) 11.6 (10.4) 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 6.9 Fiona Orford-Williams 2022e 3255.0 385.0 117.0 42.67 7.1 2.4
Sector: General industrials Thrace Plastics (PLAT) Price: €7.88 Market cap: €345m 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 fivefold while that for Packaging more than doubled. Further earnings progress was achieved in Q121 at the end of which net debt had reduced to c €6m (€9m including IFRS 16 leases).
INDUSTRY OUTLOOK
Thrace manufactures a wide range of products that are used in a variety of sectors, ranging from construction/infrastructure to food packaging, medical and horticulture primarily in Company description Europe. Management’s high-level financial objective is to pursue profitable growth using two Thrace Plastics is an established primary levers: increased capacity and value capture. international producer of Technical Fabrics (FY19: 72% of net revenues) and Packaging (28%). Each division uses a number of manufacturing processes and produces a wide range of products from polymer materials, serving a diverse range of end-markets. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 18.9 51.8 330.6 2019 327.8 30.6 10.2 12.8 61.6 13.0 Relative* 25.2 58.0 219.0 2020 339.7 76.5 56.1 93.1 8.5 4.0 * % Relative to local index Analyst 2021e 387.5 100.1 76.5 132.5 5.9 3.8 Toby Thorrington 2022e 342.4 57.8 32.9 56.2 14.0 5.3
Edison Insight | 29 July 2021 60 Sector: Media Tinexta (TNXT) Price: €37.84 Market cap: €1786m INVESTMENT SUMMARY Market Borsa Italiana STAR Tinexta announced a new venture with a subsidiary of Intesa Sanpaolo (IS), a leading bank in Italy, that will enable it to distribute its own services that help SMEs to fund, market and Share price graph (€) grow their businesses through a more significant network with existing strong relationships. We upgraded our FY22 PBT forecast by 2% and the rapid build in revenue and profitability of the new venture through FY25, post our explicit forecast period, led to an increase in our DCF-based valuation to €36.4 per share.
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 Company description changes, in Digital Trust the group is leveraging its Italian expertise to expand on an Tinexta has four divisions: Digital EU-wide basis with a unified legal base across the region. At the same time, Tinexta is likely Trust, solutions to increase trust in digital transactions; Credit Information to make acquisitions in Italy and Europe that will further expand its addressable markets & Management, services to manage and seek cross-selling opportunities between the business units. credit; Innovation & Marketing Services, 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 19.3 52.3 160.2 2019 258.7 71.3 53.5 80.3 47.1 32.4 Relative* 19.1 47.4 110.0 2020 269.0 77.9 58.6 85.4 44.3 21.7 * % Relative to local index Analyst 2021e 370.2 96.2 73.5 110.6 34.2 28.5 Russell Pointon 2022e 417.8 112.6 88.7 132.9 28.5 22.4
Sector: Technology Trackwise Designs (TWD) Price: 182.0p Market cap: £52m INVESTMENT SUMMARY Market AIM Trackwise’s FY20 results show a resilient response to the pandemic with progress made against all aspects of the group’s strategy. Revenues doubled year-on-year to £6.1m, Share price graph (p) reflecting the acquisition of Stevenage Circuits (SCL). However, concerns about the long-term economic impact of the pandemic caused a slow-down in new orders. After adjusting for exceptional costs and share-based payments, the group moved from an operating profit of £0.2m in FY19 to a £0.2m operating loss.
INDUSTRY OUTLOOK
Part of the funds raised in March 2020 were used to acquire SCL, which has become the group’s centre for advanced PCB manufacture, freeing the Tewkesbury site for IHT production. Part of the proceeds raised in December are being used during FY21 for a new Company description site in Stonehouse, Gloucestershire, which will also be dedicated to IHT production. This Trackwise Designs is a UK expansion is required to accommodate the requirements of a UK electric vehicle OEM. This manufacturer of specialist products using printed circuit technology. These OEM has recently extended the agreement from three to four years, increasing the total include a lightweight replacement for value by £16m to up to £54m. The volume ramp-up under this agreement has been delayed conventional wiring harnesses known as IHT and RF antennae. In FY20, by a quarter to H122, so we have revised our FY21 estimates, taking EPS from 4.9p profit 39% of revenues related to exports. to 1.0p loss. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (13.3) (25.7) 104.3 2019 2.9 0.5 0.1 0.8 227.5 N/A Relative* (13.0) (26.8) 74.7 2020 6.1 0.8 (0.4) 1.4 130.0 N/A * % Relative to local index Analyst 2021e 9.0 0.7 (0.7) (1.0) N/A N/A Anne Margaret Crow 2022e 22.1 4.2 1.9 6.4 28.4 N/A
Edison Insight | 29 July 2021 61 Sector: Food & drink Treatt (TET) Price: 1065.0p Market cap: £635m 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 opened in April 2021 with commissioning of the machinery due later in the year. The outlook for FY21 is optimistic, with the board raising FY expectations with the H1 results and adjusted PBT expected to be 'at least £20m'.
INDUSTRY OUTLOOK
Treatt has migrated its business from that of a pure supplier to the food and beverage Company description industries to being a valued partner in the development of new ingredients. Citrus, tea, fruit Treatt provides innovative ingredient and vegetable flavours and health & wellness (mainly sugar reduction) are core areas of solutions from its manufacturing bases in Europe and North America, focus, with the latter undergoing a structural growth trend. 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 (11.3) (7.8) 104.0 2019 112.7 15.8 14.0 19.0 56.1 30.6 Relative* (10.9) (9.2) 74.4 2020 109.0 17.9 15.8 21.3 50.0 40.6 * % Relative to local index Analyst 2021e 127.5 25.6 21.7 29.5 36.1 41.8 Sara Welford 2022e 135.2 30.2 23.6 32.0 33.3 24.2
Sector: Property Triple Point Social Housing REIT (SOHO) Price: 103.2p Market cap: £416m INVESTMENT SUMMARY Market LSE The portfolio continued to perform in line with expectations in Q121; unaudited IFRS (and EPRA) NAV per share increased to 106.55p (end-FY20: 106.42p) and including DPS paid, Share price graph (p) the quarterly NAV total return was 1.3%, continuing the consistently positive trend since IPO. A Q121 DPS of 1.3p was declared and SOHO is targeting aggregate FY21 DPS of 5.2p, up 0.4% in line with the annual February increase in the UK CPI. We forecast continuing accretive growth as the £55m (gross) proceeds from October’s equity issue, along with increased debt funding, are deployed, supporting a continuation of the progressive dividend policy, fully covered by adjusted earnings. SOHO recently completed/exchanged on the acquisition of 12 properties, committing c £14m (before costs), taking the FY21 ytd total to c £30m.
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 (2.5) 0.0 1.5 2019 21.1 15.1 11.9 3.39 30.4 22.2 Relative* (2.1) (1.5) (13.3) 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
Edison Insight | 29 July 2021 62 Sector: Technology TXT e-solutions (TXT) Price: €7.86 Market cap: €102m INVESTMENT SUMMARY Market Borsa Italiana STAR TXT e-solutions reported strong revenue and profit growth in Q121, reflecting the benefit of recent acquisitions and good cost control. Since the end of Q1, the company has signed Share price graph (€) promising contracts in both divisions, including the first contract for TXT Working Capital Solutions. With net cash of €10.8m and treasury shares worth at least €9m, management indicated it is considering further M&A while continuing to drive organic growth, and has since invested €0.5m in ReVersal SpA, a small fintech start-up.
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, TXT has expanded from providing software testing services to Italian banks to providing a Company description range of software and services (eg risk management, digital payments, supply chain finance TXT e-solutions provides IT, consulting solutions, credit management software) to an international customer base. and R&D services to aerospace, aviation, automotive, banking and 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 0.8 6.5 0.8 2019 59.1 7.0 7.6 45.551 17.3 N/A Relative* 0.6 3.0 (18.7) 2020 68.8 8.6 7.1 46.964 16.7 N/A * % Relative to local index Analyst 2021e 86.7 10.9 8.7 53.492 14.7 N/A Katherine Thompson 2022e 92.4 12.2 10.0 61.264 12.8 N/A
Sector: Construction & blding mat Tyman (TYMN) Price: 434.0p Market cap: £852m INVESTMENT SUMMARY Market LSE Tyman reported strong H121 results with good progress versus undisturbed (pre COVID-19) markets in all reporting regions. At the headline level, group like-for-like growth versus H119 Share price graph (p) was +10% in revenue terms and +20% at the EBIT level (and a 140bp EBIT margin improvement). On the same basis, gross margin was slightly improved also (+70bp to 34.9%) which is some achievement given well-publicised supply chain pressures on input costs and international freight challenges. To this end, Tyman has been rebuilding inventories where possible (with a c £28m cash outflow, partly reflecting a low starting point and seasonal build) but still managed to reduce core net debt to £95m (below 1x EBITDA). Following a return to paying dividends at the end of FY20, Tyman also reinstated a 4p interim dividend this time. Management outlook comments indicate a small nudge up in guidance implying EBIT in the £91–92m range (we were on £89.4m, pre results) and our Company description estimates are under review. Tyman’s product portfolio substantially addresses the residential RMI and INDUSTRY OUTLOOK building markets with increasing commercial sector exposure following Prior to the COVID-19 outbreak, leading North American and European markets were acquisitions. It manufactures and sources window and door hardware expected to grow modestly and the new-build sector has generally been firmer than RMI and seals, reporting in three divisions. spend which has been more patchy. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (8.2) 6.2 150.9 2019 613.7 100.8 71.0 27.3 15.9 7.6 Relative* (7.8) 4.7 114.5 2020 572.8 94.9 68.4 27.1 16.0 7.7 * % Relative to local index Analyst 2021e 620.0 104.7 80.1 31.5 13.8 8.9 Toby Thorrington 2022e 635.8 108.9 85.1 33.0 13.2 7.6
Edison Insight | 29 July 2021 63 Sector: General industrials VivoPower International (VVPR) Price: US$6.35 Market cap: US$108m INVESTMENT SUMMARY Market NASDAQ The move into electric vehicles (EVs) through the acquisition of Tembo is a step-change for VivoPower International. It brings significant growth potential in a niche market while the Share price graph (US$) group’s scale and presence has already delivered a number of distribution deals. Of particular note is the letter of intent (LOI) with Toyota Australia for volume deliveries and exclusive technical collaboration on the ubiquitous Land Cruiser, a positive endorsement of Tembo's portfolio and capabilities.
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 accelerating as are the commitments from companies including the provide sustainable energy solutions on an international scale. Key activities mining sector. 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 (20.4) (26.7) 212.8 2019 39.0 (4.0) (8.6) (63.80) N/A N/A Relative* (23.5) (30.5) 129.4 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 1548.8 N/A David Larkam 2022e 52.3 5.3 (0.9) (4.06) N/A 18.1
Sector: Technology WANdisco (WAND) Price: 363.0p Market cap: £191m INVESTMENT SUMMARY Market AIM Following the integration of LiveData with leading cloud vendors (Microsoft and AWS) and the recent signing of major partnership deals, all the pieces are now in place for a big Share price graph (p) acceleration in growth in FY21. WANdisco expects commercialisation of these deals to begin shortly and, predicated on migrating over 130PB of data in FY21, is guiding to sales of ‘at least $35m’. We expect sales to rise to $60m in FY22.
INDUSTRY OUTLOOK
The rapid adoption of cloud computing coupled with WANdisco’s proprietary technology creates a significant opportunity for both long term growth and high margins in our view. The company 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) Company description multi-cloud. Our analysis suggests that the Microsoft relationship alone could generate more WANdisco’s proprietary replication than $80m in annual revenues by 2023 with the data migration element alone presenting a technology enables its customers to solve critical data management $1.4bn opportunity in the long term. challenges created by the shift to cloud computing. It has established partner relationships with leading players in the cloud ecosystem including Microsoft and AWS. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (4.5) (24.5) (28.8) 2019 16.2 (11.7) (18.4) (38.8) N/A N/A Relative* (4.1) (25.7) (39.1) 2020 10.5 (22.2) (30.4) (57.3) N/A N/A * % Relative to local index Analyst 2021e 37.0 (2.4) (9.4) (16.9) N/A N/A Dan Gardiner 2022e 60.0 15.3 8.4 14.2 35.3 18.8
Edison Insight | 29 July 2021 64 Sector: Mining Wheaton Precious Metals (WPM) Price: C$54.94 Market cap: C$24727m INVESTMENT SUMMARY Market TSX WPM reported record revenue in Q121, resulting in its repaying all outstanding debt and approving a third successive increase in its quarterly dividend to 14c/share. Ounces Share price graph (C$) produced but not yet delivered fell to more normal levels and all of its partners' mines have now returned to normal (or near normal) operating conditions. Since its Q1 results, it has also published a sustainability report highlighting its strong ESG credentials.
INDUSTRY OUTLOOK
Under normal circumstances, we believe that WPM could easily justify a valuation of US$62.54 (or C$76.20) per share, in FY23. With precious metals returning to favour however, we believe that a valuation as high as US$84.81 (C$107.16) is achievable. In the meantime, it remains cheaper than the average valuations of its peers in at least 72% of Company description cases. This follows the settlement reached between WPM and the CRA in December 2018 Wheaton Precious Metals is the whereby income from WPM’s international subsidiaries will remain exempt from Canadian pre-eminent ostensibly precious metals streaming company, with 32 tax. Q2 results are scheduled for 13 August. high-quality precious metals streaming and early deposit agreements relating to assets in Mexico, Peru, Canada, Brazil, Chile, United States, Argentina, Sweden, Greece, Portugal and Colombia. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 1.2 3.0 (19.3) 2019 861.3 548.3 242.7 54.0 81.4 35.7 Relative* 1.1 (2.5) (36.0) 2020 1096.2 763.8 503.2 112.0 39.2 25.1 * % Relative to local index Analyst 2021e 1405.4 1002.4 705.3 157.0 28.0 19.3 Charles Gibson 2022e 1631.5 1239.7 933.5 207.0 21.2 16.0
Sector: Technology XP Power (XPP) Price: 5000.0p Market cap: £982m 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. On 4 May, Oskar Zahn was appointed to the role of CFO.
INDUSTRY OUTLOOK
XP supplies four end-markets: healthcare, industrial electronics, semiconductors and technology, across Europe, North America and Asia. The industrial electronics segment is Company description relatively fragmented, but the company sees demand across various applications. The XP Power is a developer and designer healthcare business continues to gain market share, with corporate approvals from the of power control solutions with production facilities in China, Vietnam major suppliers in place. The semiconductor segment is the most cyclical, tracking the and the United States, and design, capex requirements of semiconductor manufacturers. 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 (9.1) (3.9) 34.4 2019 199.9 44.5 32.3 141.4 35.4 N/A Relative* (8.8) (5.3) 14.9 2020 233.3 56.8 44.3 198.4 25.2 N/A * % Relative to local index Analyst 2021e 227.8 54.6 41.5 171.4 29.2 N/A Katherine Thompson 2022e 237.8 58.4 44.9 185.3 27.0 N/A
Edison Insight | 29 July 2021 65 Sector: Media YouGov (YOU) Price: 1222.5p Market cap: £1354m INVESTMENT SUMMARY Market AIM YouGov's interim statement indicated good momentum into H221 and through to FY22, with a greater number of larger, strategic contracts now on the books. April’s acquisition of Lean Share price graph (p) App added another facet to the group’s commercial offering, giving (consented, permissioned) access to consumer data on financial transactions. The purchase is on a three-year earn-out, with the founders staying with the group. More recently, the group has extended its presence in Australia with the purchase of Faster Horses (price undisclosed). 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 Company description agencies holding up and the tech sector continuing to grow. The increasing emphasis on YouGov is an international research data privacy and the forthcoming changes to third-party cookie usage (despite the delay) data and analytics group. Its data-led offering supports and improves a wide are highlighting the benefits and value inherent in permissioned, first-party data. YouGov's spectrum of marketing activities of a developments, particularly those such as YouGov Safe, sit well in this shifting environment. 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 3.2 20.4 53.8 2019 136.5 31.7 20.4 13.8 88.6 33.8 Relative* 3.5 18.7 31.5 2020 152.4 39.2 24.7 15.7 77.9 34.0 * % Relative to local index Analyst 2021e 170.0 47.9 30.6 17.4 70.3 28.8 Fiona Orford-Williams 2022e 185.0 54.3 37.0 21.3 57.4 25.0
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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 2021/03 GBP 1.0 1.4 1.8 Avon Protection 2020/09 USD 34.5 44.9 53.9 Canacol Energy 2020/12 USD 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 2021/03 GBP 10.2 10.7 11.0 Ebiquity 2020/12 GBP 0.0 0.5 1.3 Endeavour Mining 2020/12 USD 37.0 50.0 60.0 Epwin Group 2020/12 GBP 1.0 2.5 3.4 Esker 2020/12 EUR 50.0 55.0 60.0 Games Workshop Group 2020/05 GBP 145.0 235.0 250.0 Gamesys Group 2020/12 GBP 40.0 GB Group 2021/03 GBP 6.4 3.5 3.6 Genuit Group 2020/12 GBP 4.8 9.0 10.0 Greggs 2020/12 GBP 0.0 50.4 57.6 Hellenic Petroleum 2020/12 EUR 10.0 21.3 29.8 Impact Healthcare REIT 2020/12 GBP 6.3 6.4 6.6 Jersey Electricity 2020/09 GBP 16.5 17.3 18.2 La Doria 2020/12 EUR 50.0 41.0 44.0 Lookers 2019/12 GBP 1.5 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 2020/12 USD 70.0 70.0 70.0 OTC Markets Group 2020/12 USD 125.0 125.0 135.0 Palace Capital 2021/03 GBP 10.5 12.0 14.0 Pan African Resources 2020/06 USD 0.8 1.0 1.0 Primary Health Properties 2020/12 GBP 5.9 6.2 6.4 ProCredit AG 2020/12 EUR 53.0 30.5 43.3 Record 2021/03 GBP 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 Target Healthcare REIT 2020/06 GBP 6.7 6.7 6.8 Thrace Plastics 2020/12 EUR 4.6 4.6 4.6 Treatt 2020/09 GBP 6.0 8.5 9.2 Triple Point Social Housing REIT 2020/12 GBP 5.2 5.2 5.5 Tyman 2020/12 GBP 4.0 10.0 12.0 Wheaton Precious Metals 2020/12 USD 42.0 62.0 79.0 YouGov 2020/07 GBP 5.0 5.5 6.5
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Company Sector Most recent note Date published
1Spatial Software & comp services Flash 23/06/21 4iG IT services Flash 21/06/21 4imprint Group Media Update 18/05/21 AAC Clyde Space Aerospace & defence Flash 01/07/21 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 flash 18/05/21 Alkane Resources Metals & mining Outlook 09/07/21 Allied Minds Investment companies Update 09/04/21 Alphamin Resources Metals & mining Update 17/05/21 Appreciate Group Financial services Update 06/07/21 ArborGen Basic materials Update 23/06/21 Arcane Crypto TMT Initiation 03/06/21 Aspire Global Travel & leisure Update 06/05/21 Atlantis Japan Growth Fund Investment companies Investment company review 19/07/21 Attica Bank Banks Update 06/07/20 Auriant Mining Metals & mining Update 11/06/21 Avon Rubber Aerospace & defence Update 27/05/21 Axiom European Financial Debt Fund Investment companies Initiation 13/04/21 Baillie Gifford China Growth Trust Investment companies Investment company review 04/05/21 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 Update 23/07/21 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 06/07/21 BlackRock Latin American Inv. Trust Investment companies Investment company review 27/04/21 BluGlass Tech hardware & equipment Flash 28/07/21 Boku Software & comp services Update 20/07/21 Borussia Dortmund Travel & leisure Update 01/06/21 Brooge Energy Oil & gas Update 12/05/21 Brunner Investment Trust (The) Investment companies Investment company review 10/05/21 Canacol Energy Oil & gas Update 09/03/21 Canadian General Investments Investment companies Investment company review 17/05/21 Carr’s Group Food & drink Update 19/07/21 Cenkos Securities Financial services Update 12/04/21 Centaur Media Media Update 21/07/21 CentralNic Group Software & comp services Flash 27/07/21 Checkit Software & comp services Update 26/07/21 China Water Affairs Group Utilities Outlook 23/07/20 Civitas Social Housing Real estate Outlook 21/07/21 Claranova Software & comp services Update 13/05/21 Cliq Digital Media Update 28/04/21 Codere Travel & leisure Update 18/11/19 Cohort Aerospace & Defence Update 28/07/21 Coro Energy Oil & gas Flash 03/04/20 CREALOGIX Group Software & comp services Outlook 22/09/20 Custodian REIT Property Outlook 23/06/21 CVC Credit Partners European Opps Investment companies Investment company review 14/01/21 Datatec IT services Flash 02/06/21 Dentsu Group Media Update 18/05/21
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Company Sector Most recent note Date published
Deutsche Beteiligungs Investment companies Investment company review 21/05/21 discoverIE Group Electronics & electrical equipment Update 09/06/21 Diverse Income Trust (The) Investment companies Investment company review 29/04/21 Doctor Care Anywhere Group Healthcare equipment & services Update 29/07/21 Draper Esprit Listed venture capital Update 22/06/21 Ebiquity Media Update 14/07/21 EJF Investments Investment companies Flash 27/04/20 Electra Private Equity Investment companies Update 25/05/21 EMIS Group Software & comp services Update 13/07/21 EML Payments Software & comp services Update 14/06/21 Endeavour Mining Metals & mining Update 14/06/21 Epwin Group Industrials Update 15/06/21 EQS Group Media Update 16/06/21 Esker Technology Update 16/07/21 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 Filtronic Tech hardware & equipment Update 17/06/21 FinLab Investment companies Initiation 27/08/19 Finsbury Growth & Income Trust Investment companies Investment company review 07/06/21 Foresight Solar Fund Investment companies Initiation 18/02/21 Forward Industries Consumer discretionary Initiation 02/11/20 Foxtons Group Financial services Initiation 29/06/21 Fundsmith Emerging Equities Trust Investment companies Initiation 29/01/21 Games Workshop Group Consumer goods Update 20/05/21 Gamesys Group Travel & leisure Update 09/03/21 GB Group Technology Flash 29/07/21 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 07/06/20 Genuit Group Building & construction Update 28/05/21 Georgia Capital Investment companies Investment company review 05/03/21 Global Energy Ventures Industrial support services Initiation 23/07/21 Greggs Food & drink Update 28/06/21 Gresham House Strategic Investment companies Investment company review 08/10/20 Hansa Investment Company Investment companies Investment company review 06/05/21 HarbourVest Global Private Equity Investment companies Investment company review 29/09/20 HBM Healthcare Investments Investment companies Investment company review 03/06/21 Hellenic Petroleum Oil & gas Update 02/06/21 Henderson Far East Income Investment companies Investment company review 23/07/21 Henderson International Income Trust Investment trusts Investment company review 01/02/21 Henderson Opportunities Trust Investment trusts Investment company review 24/06/21 HgCapital Trust Investment companies Investment company review 09/06/21 Hurricane Energy Oil & gas Update 18/08/20 ICG-Longbow SSUP Investment companies Investment company review 08/01/20 Impact Healthcare REIT Real estate Outlook 13/07/21 Invesco Asia Trust Investment companies Investment company review 02/06/21 IQE Tech hardware & equipment Update 15/07/21 Jersey Electricity Industrials Outlook 03/06/21 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 KEFI Gold and Copper Mining Outlook 06/07/21 Kendrion Industrial engineering Update 10/05/21 Keywords Studios Software & comp services Update 15/06/21
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Company Sector Most recent note Date published
Kopy Goldfields Metals & mining Update 01/04/21 La Doria Food & drink Outlook 27/05/21 Lepidico Metals & mining Update 18/06/21 Lookers General retailers Update 24/08/20 Lowland Investment Company Investment companies Investment company review 09/04/21 LXi REIT Real estate Update 07/06/21 Marble Point Loan Financing Investment companies Outlook 23/11/20 Marshall Motor Holdings Automotive retailers Update 25/06/21 Martin Currie Global Portfolio Trust Investment companies Investment company review 10/06/21 Medserv Industrial support services Flash 12/04/21 Merchants Trust (The) Investment companies Investment company review 26/07/21 Mercia Asset Management Investment companies Update 07/07/21 Mirriad Advertising Media Update 13/05/21 Monarch Gold Metals & mining Update 19/05/21 Monarch Mining Corporation Metals & mining Update 15/06/21 Mondo TV Media Outlook 09/06/21 Murray Income Trust Investment companies Investment company review 18/05/21 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 21/07/21 NB Private Equity Partners Investment companies Investment company review 22/06/21 Newmont Corporation Metals & mining Update 14/05/21 Norcros Construction & materials Update 19/04/21 Numis Corporation Financial services Update 14/07/21 Ocean Wilsons Holdings Investment companies Outlook 21/06/21 OPAP Travel & leisure Outlook 15/06/21 OPG Power Ventures Utilities Update 22/06/21 Osirium Technologies Software & comp services Update 11/06/21 OTC Markets Group Financial services Update 11/05/21 Palace Capital Real estate Update 17/06/21 Pan African Resources Metals & mining Update 21/07/21 paragon General industrials Update 27/11/19 Phoenix Spree Deutschland Real estate Update 15/06/21 Picton Property Income Property Outlook 23/06/21 PIERER Mobility Automobiles & parts Update 15/02/21 PowerHouse Energy Group Alternative energy Flash 15/07/20 Premier Miton Global Renewables Trust Investment companies Initiation 05/02/21 Primary Health Properties Property Update 13/05/21 Princess Private Equity Holding Investment companies Investment company update 24/06/21 ProCredit Holding Banks Update 20/05/21 Quadrise Fuels International Alternative energy Update 29/06/21 Raven Property Group Property Update 19/03/21 Record Financials Update 29/07/21 Regional REIT Real estate Update 20/05/21 Renergen Oil & gas Update 30/01/20 Renewi Industrial support services Update 25/06/21 Riber Tech hardware & equipment Outlook 25/06/21 Riverstone Credit Opportunities Income Investment companies Initiation 11/03/21 Rock Tech Lithium Metals & mining Update 18/12/20 S&U Financials Update 24/05/21 SandpiperCI Group Retail Update 21/05/21 Schaltbau Holding Industrial engineering Update 10/05/21 S Immo Real estate Outlook 16/06/21 SDX Energy Oil & gas Update 21/12/20 Secure Trust Bank Financials Flash 26/07/21
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Company Sector Most recent note Date published
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 19/07/21 Standard Life UK Smaller Cos Trust Investment companies Investment company review 26/04/21 Stern Groep Automotive retail Update 12/05/21 Studio Retail Group Retail Flash 05/07/21 Supermarket Income REIT Property Update 24/03/21 SynBiotic Consumer Initiation 29/07/21 Target Healthcare REIT Property Outlook 07/05/21 Technicolor Media Update 14/05/21 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 Update 01/06/21 Thrace Plastics General industrials Update 10/06/21 Tinexta Professional services Update 25/06/21 Town Centre Securities Real estate Outlook 26/05/21 Trackwise Designs Tech hardware & equipment Update 29/06/21 TR European Growth Trust Investment trusts Investment company review 22/03/21 Treatt Basic industries Outlook 18/05/21 Triple Point Social Housing REIT Real estate Update 18/05/21 TXT e-solutions Technology Update 18/05/21 Tyman Construction & materials Update 12/05/21 UIL Investment companies Investment company review 22/04/21 Utilico Emerging Markets Trust Investment companies Investment company review 24/03/21 Vietnam Enterprise Investments Investment companies Investment company review 22/01/21 VietNam Holding Investment companies Investment company review 28/06/21 VinaCapital Vietnam Opportunity Fund Investment companies Investment company review 18/12/20 VivoPower International General industrials Update 22/06/21 Volta Finance Investment companies Investment company review 22/01/21 WANdisco Technology Update 06/05/21 Wheaton Precious Metals Metals & mining Update 21/05/21 Witan Investment Trust Investment companies Investment company review 11/03/21 Worldwide Healthcare Trust Investment companies Investment company review 20/07/21 XP Power Electronic & electrical equipment Update 13/04/21 YouGov Media Update 25/03/21
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