Edison Insight
Strategic perspective | Company profiles
April 2016
Published by Edison Investment Research
Contents
Global perspectives 2 Company profiles 8 Edison dividend list 94 Results diary 96 Stock coverage 98
Prices at 22 April 2016 Published 28 April 2016
US$/£ exchange rate: 0.7010 TRY/£ exchange rate: 0.2467 €/£ exchange rate: 0.7941 HK$/£ exchange rate: 0.0904 C$/£ exchange rate: 0.5371 NOK/£ exchange rate: 0.0848 A$/£ exchange rate: 0.4936 JPY/£ exchange rate: 0.0063 NZ$/£ exchange rate: 0.4819 SG$/£ exchange rate: 0.5184
Welco me to the April edition of the Edison Insight. We now have over 400 companies under coverage, of which 172 are profiled in this edition. Healthcare companies are now covered separately in Edison Healthcare Insight. Click here to view the latest edition.
The book opens with a strategy piece from Alastair George, who believes the risk of an actual Brexit is modest as polls indicate the “Remain” campaign is still on target to win the vote. However, the
uncertainty surrounding Brexit may be opening up a relative valuation anomaly, as the combination of the decline in sterling and the underperformance of the UK market leaves export-led UK industrials at a significant discount to US peers. With growth expectations similar for both indices, UK investors should stay aware of the potential for M&A, despite relatively low levels of activity during 2016 to date.
Separately, we remain of the view the relief rally which started in February is largely behind us. Oil prices have risen to levels more consistent with long-run marginal supply and commodity prices look to have run ahead of improvements in the economic data. With the reduction in financial market volatility, we also believe the US Fed is on course for a rate increase in June.
This month we have added China Water Affairs Group, Greggs, Mitula Group and Real Estate Investar to the company profiles.
Readers wishing 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, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to close to 500 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority (www.fsa.gov.uk/register/firmBasicDetails.do?sid=181584). 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 | 28 April 2016 1
Global perspectives: Brexit – ultimately unlikely Analyst We believe the risk of an actual Brexit is modest. Polling indicates that the Alastair George “Remain” campaign is still on target to win the vote. In the event of a narrow +44 (0)20 3077 5700 victory, there is nothing to prevent a renewed attempt to renegotiate the UK’s [email protected] position from within the EU, even though this has been ruled out for now.
Could the uncertainty surrounding Brexit be opening up a (relative) valuation opportunity? The combination of the decline in sterling and the underperformance of the UK market leaves export-led UK industrials at a significant discount to US peers. With growth expectations similar for both US and UK industrials, there does seem an increased prospect of inbound M&A, after a very slow start in 2016 to date.
We remain of the view that the global relief rally is largely behind us. Oil prices have risen to levels more consistent with long-run marginal supply from US producers and commodity prices look to have run ahead of improvements in global economic data. With the reduction in financial market volatility, we also believe the US Fed is on course for an interest rate increase in June.
Edison Insight | 28 April 2016 2
Brexit: Ultimately unlikely Edison has not taken any formal position on the desirability or otherwise of the UK leaving the EU. However, we provide the following summary of what we believe are the key issues.
Any discussion on Brexit should be placed in the proper context. Based on current polling data it is significantly more likely than not that the UK will remain in the EU in the two years following the referendum on 23 June. Online polls may indicate a nation split nearly 50:50 on the issue, but online polls also proved significantly less accurate than telephone surveys in the UK’s most recent election.
We would lend greater weight towards telephone polls which continue to point to a victory for “Remain” by a margin of 50% to 39%, with 11% undecided. Furthermore, recent bookmakers’ odds indicate only a 33% chance of a vote for Brexit. Academic research at University College London on the behaviour of voters in referenda also suggests that undecided voters tend to migrate to the status quo as a referendum approaches. On this basis polls are likely to swing further towards the “Remain” camp in coming weeks. In our view, based on the polls, bookmakers’ odds and likely shifts in voting intentions up to the date, we think there is about a one in three chance of a Brexit.
The key uncertainty would appear to be in the turnout; Brexit is favoured by older voters who, if the UK’s last general election is a guide, are significantly more likely to vote than the young, who favour remaining in the EU. However, on balance (and we emphasise again we have taken no position on the outcome) the data continues to point to a victory for “Remain”.
Further, should the electorate vote for Brexit in the referendum, although Prime Minister Cameron has indicated that Article 50 (to leave the EU) would be invoked immediately, he would be under no legal obligation to do so. The UK’s EU Referendum Act 2015 only obliges the holding of a referendum and makes no legal obligation to take any action following the result.
Given the magnitude of any decision to leave the EU, the temptation for the UK’s incumbent political leaders to re-frame a marginal victory for “Leave” into another attempt at re-negotiating the UK’s relationship with the EU cannot be completely excluded, in our view. A second referendum is entirely possible in this scenario, even if campaigners for "Remain" have emphatically ruled this out at the present time. Prior experience in Europe shows that referendum results which go against the wishes of EU policymakers are often not definitive. Academic studies also demonstrate that European governments have proved adept at winning a second referendum in these circumstances.
Therefore, taking into account that even after a vote to leave there is a significant likelihood of remaining in the EU, the actual probability of Brexit is even lower than the referendum polls suggest. In addition, there is certainly merit in the argument that it is better to negotiate for better terms from within the EU rather than outside. For investment purposes we would suggest the Brexit probability in the next five years is currently 10-15% (c 33% chance of vote to leave and a 30-50% probability of Brexit if so). For comparison, we would put similar odds of the EU breaking apart for another reason over the same period.
While we may be relatively relaxed about the outcome of the UK’s referendum, we would caution against underestimating the medium-term risks arising from the EU's low-growth economic trajectory, Exhibit 1. This low-growth trajectory is in our view the primary cause of the EU's financial instability and voter disaffection. The ‘reformed EU’ scenario presented by the UK’s Treasury is perhaps not an optional extra but an absolute necessity over the medium term. Otherwise electorates will continue to question the cost of centralising political power to achieve the benefit of only modest improvements in welfare.
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Exhibit 1: US, UK, Switzerland and EU GDP growth
135 130 125 120 115 110 Index level 105 100 95 90 2000 2002 2004 2006 2008 2010 2012 2014
US UK EU Switz
Source: Thomson Reuters Datastream
Global markets may therefore be over focused on the Brexit vote, which is at risk of demonstrating in real-time Kahneman and Tversky's availability heuristic. It seems every soft data point for the UK’s economy can now be attributed to the Brexit vote by executives and the media. This deflects from the underlying issues of low global growth.
Brexit: But what if it does happen? Even if Brexit has in our view only a modest probability, we should consider the potential impact for investors. Here we have changed our views somewhat from February, as on closer examination an exit would in itself give rise to significant uncertainties in the timing and terms. Uncertainty is the enemy of investment and as the recipient of a 20% share of European foreign direct investment (FDI), the UK would quickly suffer, even if the reported slowdown in City hiring looks a little premature.
Importantly, the Brexit vote is also highlighting the UK's current account deficit, which reached over 7% of GDP in Q415, the widest deficit in 30 years as shown in Exhibit 2. This, in our view, is the crucial issue. We understand that changes in net foreign income have exacerbated the situation in recent years but the correlation between the deficit and the declining savings rate is striking, Exhibit 2. BOE Governor Mark Carney has highlighted that the UK is reliant on the kindness of strangers; but such financing can prove fickle in the event of a shock. Both the savings rate and the current account deficit are uncomfortably close to the levels of 2008.
Exhibit 2: UK current account and savings ratio
18 1 16 0 14 -1 12 -2
10 -3 % % 8 -4 6 -5 4 -6 2 -7 0 -8 Jun-85 Apr-87 Feb-89 Dec-90 Oct-92 Aug-94 Jun-96 Apr-98 Feb-00 Dec-01 Oct-03 Aug-05 Jun-07 Apr-09 Feb-11 Dec-12 Oct-14
Savings ratio (LHS) CA deficit (RHS)
Source: Thomson Reuters Datastream
Apart from the obvious threat to sterling, the Brexit process becomes lost in a fog of media campaigns in respect of the longer-term position of a UK outside the EU. There are many different precedents - such as Switzerland, Norway or New Zealand. Even the Albanian model has been suggested. In our view it is illogical to expect that withdrawing from a free trade area with 450m
Edison Insight | 28 April 2016 4
inhabitants is likely to benefit trade, except possibly over the extremely long term if structural changes bring increased competitiveness. In our view, the biggest risk is to the UK’s financial services industry which represents the crown jewels of the UK’s services sector.
Unsurprisingly, many financial firms have already come out in support of the “Remain” campaign. While larger firms can establish subsidiaries within the EU as a short-term solution to the absence of “passporting”, Brexit could represent a renewed threat to London’s pre-eminence as the financial centre of Europe. The remaining members of the EU would naturally look towards the development of a new EU financial centre within the eurozone, although reaching a decision over its location would likely hamper progress.
Furthermore, while a significant draw, we are not convinced the benefits of the English language and English law are sufficient to attract international corporate and individual investors to the UK, in the absence of full access to the EU. Therefore, in the (unlikely) event of Brexit, the risk to London’s role as the financial centre for Europe appears real over the medium term. It is also not at all clear whether the political appetite for UK tax incentives to keep London pre-eminent would exist in the circumstances.
Therefore, investors who wish to steer clear of Brexit risk would underweight the banks sector and the until recently very strongly performing London property market.
However, investors should also remember the UK’s stock market is only loosely linked to the fortunes of the UK itself, given the relatively high international exposure of UK listed companies. In recent months there has also been a widening discrepancy between US and UK industrial valuations, partly due to pressure on sterling, which may present an opportunity for investors. If sterling remains under pressure this would also be a strong tailwind for exporters who are focused on global rather than EU markets.
Brexit vote: Opening up a (relative) valuation opportunity? Whether down to the potential for Brexit or a widening current account deficit the decline in sterling over the last six months has been substantial. Although not as pronounced as earlier in April, on a quarter-on-quarter basis the trade-weighted value of sterling had fallen by as much as 7%, representing a move of more than 2 standard deviations away from the mean. Only during the financial crisis and the exit from the ERM has sterling fallen faster, Exhibit 3.
Exhibit 3: 2 standard deviation q-o-q decline in trade-weighted sterling
110 4 105 3 100 2 1 95 0 90 -1 85 -2 80 -3 75 -4 70 -5 1990 1993 1996 1999 2002 2005 2008 2011 2014
Q/Q change (number of std deviations) Trade weighted sterling index
Source: Thomson Reuters Datastream
At the same time, the weak sterling-denominated share price performance of the UK's industrial goods and services sector - which has a large proportion of sales overseas - is becoming notable. Relative to US industrials, UK industrials have underperformed by close to 25%, Exhibit 4. This period of relative weakness is only matched by the late 1990s.
Edison Insight | 28 April 2016 5
Exhibit 4: US industrials have outperformed UK peers by 25% since 2014
320
270
220
170 Index level
120
70 1990 1993 1996 1999 2002 2005 2008 2011 2014
Source: Thomson Reuters Datastream
Leaving aside the odds on the outcome of Brexit debate, we believe that valuations of UK industrials are becoming significantly more attractive for overseas buyers, notably those based in the US. We have therefore screened the UK industrials sector for companies with more than 50% of sales overseas to see just how discounted the UK has become. To avoid the results being dominated by the largest companies in the index, in the following charts we use the median rather than the weighted average measure and estimate that for the selected universe of UK companies, US peers are on a price/sales premium of 50%, close to the highs of the last 25 years, Exhibit 5. Furthermore, US industrial EV/EBITDA multiples are currently at a 20% premium to the UK, following a decade where EV/EBITDA multiples traded in-line.
Exhibit 5: Median US industrials price/sales median close to record premium over UK
80%
60%
40%
20%
0% P/sales premium (%) -20%
-40% 1990 1993 1996 1999 2002 2005 2008 2011 2014
Source: Thomson Reuters Datastream, Edison calculations
The premiums for US peers do not seem to be justified by diverging sales growth prospects, as shown in Exhibit 6. US companies would appear to face the same headwinds in generating growth as UK companies with international sales. To some extent at least, the valuation gap therefore appears to be an artificial domicile effect, as both groups of companies operate in the same global markets.
Edison Insight | 28 April 2016 6
Exhibit 6: Median sales growth outlook for US and UK international industrials is similar
20%
0% Growth
-20% 1990 1993 1996 1999 2002 2005 2008 2011 2014 US UK overseas earners
Source: Thomson Reuters Datastream, Edison calculations
There is, however a widening gap in terms of EBITDA margins in this cycle; current margin forecasts for the US are close to 20% vs 15% for the UK. This is notable as before 2011, US and UK industrial margins fluctuated with the economic cycle but otherwise tracked each other closely.
Without wishing to suggest that a US-led M&A boom is imminent, the decline in sterling and relative price underperformance of the UK's export-focused industrial sector has opened a significant valuation gap which, if sustained, could have US investment bankers dusting off pitch books for UK targets. Even if a number of high profile but tax-led US/UK transactions have fallen by the wayside, there is no reason why traditional M&A based on earnings accretion, growth and synergies from closing the gap in EBITDA margins will not attract the attention of growth-starved US executives.
Conclusion In terms of the Brexit vote, based on recent polls and analysis of polling trends in referenda, like the bookmakers we think there is about a one in three chance of a vote for Brexit. However, the UK government is not obliged to act following the vote and we would estimate the current likelihood of an actual Brexit at only 10-15%. In this context, we believe markets may be paying more attention to the issue than is warranted.
In this 10-15% scenario, if we examine the ramifications should Brexit occur despite the low odds, during the process leading to Brexit we now believe there would be a significant degree of uncertainty until the new UK/EU relationship is established. The key risk is the UK’s current reliance on foreign inflows of capital and as a result the likely pressure on sterling in the circumstances.
With a question mark over UK/EU trade in services, we conclude that larger financial services firms would also be likely to suffer, in addition to London real estate and related sectors. The decline in sterling would however benefit exporters focused on international markets outside the EU. The uncertainty has perhaps already led to a valuation gap in this segment of the stock market and investors should stay aware of the potential for M&A, despite relatively low levels of M&A activity recently.
In terms of global markets, we remain of the view the relief rally which started in February is largely behind us. Oil prices have risen to levels more consistent with long-run marginal supply and commodity prices look to have run ahead of improvements in the economic data. With the reduction in financial market volatility, we also believe the US Fed is on course for an interest rate increase in June.
Edison Insight | 28 April 2016 7 Sector: Media & entertainment 4imprint Group (FOUR) Price: 1305.0p Market cap: £365m INVESTMENT SUMMARY Forecast net cash (US$m) 13.0 Forecast gearing ratio (%) N/A FY15 results showed underlying revenue growth of 20% on a stable gross profit margin, Market LSE implying a strong H2, with operating profits and earnings up by the same percentage. Given Share price graph (p) the group's marketing strengths and operational efficiency, there remains plenty of scope to continue to build market share, especially with the added capacity afforded by the investment into offices and distribution facilities at the group's main Oshkosh site (on time and on budget). The buy-out of pension liabilities completes in H116, halving the remaining net deficit. Numbers are stated pre-pension, share option and exceptional charges.
INDUSTRY OUTLOOK
Trade association ASI listed 4imprint as the second largest US distributor in 2014, up from number five in 2013, and current momentum would mean that they should soon take over Company description the number one slot over Staples Promotional Products, which had estimated FY14 4imprint is a supplier of promotional revenues of $447m. The total market size was estimated at $22bn for FY15, indicating how products with market-leading businesses in North America and the fragmented the industry remains. Online sales were estimated to represent 16% of the total UK. 92% of revenues are derived from distributor market. The ASI estimates that the distributor market grew 3.4% in CY15, with a North America, where a strategy of investment in marketing has led to continuing shift in share towards the larger distributors. strong revenue and profit growth.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 2.6 8.8 19.7 2014 415.8 29.5 27.9 71.5 26.0 18.7 Relative* 1.0 2.0 31.5 2015 497.2 35.5 33.5 87.5 21.3 17.0 * % Relative to local index Analyst 2016e 560.0 39.7 37.7 95.0 19.6 14.8 Fiona Orford-Williams 2017e 616.0 44.2 41.6 104.8 17.8 12.0
Sector: Mining Acacia Mining (ACA) Price: 330.5p Market cap: £1355m INVESTMENT SUMMARY Forecast net cash (US$m) 154.3 Forecast gearing ratio (%) N/A Excluding a second, successive, anomalously high quarterly tax charge owing to new tax Market LSE provisions, underlying Q116 EPS were 13.2% above our expectations, at 4.4cps. Q116 Share price graph (p) output was 190koz at a cash cost of US$693/oz. Official management guidance is for 765koz of output at c US$685/oz for the full year. However, output will be weighted towards H2 in a c 45:55 ratio, leading us to believe that it is quite possible that ACA will exceed both expectations and guidance.
INDUSTRY OUTLOOK
Our revised FY16 EPS estimate of 35c (vs 29c previously and a consensus of 24c, within the range 6-35c) assumes a gold price of US$1,224/oz. Note that ACA has put a zero-cost collar hedge in place over 136koz of production from Buzwagi in FY16 at Company description US$1,150-1,290/oz. In the meantime, we estimate an NPV of potential dividends to Acacia Mining (previously African investors in ACA of US$5.24 (£3.64) per share (at a 10% discount rate and Edison's Barrick Gold) was historically the Tanzanian gold mining business of long-term gold price forecasts) or US$3.58 (£2.48) per share at US$1,224/oz (flat, real), Barrick and is one of Africa's five excluding Nyanzaga. largest gold producers with output from three mines: Bulyanhulu, Buzwagi and North Mara.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 19.0 89.3 20.6 2014 930.2 249.2 116.4 21.9 21.5 6.6 Relative* 17.2 77.6 32.5 2015 868.1 166.6 22.0 (12.4) N/A 11.8 * % Relative to local index Analyst 2016e 1009.5 368.5 206.6 35.2 13.4 6.7 Charles Gibson 2017e 962.4 356.9 177.6 30.7 15.4 5.3
Edison Insight | 28 April 2016 8 Sector: Technology Acal (ACL) Price: 272.0p Market cap: £175m INVESTMENT SUMMARY Forecast net debt (£m) 40.4 Forecast gearing ratio (%) 43.0 Acal achieved FY16 revenue growth of 6% y-o-y, or 14% on a constant exchange rate Market LSE (CER) basis. While this is slightly below our 8.8% forecast, the company expects to report Share price graph (p) underlying earnings slightly ahead of expectations. Trading in Q416 was better than management expected and recent acquisitions are performing well and as expected. Contract wins in both divisions, combined with currency tailwinds, support growth expectations for FY17. We leave our forecasts unchanged pending full year results on 1 June.
INDUSTRY OUTLOOK
Acal is a supplier of customised electronics to industry with operations throughout Europe and increasingly outside Europe. Its solutions are used in both the design and production Company description phases of a customer’s product. Design activity tends to be technology driven, whereas Acal is a leading international supplier production activity is more geared to general economic conditions. The company is focused of customised electronics to industry. It designs, manufactures and distributes on growing the percentage of higher-margin specialist product through organic growth and customer-specific electronic products acquisition. and solutions to 20,000 industrial 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 11.0 3.6 (4.6) 2014 211.6 9.1 6.9 13.1 20.8 19.2 Relative* 9.3 (2.8) 4.8 2015 271.1 16.6 12.4 16.4 16.6 23.7 * % Relative to local index Analyst 2016e 294.9 19.6 14.5 16.5 16.5 13.2 Katherine Thompson 2017e 317.9 22.8 16.7 18.4 14.8 9.7
Sector: Financials AFH Financial Group (AFHP) Price: 158.5p Market cap: £38m INVESTMENT SUMMARY Forecast net debt (£m) N/A Forecast gearing ratio (%) N/A Although Lighthouse Group rejected AFH's approach at a price of 13p (c £17.4m, a 26.8% Market AIM premium to Lighthouse's market capitalisation the day before the approach was made), the Share price graph (p) company has a healthy pipeline of potential IFA acquisitions. AFH also has the funds to make them, having raised £6.37m in December from investors including new institutional holders. Acquisitions are structured to limit exposure to disappointing results and have helped to grow AUM in absolute terms and per advisor to £1.8bn and £11m, respectively (as at year end on 31 October). Recurring revenue makes up 65% of the total and covers almost 90% of the total cost base, providing a strong platform for further growth.
INDUSTRY OUTLOOK
AFH’s financial advice market should see double-digit, long-term structural growth. In the Company description near term, regulatory changes have distorted the market, putting pressure on banks and AFH Financial Group is a national small IFAs, allowing acquisitions. Changes to the pensions regime are likely with the lack of independent financial advisory (IFA) and discretionary wealth management action in the latest budget probably merely deferring this. firm. It has actively consolidated in the fragmented IFA market, making ten material acquisitions in 2015.
Y/E Oct Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (3.4) (4.8) 3.9 2014 15.0 1.5 1.4 5.83 27.2 18.2 Relative* (4.8) (10.7) 14.2 2015 21.0 3.0 2.7 11.30 14.0 N/A * % Relative to local index Analyst 2016e 27.5 4.1 3.7 12.68 12.5 11.1 Andrew Mitchell 2017e 31.0 5.4 5.0 16.20 9.8 9.5
Edison Insight | 28 April 2016 9 Sector: Oil & gas African Petroleum Corporation (APCL) Price: NOK3.10 Market cap: NOK314m INVESTMENT SUMMARY Forecast net cash (US$m) 5.6 Forecast gearing ratio (%) N/A In December 2015, African Petroleum (APCL) announced it had entered into a farm-down Market Oslo agreement with Ophir Energy over its CI-513 licence area. On 10 March the transaction Share price graph (NOK) completed. This will trigger a payment of US$16.9m towards APCL’s back costs, provide it with a well-funded partner and is a vote of confidence in its asset quality. The deal was made possible by the flexibility shown by the Côte d’Ivoire government to make fiscal terms more attractive and the extended drilling timetable, which is important in the current macro environment. The cash payment will fund APCL to continue to farm down its other assets in West Africa, many of which are close to recent discoveries in Senegal and Mauritania. We await further deals and the probable announcement of drilling in 2017.
INDUSTRY OUTLOOK
Company description The recent successes of nearby exploration by Cairn/FAR (including FAR's increase of African Petroleum is an Oslo-listed SNE's resources to 468mmbbl from 330mmbbls) is encouraging. pure-play explorer with high working interests in 10 offshore licences across five West African countries. The company is in discussions to farm-down its blocks to fund drilling.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (1.6) 148.0 (26.2) 2014 5.6 (41.3) (42.2) (6.5) N/A N/A Relative* (1.9) 129.4 (15.8) 2015 0.5 (13.6) (14.0) (16.9) N/A N/A * % Relative to local index Analyst 2016e 0.0 (9.4) (10.5) (9.8) N/A N/A Will Forbes 2017e 0.0 (9.4) (14.4) (13.5) N/A N/A
Sector: Mining Alkane Resources (ALK) Price: A$0.22 Market cap: A$90m INVESTMENT SUMMARY Forecast net cash (A$m) 21.8 Forecast gearing ratio (%) N/A Alkane is set to raise A$16m in capital as it seeks to complete a final push towards securing Market ASX off-takes and financing for its A$1.3bn Dubbo specialty metals project in NSW. Whilst the Share price graph (A$) TGO has generated c a$33m in positive cash-flow since production commenced in 2014, with the lions share of this pumped back into the DZP – management now guides to the TGO funding its own set of development programmes to extend the LOM beyond 10 years. The A$16m capital raising will be used to purchase the remaining land required and, inter alia, provide a set of product samples to finalise off-takes, which in turn will unlock financing. The offering will comprise the issue of 80m new shares at A$0.20/share. The offering is not underwritten, though directors and management of the company are set to fully take up their respective entitlements which account for c 25% of the raising.
INDUSTRY OUTLOOK Company description Alkane Resources is a Concerning future DZP off-takes, ALK, via its wholly owned subsidiary Australia Zirconia multi-commodity explorer and developer, with projects in the central (AZL), has signed a letter of intent with a private Vietnamese specialty metals refiner and west region of New South Wales in trader relating to the toll treatment of DZP rare earth (RE) output. The agreement, although Australia. Alkane owns the Tomingley Gold Operation and DZP rare metal early stage, removes a degree of uncertainty over the future sale of a significant portion of and rare earths projects (both 100%). the DZP’s annual production. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual 8.8 3.6 (13.0) 2014 35.5 3.9 3.4 (0.4) N/A N/A Relative* 7.3 (2.9) (4.6) 2015 101.8 26.5 0.1 1.0 22.0 3.2 * % Relative to local index Analyst 2016e 100.7 20.1 (6.6) (1.6) N/A 6.0 Tom Hayes 2017e 113.4 50.1 (5.5) (0.5) N/A 5.0
Edison Insight | 28 April 2016 10 Sector: Mining Almonty Industries (AII) Price: C$0.35 Market cap: C$35m INVESTMENT SUMMARY Forecast net debt (C$m) 57.0 Forecast gearing ratio (%) 163.0 Almonty (ALL) announced on 1 April 2016 that it had closed the second tranche of its Market CV previously announced non-brokered private placement of up to 20m units on 31 March. In Share price graph (C$) aggregate, both tranches saw the issue of a total of 12.9m units raising gross proceeds of US$3.2m. All units issued are subject to a four-month resale restriction. Each unit comprises one share and one half share purchase warrant, with each whole warrant entitling the holder to purchase an Almonty share for US$0.30 for a period up to two years after closing. Almonty has also agreed with TaeguTec, an extension in debt repayment of an outstanding C$6.33m relating to its Sangdong asset held by subsidiary, Almonty Korea Tungsten.
INDUSTRY OUTLOOK
Company description We note that European APT prices at 22 April show a slight improvement, averaging c Almonty Industries is an independent US$180/mtu. This is still a way off our FY16 average APT price assumption of US$250/mtu, tungsten producer, with two operating mines – Los Santos in Spain and which we will now need to revise. All-in cash costs at Los Santos for Q116 were Wolfram Camp in Australia – and the US$124/mtu and at WCM averaged US$465/mtu. Almonty states it may need to suspend development stage Valtreixal tungsten-tin project in Spain. operations at WCM if APT prices remain at current levels.
Y/E Sep Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (C$m) (C$m) (C$m) (c) (x) (x) % 1m 3m 12m Actual 22.8 20.7 (46.2) 2014 29.6 16.1 9.9 25.4 1.4 1.6 Relative* 19.4 7.8 (40.6) 2015 36.1 (7.9) (20.9) (40.4) N/A 12.9 * % Relative to local index Analyst 2016e 37.1 9.2 (3.7) (4.3) N/A N/A Tom Hayes 2017e N/A N/A N/A N/A N/A N/A
Sector: Mining Amara Mining (AMA) Price: 17.2p Market cap: £73m INVESTMENT SUMMARY Forecast net debt (US$m) N/A Forecast gearing ratio (%) N/A Yaoure's optimised PFS (by Amara with input from GeoSystems, Tetra Tech and AMEC Market AIM Foster Wheeler) estimates a post-tax project NPV of US$555m (US$1.32/sh) at an 8% Share price graph (p) discount rate and US$1,200/oz Au vs its PFS NPV of US$286m (68cps) at 8% and US$1,250/oz and US$513m (US$1.22/sh) for its enhanced (albeit non-NI 43-101 compliant) MII option. Compared to the PFS, the optimised PFS is smaller (4.5Mtpa vs 6.5Mtpa) and requires less initial capex (US$334m vs US$447m) for 203koz of average annual production over 15 years. The PFS estimates total cash costs at US$618/oz (vs PFS US$739/oz and MII US$608/oz).
INDUSTRY OUTLOOK
On 28 February, Australia's Perseus made a recommended offer for Amara (AMA) at a rate Company description of 0.68 Perseus shares (currently priced at A$0.49 each) plus 0.34 warrants (at a strike The Kalsaka/Sega complex having price of A$0.44/sh) per Amara share, valuing AMA at 16.3p per share at the time, or reached the end of its productive life, Amara Mining is now developing the US$9.11 per in-situ resource ounce. Trading in Amara shares has now been suspended pre-feasibility stage Yaoure Gold pending imminent finalisation of the transaction. Project in Cote d'Ivoire. It also has a development stage project in Baomahun in Sierra Leone.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 25.5 138.1 11.3 2013 52.4 (14.3) (22.1) (10.0) N/A 3.5 Relative* 23.5 123.4 22.2 2014 53.3 (2.5) (15.1) (3.7) N/A 74.5 * % Relative to local index Analyst 2015e N/A N/A N/A N/A N/A N/A Charles Gibson 2016e N/A N/A N/A N/A N/A N/A
Edison Insight | 28 April 2016 11 Sector: Mining Amur Minerals (AMC) Price: 5.2p Market cap: £27m INVESTMENT SUMMARY Forecast net cash (US$m) 9.1 Forecast gearing ratio (%) N/A Kun-Manie is one of the world's 20 largest nickel sulphide deposits and the award of a Market AIM production licence (until 2035) allows Amur to shift its strategy to one of pre-production. In Share price graph (p) order to expedite a definitive feasibility study, it has doubled its drilling and earth moving capacity. An updated PFS currently envisages a 6.0Mtpa operation over 15 years, together with an owner-operated smelter (vs toll smelting previously).
INDUSTRY OUTLOOK
In our January note, we calculated values for concentrate, low-grade matte, high-grade matte and refined metal project options of 29 US cents, 38c, 29c and 35c per share, respectively (assuming 80:20 debt:equity funding). However, recent positive drill results suggest that there is scope to positively reinterpret the geology to support a materially larger Company description operation and a recent resource update increased the mineralised tonnage at Maly Amur Minerals is an exploration and Kurumkon-Flangovy by 71.3%, or 37.7Mt, to take Amur's overall resource at Kun-Manie to development company focused on base metal projects located in Russia's 723kt contained Ni (vs 650.6kt previously). far east. Amur's flagship Kun-Manie Ni-Cu project has a current global resource of 650,600t contained nickel and 178,400t contained copper.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (17.6) (13.5) (59.3) 2013 0.0 (2.5) (3.7) (1.0) N/A N/A Relative* (18.9) (18.9) (55.3) 2014 0.0 (2.4) (2.5) (0.6) N/A N/A * % Relative to local index Analyst 2015e 0.0 (2.1) 1.0 0.1 74.2 N/A Charles Gibson 2016e 0.0 (2.1) (1.7) (0.3) N/A N/A
Sector: Financials Arbuthnot Banking Group (ARBB) Price: 1454.0p Market cap: £216m INVESTMENT SUMMARY Forecast net cash (£m) N/A Forecast gearing ratio (%) N/A ABG reported record pre-tax profits of £34.2m for 2015 including the results of Everyday Market AIM Loans, the sale of which completed in April with an expected profit of £115m. A special Share price graph (p) dividend of 25p is proposed following the disposal. Secure Trust Bank should be able to deploy the capital generated to accelerate its loan growth and more than offset the earnings generated by Everyday Loans. Arbuthnot Latham increased its pre-tax profits by 65%, has been adding clients at the rate of 50 per month and increased customer assets by 15% to £619m and AUM by 11% to £739m. The roll-out of a commercial banking service to clients is set to generate additional loan assets and strengthen relationships with entrepreneurial individuals. We will update estimates shortly.
INDUSTRY OUTLOOK
Company description Market conditions for big banks continue to be challenging, creating opportunities for Arbuthnot Banking Group (ABG) is well-funded and capitalised alternative providers such as ABG. While private banking is engaged in retail and private banking. It owns 51.9% of the rapidly growing competitive, the environment for recruitment is favourable, helping Arbuthnot Latham to gain Secure Trust Bank. Private banking is share and deploy growing deposits profitably. conducted through Arbuthnot Latham.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 10.4 0.2 1.7 2014 92.0 N/A 17.8 52.8 27.5 N/A Relative* 8.7 (6.0) 11.7 2015 126.7 N/A 26.0 83.3 17.5 N/A * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Andrew Mitchell 2017e N/A N/A N/A N/A N/A N/A
Edison Insight | 28 April 2016 12 Sector: Consumer support services artnet (ART) Price: €2.60 Market cap: €15m INVESTMENT SUMMARY Forecast net cash (€m) 0.9 Forecast gearing ratio (%) N/A Following a year of investment and reorientation in FY14, artnet had good success in FY15 Market FRA, Xetra in turning its Gallery segment back into growth and in building strong web traffic – and Share price graph (€) hence group advertising revenues – with artnet News. In US$ terms, FY15 group revenues were up 4% y-o-y, with currency swelling this to a 24% rise in euro terms. Q116 also saw a rise in revenues – up 6% vs Q115 ($291k) to $4.85m, largely due to higher advertising revenue. The shift in mix is helping gross margins and with stable operating costs in US$, we expect further progress in FY16 and FY17.
INDUSTRY OUTLOOK
The art market had a mixed 2015, with good US growth but a sharp downturn in China. The growth in the use of online resources attracted a number of new auction market entrants Company description and increased competition in the galleries segment. Overall, the online market continues to artnet is an online business offering an build its share strongly, particularly in the sub $10k space. The newly-issued Hiscox Online integrated range of information and transaction services in the fine art, Art Trade Report shows 24% growth in the online market in 2015. Its revised (higher) design and decorative art markets. It projection is for sales of $9.58bn by 2020. It ranks the artnet platform market leader for has four divisions: Price Database, Galleries, Auctions and News. traffic and 3rd overall behind Christie's and Artsy.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 29.2 37.5 32.0 2014 13.9 0.3 (0.1) (6.3) N/A N/A Relative* 24.5 29.5 51.0 2015 17.3 1.2 0.9 15.7 16.6 68.7 * % Relative to local index Analyst 2016e 18.4 1.7 1.4 18.5 14.1 18.1 Fiona Orford-Williams 2017e 19.8 2.2 1.9 23.7 11.0 10.6
Sector: Mining Atalaya Mining (ATYM) Price: 96.5p Market cap: £113m INVESTMENT SUMMARY Forecast net cash (€m) 40.4 Forecast gearing ratio (%) N/A Located on the world's largest VMS system (the Iberian pyrite belt), Atalaya declared Market AIM, Toronto commercial production from 1 February 2016 and is now processing at an annualised rate Share price graph (p) of 4.9Mtpa with metallurgical recoveries at 82% and the concentrate meeting acceptable commercial specifications. As a result, the company is now progressing its expansion project (92% complete) to take throughput to 9.0-9.5Mtpa (to produce 40ktpa Cu). Commissioning is scheduled for May with subsequent ramp-up in Q216 and Q316 for full production from January 2017.
INDUSTRY OUTLOOK
Atalaya has dismissed a legal claim against it by Astor Management regarding deferred consideration relating to Atalaya's acquisition of 49% of the Rio Tinto project as it has not Company description met the pre-condition of drawing down senior debt. NB: pre-FY16 per share numbers are Atalaya Mining owns 100% of the Rio expressed pre-Atalaya's 30:1 share consolidation of October 2015. Q1 financial results are Tinto copper project in Southern Spain. Following the receipt of the main scheduled for end May. C1 cost guidance for H116 remains US$1.90-2.00/lb, helped by permits in March to April 2014, the Euro devaluation. company proposed a 100% equity funding package to bring the project into production in H215.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (7.2) 10.3 (28.4) 2013 0.0 (9.5) (12.5) (1.60) N/A N/A Relative* (8.6) 3.5 (21.3) 2014 0.0 (11.4) (12.4) (0.94) N/A N/A * % Relative to local index Analyst 2015e 19.1 (0.4) (8.0) (0.32) N/A N/A Charles Gibson 2016e 141.7 49.1 40.8 34.99 3.5 5.6
Edison Insight | 28 April 2016 13 Sector: Support services Augean (AUG) Price: 47.0p Market cap: £48m INVESTMENT SUMMARY Forecast net debt (£m) 3.0 Forecast gearing ratio (%) 5.0 Recent FY15 results were in line with expectations, with double-digit growth achieved Market AIM helped by the strategy of operating five business units in diverse markets. The challenge Share price graph (p) from weak oil prices and new Landfill Tax guidance remains, but plans are in place in other areas to compensate for these pressures and 2016 forecasts are unchanged. It is encouraging that the group has also now announced new APCR contracts, which was a key strategic aim in 2016. Strong cash generation allowed a positive surprise with a 30% dividend increase and still leaves the group with significant flexibility and firepower to enhance growth, both organically and by acquisition.
INDUSTRY OUTLOOK
There is an increasing trend towards treatment, recovery and recycling in the waste Company description hierarchy, highlighted in the government's Strategy for Hazardous Waste Management. This Augean manages hazardous waste increasingly more stringent environmental regulation supports Augean's specialist industry through five divisions: Radioactive Waste Services (4% of group knowledge model and provides a platform for growth, in our view. revenues), Energy & Construction (37%), Industry & Infrastructure (21%), Augean Integrated Services – AIS (9%) and ANSS (28%).
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 0.0 (4.1) (0.5) 2014 55.2 10.0 5.4 4.13 11.4 5.0 Relative* (1.5) (10.0) 9.3 2015 61.0 12.1 6.0 4.65 10.1 3.9 * % Relative to local index Analyst 2016e 57.6 12.9 6.6 5.08 9.3 4.2 Neil Basten 2017e 59.4 14.2 7.4 5.73 8.2 3.5
Sector: Mining Avalon Rare Metals (AVL) Price: C$0.27 Market cap: C$47m INVESTMENT SUMMARY Forecast net debt (C$m) N/A Forecast gearing ratio (%) N/A Avalon has completed pilot plant processing of the bulk sample from the Separation Rapids Market NYSE MKT, Toronto (SR) Lithium Project. One tonne of high purity mineral concentrate (petalite) management Share price graph (C$) states meets target recommendations. Further process work, including the design of an flowsheet, will be completed to understand the potential for producing a high quality lithium chemical concentrate for use in lithium-ion battery manufacture. Of particular note is that Separation Rapids could produce a lithium-hydroxide (the preferred ingredient for producing batteries) product directly and not require the additional cost of converting lithium carbonate into lithium hydroxide which is the current convention. A PEA on SR is being compiled, followed by a full feasibility study envisaged for Q217.
INDUSTRY OUTLOOK
Company description Our valuation of AVL’s lithium asset is based on a pre-production peer group analysis of Avalon Rare Metals is focused on the suitable lithium companies generating an in situ lithium resource multiple of US$24.48/t development of its three 100% owned Advanced Materials projects in Li2CO3. Applying this to Avalon’s pre-NI43-101 resource of 251kt of contained (equivalent) Canada: Separation Rapids Lithium Li2CO3, results in a per AVL share value of US$0.04 or C$0.05. We maintain our DCF Project, East Kemptville Tin-Indium Project and Nechalacho Heavy Rare valuation of East Kemptville based on the February 2015 CRS, adjusted for our in-house Earths Project. metal price assumptions, at a 10% discount rate. Y/E Aug Revenue EBITDA PBT EPS P/E P/CF Price performance (C$m) (C$m) (C$m) (c) (x) (x) % 1m 3m 12m Actual 107.7 125.0 (23.9) 2014 0.0 (5.6) (5.9) (5.3) N/A N/A Relative* 102.0 100.9 (16.1) 2015 0.0 (4.8) (4.8) (3.4) N/A N/A * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Tom Hayes 2017e N/A N/A N/A N/A N/A N/A
Edison Insight | 28 April 2016 14 Sector: Aerospace & defence Avanti Communications Group (AVN) Price: 96.8p Market cap: £143m INVESTMENT SUMMARY Forecast net debt (US$m) 539.8 Forecast gearing ratio (%) 227.0 Avanti has successfully developed and deployed a valuable Ka-band satellite network Market AIM covering EMEA. With future capacity expansion funded, the clear focus for management Share price graph (p) now is to build the revenue streams by filling existing capacity through its growing, prestigious customer base. The first pre-sale of HYLAS 4 capacity for Bentley Walker, an existing customer, supports the longer-term outlook. Q3 results due next month should show progress in recurring revenues. If achieved, it augurs well for future cash delivery and therefore the value of the currently debt-encumbered equity. Our current cash based fair value of 427p has further potential upside as cash flow grows and risk retires.
INDUSTRY OUTLOOK
Avanti is building a Ka-band satellite network to service broadband connectivity for Company description underserviced markets and remote locations in EMEA. In these markets it has been a first Avanti Communications is a mover, and it currently owns and operates three satellites in geostationary orbit. The London-based fixed satellite services (FSS) provider. It sells satellite data company's increasing focus on Africa is a reflection of the expected rapid growth of demand communications services to service for data transmission in the region. The potential in the market appears to be validated by providers to key markets in Enterprise, Broadband, Carrier Services and recent competitor announcements of future deployment of Ka-band capacity servicing Government. It has Ka-band capacity on four satellites, with two launches Africa, to be launched after Avanti's own additions, notably HYLAS 4. due in 2017. Y/E Jun Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (1.3) (23.5) (55.8) 2014 65.6 (5.8) (93.0) (85.2) N/A 29.1 Relative* (2.8) (28.3) (51.4) 2015 85.2 13.9 (73.3) (61.4) N/A N/A * % Relative to local index Analyst 2016e 86.7 17.8 (77.8) (52.8) N/A 10.6 Andy Chambers 2017e 126.3 56.1 (39.6) (26.7) N/A 3.7
Sector: Media & entertainment Avesco (AVS) Price: 216.5p Market cap: £41m INVESTMENT SUMMARY Forecast net debt (£m) 3.5 Forecast gearing ratio (%) 8.0 FY15 results were ahead of forecasts, with particularly strong performance from Creative Market AIM Technology (CT) in the US and with CT Europe getting a boost from the European Games Share price graph (p) in Baku. FY16 should benefit from the UEFA European Championships and Rio Olympics. Growth of corporate revenues and the migration of Presteigne to dry hire only are helping to even out swings between odd and even years, with the ‘odd’ FY15 outperforming previous ‘even’ highs. The Fountain Studio sale will have further bolstered the balance sheet, supporting investment to grow CT (appointments have been announced in sales in the US and Germany) and a progressive dividend.
INDUSTRY OUTLOOK
New technologies such as large LED screens, HD projection, IPTV and streaming allow Company description ever more dramatic event staging and information displays, underpinning demand for Avesco is a leading international specialist suppliers such as Avesco. The audiovisual industry is estimated to have been provider of broadcast and audiovisual rental equipment and services to the worth $91bn in 2014 and to grow to $114bn by 2016, a CAGR of over 10%. PWC believes corporate presentation, entertainment that investment to expand capacity will push global trade show revenues to $40bn by 2019, and broadcast industries worldwide. up from $31.8bn in 2014, with exhibitors' appetite for striking displays ever-greater.
Y/E Sep Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 0.0 (1.8) 73.9 2014 126.4 25.0 5.0 12.4 17.5 2.8 Relative* (1.5) (7.9) 91.0 2015 133.7 27.0 5.7 25.3 8.6 1.6 * % Relative to local index Analyst 2016e 137.5 27.0 6.6 20.8 10.4 1.9 Fiona Orford-Williams 2017e 136.5 27.1 7.1 22.3 9.7 1.9
Edison Insight | 28 April 2016 15 Sector: Aerospace & defence Avon Rubber (AVON) Price: 770.5p Market cap: £239m INVESTMENT SUMMARY Forecast net debt (£m) 7.3 Forecast gearing ratio (%) 15.0 Avon Rubber announced on 3 March that it had received an order for 166,623 M50 mask Market LSE systems from the US DoD, worth some $42m under its 10-year sole source contract. This Share price graph (p) underpins the expected M50 volumes for the DoD in 2016 and highlights the visibility this contract provides the group. This followed the late January AGM trading update which reconfirmed strong cash generation, but highlighted a less favourable Q1 environment within Dairy markets. As usual, the timing of receipt and delivery of impact orders in Protection & Defence will also drive H1:H2 weighting. Longer-term growth opportunities, supported by product development, market expansion and acquisitions, remain and provide substantial upside opportunity.
INDUSTRY OUTLOOK
Company description Despite pressured budgets, the protective and consumable nature of Avon's products Avon Rubber designs, develops and provides resilience. The emerging portfolio effect should enable continued growth, while manufactures products in the respiratory protection, defence (74% of dairy expansion in the BRICs and the sales synergies from the InterPuls acquisition provide 2015 sales) and dairy (26%) sectors. further long-term opportunities. Its major contracts are with national security and safety organisations such as the DoD.
Y/E Sep Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (4.8) (21.1) (0.3) 2014 124.8 23.3 16.6 43.7 17.6 9.2 Relative* (6.3) (25.9) 9.6 2015 134.3 25.2 19.8 56.1 13.7 11.3 * % Relative to local index Analyst 2016e 150.6 28.1 20.5 54.7 14.1 8.5 Roger Johnston 2017e 157.4 31.0 21.7 56.5 13.6 8.4
Sector: Financials Banca IFIS (IF) Price: €25.85 Market cap: €1391m INVESTMENT SUMMARY Forecast net cash (€m) N/A Forecast gearing ratio (%) N/A Following strong growth in 2015, IFIS has continued to expand its core trade receivables Market Borsa Italiana STAR business with the acquisition in April of two portfolios of non-performing loans (NPLs) Share price graph (€) totalling €450m, one from a factoring company and one from Deutsche Bank S.p.A. This puts the company on track to achieve management's goal of 2bn of consumer NPLs this year. In 2015 the company's total NPL purchases were €4.1bn. The 22 March AGM approved the €0.76 dividend and we forecast a dividend of €0.80 for 2016. At the time of writing Q116 results are due shortly, on 27 April.
INDUSTRY OUTLOOK
Managing trade receivables should show growth and maintain margins as banks limit lending, yet retain its good credit characteristics. The NPL business offers significant growth Company description from better managing collections. Italian government bonds may be volatile but the IFIS Banca IFIS’s core business is exposure here is exclusively to short-term floating rate/inflation linked bonds with an financing Italian SME trade receivables and non-performing loans. There are average residual life of c 30 months. Previously a significant source of earnings, we assume modest operations in Romania, government bonds will be a small contributor in our estimates. Hungary and Poland. The Italian government bond portfolio is now under 10% of group profits.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (10.2) (6.0) 36.3 2014 284.1 N/A 144.9 179.8 14.4 N/A Relative* (10.2) (4.5) 66.7 2015 408.0 N/A 245.6 299.8 8.6 N/A * % Relative to local index Analyst 2016e 286.6 N/A 139.3 168.8 15.3 N/A Andrew Mitchell 2017e 322.8 N/A 164.9 197.3 13.1 N/A
Edison Insight | 28 April 2016 16 Sector: Mining Bezant Resources (BZT) Price: 1.8p Market cap: £2m INVESTMENT SUMMARY Forecast net debt (£m) N/A Forecast gearing ratio (%) N/A The interim results highlighted that Bezant (BZT) continues to conserve cash as it appraises Market AIM options to develop its gold and platinum interests in Columbia (the Leeward Resources Share price graph (p) transaction) and pursue the sale of its Mankayan asset in the Philippines which has been affected by adverse mining law proposals. Group expenditures for H116 were £265k, a 19% fall from a year earlier (H115: £328k). The option entered into with Leeward Resources, relates to options held over certain interests in certain licences covering what is understood by management to be highly prospective platinum and gold bearing areas in the Choco region in Columbia. The ‘Leeward’ transaction included a US$50k upfront payment and a US$350k working capital loan facility to Leeward used under BZT’s full supervision. BZT had cash of £1.5m at 31 December 2015.
INDUSTRY OUTLOOK Company description BZT has interests in three global The current platinum price is c US$1,032/oz, a m-o-m rise of c 6%, and gold currently assets: the Mankayan Project (a copper/gold porphyry project in the trades at c US$1,250/oz, relatively flat over the same period. Philippines), the Eureka Project (a copper/gold deposit in northern Argentina) and the gold enterprise Mkurumu Project, located in Tanzania.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (22.2) (6.7) (33.3) 2014 0.0 (1.2) (1.2) (1.4) N/A N/A Relative* (23.4) (12.5) (26.8) 2015 0.0 (0.6) (0.6) (0.7) N/A N/A * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Tom Hayes 2017e N/A N/A N/A N/A N/A N/A
Sector: Technology Blancco Technology Group (BLTG) Price: 232.5p Market cap: £184m INVESTMENT SUMMARY Forecast net cash (£m) 7.9 Forecast gearing ratio (%) N/A Regenersis has become Blancco and is now focused solely upon data erasure software and Market AIM mobile diagnostics. The interim results showed the strong progress that Blancco is making Share price graph (p) with its erasure technology, particularly in hosted/virtual markets. The recent announcement of a major contract win for Xcaliber shows the traction and potential this mobile phone diagnostics business has, and we welcome Blancco's move to acquire the remainder of the company. The shares trade at earnings discounts to key comparators despite the good newsflow and considerable potential market for its products.
INDUSTRY OUTLOOK
The growing need for effective data erasure for enterprises and governments is driven both by legislation, the spectre of litigation and operational imperatives. Blancco's software Company description offering is one of only a few that brings together the facilitation, management and recording Blancco Technology Group provides a of data erasure. However, while the potential market is considerable, the actual market suite of lifecycle support services and technologies designed to help remains nascent in form. companies and their customers successfully deploy, protect, sustain, retire and re-use digital technology.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 9.4 35.6 5.7 2014 N/A N/A N/A N/A N/A 20.9 Relative* 7.7 27.2 16.1 2015 15.0 8.2 2.7 2.8 83.0 54.8 * % Relative to local index Analyst 2016e 22.7 6.4 5.1 5.8 40.1 13.9 Ian Robertson 2017e 31.2 8.2 7.2 11.4 20.4 N/A
Edison Insight | 28 April 2016 17 Sector: Travel & leisure Borussia Dortmund (BVB) Price: €3.89 Market cap: €358m INVESTMENT SUMMARY Forecast net cash (€m) 35.0 Forecast gearing ratio (%) N/A Early qualification for the group stage of next season's Champions League (current runaway Market FRA second place in the Bundesliga) justifies confidence in a possible step change in returns in Share price graph (€) FY17. We look for a doubling in pre-transfer EBITDA (our key metric) and strong cash generation for player investment. In the current year, while maintained revenue in the first half was no mean feat without the Champions League, pre-transfer EBITDA was a casualty (-59%) of much higher than expected costs, driven by the team’s outstanding performance. Progress to the German Cup Final offers a potential boost to this year's earnings.
INDUSTRY OUTLOOK
Unsustainable spend on wages and transfers is increasingly being penalised by new UEFA Financial Fair Play requirements. Notwithstanding a phased implementation, a 'break-even Company description requirement' applied initially to 2012 financial statements, obliges clubs to spend no more The group operates Borussia than they generate over a rolling three-year period. Sanctions vary from a warning to a ban Dortmund, a leading German football club, recent back-to-back champions from UEFA competition, fines and a cap on wages and squad size. of the Bundesliga and competing in this season’s UEFA Europa League (Round of 16 participant in 2014/15 UEFA Champions League).
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (2.0) 1.1 9.9 2014 256.3 44.7 37.1 50.8 7.7 7.5 Relative* (5.7) (4.8) 25.8 2015 263.6 48.0 44.2 42.7 9.1 15.6 * % Relative to local index Analyst 2016e 256.0 34.0 25.5 23.3 16.7 12.3 Richard Finch 2017e 300.0 60.0 51.0 46.7 8.3 6.5
Sector: Oil & gas Bowleven (BLVN) Price: 22.0p Market cap: £72m INVESTMENT SUMMARY Forecast net cash (US$m) 102.6 Forecast gearing ratio (%) N/A Bowleven’s (BLVN) interim announcement gave little new news, although the confirmation Market AIM that the appraisal wells may not be drilled until 2017 has affected the shares. Although Share price graph (p) disappointing, this delay has a very minor effect on valuation and will still enable the new operator (NewAge) to take advantage of low rig rates. At Bomono, the company is working with the government to progress the BEAA to enable a small gas-to-power scheme, producing useful cash flows. We adjusted our modelling slightly after Bowleven’s interim results (30 March), but the valuation is unchanged. The share price is broadly supported by the current cash position of $100m (21p/share), leaving value at Etinde and Bomono upside available to long-term investors.
INDUSTRY OUTLOOK
Company description Bowleven is an AIM-listed, Africa-focused E&P with assets in Cameroon and Kenya. Its main asset is its 20% net interest in the Etinde development, which will provide gas to a fertiliser plant for 20 years.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (5.4) 11.4 (29.0) 2014 0.0 (11.6) (13.6) (4.2) N/A N/A Relative* (6.8) 4.5 (22.1) 2015 0.0 (11.5) (14.1) (4.3) N/A N/A * % Relative to local index Analyst 2016e 0.0 (10.2) (2.4) (0.7) N/A N/A Will Forbes 2017e 6.3 (7.4) (7.5) (2.3) N/A N/A
Edison Insight | 28 April 2016 18 Sector: Technology Brady (BRY) Price: 56.0p Market cap: £47m INVESTMENT SUMMARY Forecast net cash (£m) 7.0 Forecast gearing ratio (%) N/A While FY15 got off to a good start, the rout in commodity prices through H2 affected the Market AIM group’s customer base. Hence several deals that were anticipated in the second half were Share price graph (p) deferred and the group announced a profits warning in late November. Nevertheless, 20 significant deals were signed in FY15, of which nine were cloud deals, and 27 contracts went live. Group revenues dipped 12% y-o-y (or 7% at constant currencies) to £27.4m, while adjusted operating profit fell 82% to £0.9m. Our forecasts are broadly maintained, albeit for the inclusion of energycredit, which was acquired in January and gives a small boost to our earnings forecasts. It also provides potential for upgrades, as its solutions can be offered to Brady's broader customer base. With commodity markets stabilising, we believe Brady has good recovery potential, trading on c 13x our cash-adjusted FY16 EPS.
INDUSTRY OUTLOOK Company description Brady provides a range of transaction Brady provides trading, risk and connectivity software solutions to the global commodity, and risk management software applications, which help producers, recycling and energy markets – mining and oil companies, fabricators, traders, banks, etc. consumers, financial institutions and Key operational drivers are that the target market is underinvested in IT, auditors and trading companies manage their commodity transactions in a single, regulators are seeking increased reporting and accountability, and fundamental changes integrated solution. such as electronic trading and the EEGI. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 8.7 1.8 (45.6) 2014 31.0 5.6 5.1 5.3 10.6 7.3 Relative* 7.1 (4.5) (40.3) 2015 27.4 1.5 1.0 1.0 56.0 19.6 * % Relative to local index Analyst 2016e 30.5 4.0 3.5 3.5 16.0 12.5 Richard Jeans 2017e 32.2 4.6 4.1 3.9 14.4 7.6
Sector: Industrial support services Braemar Shipping Services (BMS) Price: 450.0p Market cap: £136m INVESTMENT SUMMARY Forecast net cash (£m) 8.0 Forecast gearing ratio (%) N/A Acquisitions have transformed the medium-term potential for Braemar Shipping. Several Market LSE deals since 2007 have established non-broking divisions where demand is related to the Share price graph (p) volume of seaborne trade and the oil & gas market, while last year's merger with ACM rejuvenated the group's broking business. The shares offer a safe high yield, supported by a strong balance sheet and sound medium-term growth potential related to merger benefits and eventual recovery in the shipping cycle. We look forward, with optimism, to the full year figures which are due to be announced on 16 May.
INDUSTRY OUTLOOK
The shipping industry expanded to absorb the shift in global manufacturing capacity towards lower-cost territories, responding to the increased movement of raw materials, components Company description and finished goods. Global recession in 2008/09 upset the supply/demand balance leading Braemar Shipping Services is a to sharply reduced charter rates; volumes of seaborne trade have recovered, but shipping leading global shipping services group, with interests ranging from shipbroking overcapacity remains. Oil price weakness has lifted tanker demand, but reduced exploration to the supply of specialist technical and activity; dry cargo rates remain depressed. logistics support to the various parties involved in the transporting of goods by sea and the energy sector.
Y/E Feb Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 7.1 4.5 4.7 2014 125.5 10.6 9.4 33.5 13.4 43.6 Relative* 5.5 (2.0) 14.9 2015 145.8 13.2 11.0 31.3 14.4 15.9 * % Relative to local index Analyst 2016e 158.0 15.6 13.4 34.0 13.2 10.4 Nigel Harrison 2017e 165.0 16.2 13.9 35.4 12.7 8.7
Edison Insight | 28 April 2016 19 Sector: Basic industries British Polythene Industries (BPI) Price: 685.0p Market cap: £188m INVESTMENT SUMMARY Forecast net debt (£m) 15.1 Forecast gearing ratio (%) 16.0 British Polythene Industries (BPI) successfully navigated a challenging FY15 trading year to Market LSE deliver very respectable progress in profitability, earnings and dividends. FY15 results came Share price graph (p) in £0.4m ahead of our expectations at PBT £27.4m, up almost 9% on the previous year. EPS and DPS rose by 16% and 12.5% respectively. Having raised estimates following the results, we have done so again after the Q116 trading update, which also confirmed the completed disposal of BPI’s China operation. The AGM will be on 10 May.
INDUSTRY OUTLOOK
Polymer price softness at the beginning of 2015 gave way to a strong rebound during Q2, as reported with the H115 results. Prices generally eased again during Q3 and into October before increases were sought by polymer producers towards the end of 2015. We believe Company description that Euro pricing eased modestly at the beginning of 2016, though there is some upward British Polythene Industries (BPI) is pressure latterly. one of the largest manufacturers of polythene film products in Europe. It is also Europe's largest recycler of waste polythene film.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (4.2) 8.7 (2.0) 2014 499.0 41.0 25.1 66.2 10.3 5.0 Relative* (5.7) 2.0 7.6 2015 468.3 43.4 27.4 76.6 8.9 8.5 * % Relative to local index Analyst 2016e 493.2 47.4 30.7 82.8 8.3 4.5 Toby Thorrington 2017e 501.8 49.1 31.8 85.8 8.0 4.4
Sector: Mining Bushveld Minerals (BMN) Price: 2.5p Market cap: £12m INVESTMENT SUMMARY Forecast net debt (£m) N/A Forecast gearing ratio (%) N/A Bushveld has made a major move towards re-aligning its business with the nascent, though Market AIM potentially very high growth, energy storage market through the signing of an MoU with US Share price graph (p) company UNiEnergy. The early-stage agreement is signed between Bushveld’s 84% owned energy subsidiary, Bushveld Energy Ltd and UniEnergy Technologies (UET). UniEnergy provides energy storage solutions for commercial, grid-scale, industrial and other applications using a specialized system of vanadium redox flow battery technology. If an off-take for vanadium is signed in the future, it would provide BMN with a strong incentive to develop its South African Mokopane vanadium project – one of the largest and highest grade vanadium deposits in the world.
INDUSTRY OUTLOOK
Company description A move towards involvement in the energy storage space and away from the Bushveld Minerals (BMN) is an much-maligned steel sector is the best strategy for Bushveld currently. With the steel sector AIM-listed junior iron and tin explorer in the mineral-rich Bushveld Complex in still seeing a major re-balancing of output to current and projected new demand, vanadium South Africa. Its flagship is an redox-technology provides a potentially high-growth alternative end-market. iron-titanium-vanadium deposit in the northern limb of the Bushveld Complex.
Y/E Feb Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 7.7 (16.2) 6.5 2014 0.0 (1.3) (1.4) (0.4) N/A N/A Relative* 6.0 (21.4) 17.0 2015 0.0 (3.2) (3.2) (0.6) N/A N/A * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Tom Hayes 2017e N/A N/A N/A N/A N/A N/A
Edison Insight | 28 April 2016 20 Sector: Basic industries Byotrol (BYOT) Price: 3.9p Market cap: £10m INVESTMENT SUMMARY Forecast net debt (£m) 0.5 Forecast gearing ratio (%) 126.0 The continued challenging global consumer climate and demanding regulatory regimes in Market AIM the US and the EU continue to delay the introduction of new products employing Byotrol Share price graph (p) technology. However, management has indicated that the momentum of opportunities continues to increase, while work to adapt to regulatory changes continues apace, with encouraging progress reported. In its 25 February trading update, the chairman reported that the board has never been more positive about group opportunities and that the workload has never been higher. Moreover, the group's working capital position is indicated to be adequate for future needs.
INDUSTRY OUTLOOK
The global market for specialist antimicrobial technology is vast, as awareness of infection Company description and diseases increases. While many products use chemicals (sometimes solving one Byotrol has developed and controls problem to create another), a product that can damage the reproductive capacity of various patents for a unique technology to facilitate the safe eradication of bacteria offers considerable attractions to users. The challenge is convincing the major harmful microbes. These include industry players of the efficacy of technology and seeing new products to market. several high-profile infections, such as MRSA and swine flu.
Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 0.0 14.8 14.8 2014 3.1 (0.6) (0.7) (0.3) N/A N/A Relative* (1.5) 7.7 26.1 2015 3.3 (0.4) (0.6) (0.3) N/A N/A * % Relative to local index Analyst 2016e 3.5 (0.4) (0.5) (0.2) N/A N/A Nigel Harrison 2017e 4.5 0.1 0.0 0.0 N/A 233.7
Sector: Mining Caledonia Mining (CMCL) Price: 65.5p Market cap: £34m INVESTMENT SUMMARY Forecast net cash (US$m) 10.6 Forecast gearing ratio (%) N/A Caledonia saw stable gold production at Blanket in 2015, albeit at slightly higher costs due Market AIM, TSE mainly to a reduced average gold grade and additional sustaining capex. Investment Share price graph (p) accelerated with the implementation of the revised investment plan (RIP), significantly yielding ore production for the first time from below the 750m reduced level (RL) via the completed No. 6 Winze. This level is a key ‘watermark’ in that the company’s longer-term growth hinges on gold production below this depth. Such an important milestone mirrors a management team that is delivering on its 2014 initiated RIP and one that has taken precautionary measures to ensure its successful completion (inter alia, a small gold hedge).
INDUSTRY OUTLOOK
We adjust our model for Caledonia’s FY15 accounts and its US dollar accounting format. Company description On this basis, our DCF valuation of Blanket’s cash flows, based on the RIP’s production and Caledonia Mining mines gold at its cost profile, is £1.59 per share, at a 10% discount rate to reflect general equity risk and our main operating asset, the 49%-owned Blanket gold mine in southern gold price assumptions. On the same basis but using a flat gold price of US$1,200/oz, our Zimbabwe. It is also progressing its valuation becomes £1.05. We also note that Caledonia should realise a 190% uplift in understanding of a number of promising satellite projects close to earnings in FY16, based on an average gold price of US$1,224/oz and achieving 50koz of Blanket. gold production. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 35.1 56.0 54.1 2014 53.5 14.7 11.0 10.4 9.0 3.1 Relative* 33.0 46.3 69.3 2015 49.0 9.0 5.1 8.1 11.5 5.8 * % Relative to local index Analyst 2016e 60.4 19.5 16.0 23.5 4.0 2.9 Tom Hayes 2017e 87.2 40.3 36.7 46.7 2.0 1.3
Edison Insight | 28 April 2016 21 Sector: Oil & gas Canadian Overseas Petroleum (XOP) Price: C$0.06 Market cap: C$31m INVESTMENT SUMMARY Forecast net debt (C$m) N/A Forecast gearing ratio (%) N/A Canadian Overseas Petroleum (COPL) is raising money to fund its continued expansion Market Toronto across Africa via its partnership with Shoreline Energy. An ongoing private placement in Share price graph (C$) both Canada and the UK is expected to raise $8.25m, with the acquisition of OPL 226 in Nigeria representing the JV's first major deal expected to close shortly. Outside of the Shoreline JV, COPL is partnering ExxonMobil in Liberia, with the company's much anticipated LB-13 well potentially drilling end 2016/early 2017. Based on tentative Liberia drill activity, our RENAV value is C$0.36/share. However, taking into consideration the play-opening potential of its Liberia block, we anticipate a risked M&A valuation of C$1.60/share in the event of exploration success.
INDUSTRY OUTLOOK
Company description Oil companies are attracted to Liberia given its location on the West African Transform Canadian Overseas Petroleum is an Margin, where exploration success has been achieved in offshore Ghana and Sierra African-focused E&P with assets in Liberia and plans to expand into Leone/Senegal. Chevron, ENI, Exxon, Repsol and Anadarko are all active. Nigeria. ExxonMobil is its operator and farm-in partner in Liberia Block LB-13.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (C$m) (C$m) (C$m) (c) (x) (x) % 1m 3m 12m Actual (13.3) 85.7 (23.5) 2013 0.0 (9.8) (9.9) (3.0) N/A N/A Relative* (15.7) 65.8 (15.6) 2014 0.0 (8.5) (8.5) (1.9) N/A N/A * % Relative to local index Analyst 2015e N/A N/A N/A N/A N/A N/A Sanjeev Bahl 2016e N/A N/A N/A N/A N/A N/A
Sector: Alternative energy Carbios (ALCRB) Price: €10.98 Market cap: €41m INVESTMENT SUMMARY Forecast net cash (€m) 4.1 Forecast gearing ratio (%) N/A Carbios leverages proprietary and unique enzyme-based technology for self-destruction and Market Euronext Paris recovery of plastics. It addresses the issue of plastics disposal in the face of growth in Share price graph (€) demand for plastics driven by major global trends, as well as environmental and sustainable solutions via break-through technologies for a circular plastics economy. Our fair value range is €23-37 per share, based on probability-weighted cash flows. The company has recently announced the start of pilot production which is a significant step. FY15 results were characterised by faster than expected expansion towards industrialisation. It reported an operating loss of €4.1m (vs €3.4m 2014). The company needs to reach industrialisation and commercialisation stage in 2017, which is when its Thanaplast project ends.
INDUSTRY OUTLOOK
Company description Growing volumes, environmental concerns and an increasing focus on sustainability are Carbios develops enzyme-based becoming ever more important challenges to conventional plastic market participants. processes for biodegradation and bioproduction of plastics, with a Biological plastic production and recycling is the single most important aim of the industry as long-term aim of displacing current a response. The target is a circular economy whereby plastic is constantly reused and recycling and production practices. recycled.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (6.9) (13.5) (13.7) 2014 0.7 (3.3) (3.3) (59.3) N/A N/A Relative* (9.5) (17.8) (2.0) 2015 0.8 (3.9) (4.0) (81.3) N/A N/A * % Relative to local index Analyst 2016e 0.6 (5.3) (5.5) (111.7) N/A N/A Catharina Hillenbrand-Saponar 2017e 0.7 (4.1) (4.4) (93.1) N/A N/A
Edison Insight | 28 April 2016 22 Sector: Technology Carclo (CAR) Price: 151.8p Market cap: £100m INVESTMENT SUMMARY Forecast net debt (£m) 24.9 Forecast gearing ratio (%) 56.0 The year end trading update confirmed that the underlying business continues to make Market LSE good progress, reaffirming our view that the VW Phaeton contract loss was taken too hard Share price graph (p) by the markets. In our initiation note (June 2015), we identified Carclo’s earnings multiples discount compared to its UK comparators with established growth stories. We think the extent of the discount is unjustified and expect the long-term story to remain firmly intact.
INDUSTRY OUTLOOK
The healthcare device markets that Carclo serves continue to grow and the underlying long-term story for this industry is, in our view, attractive. Not only is demand driven by global economic development, but device manufacturers continue to innovate. The supercar market continues to grow, with volumes for Carclo driven not just by strong demand for Company description end-products, as the rich get richer, but also by developments in lighting technologies and Carclo is a specialist in high-precision the moves by manufacturers to build an increasing variety of cars. plastic moulding principally for healthcare, optical and automotive applications. Its two main end-markets are high-volume medical consumables and low-volume, very high-value automotive lens components.
Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 13.5 13.5 2.4 2014 97.3 10.2 5.3 6.1 24.9 17.8 Relative* 11.7 6.4 12.4 2015 107.5 11.4 7.1 7.9 19.2 28.3 * % Relative to local index Analyst 2016e 111.3 14.0 8.6 9.5 16.0 6.6 Ian Robertson 2017e 120.7 15.8 10.4 11.5 13.2 6.0
Sector: General industrials Carr's Group (CARR) Price: 149.0p Market cap: £134m INVESTMENT SUMMARY Forecast net debt (£m) 21.7 Forecast gearing ratio (%) 20.0 Carr's interims show that its strategy of innovation, investment and internationalisation is Market LSE able to counter the impact of the headwinds prevailing in many of its markets. The Share price graph (p) announcement notes that Carr’s is trading in line with expectations but comments on a challenging agricultural market globally. We leave our FY16 estimates unchanged, while reducing FY17 and FY18 profit estimates slightly, and revise our indicative valuation to 197p/share (previously 205p).
INDUSTRY OUTLOOK
Group revenues reduced by 9% y-o-y to £189.1m, reflecting lower commodity prices. Reported profit before tax was almost flat at £10.5m (£10.6m). Growth in the Agriculture division, where the US feed block operations performed well, and the Food division offset a Company description comparatively weak performance from the Engineering division. New manufacturing Carr’s Agriculture serves farmers in the contracts from the UK nuclear industry are expected to drive a recovery in Engineering UK, the US, Germany and New Zealand. The Food division mills flour profits during H216. in the UK and Engineering offers remote handling equipment and fabrications to the global nuclear and oil & 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 (5.6) (6.6) (3.9) 2014 429.0 20.9 17.0 12.8 11.6 7.8 Relative* (7.0) (12.4) 5.6 2015 411.6 22.2 18.1 13.6 11.0 8.8 * % Relative to local index Analyst 2016e 403.2 22.5 18.1 13.5 11.0 6.6 Anne Margaret Crow 2017e 409.2 22.0 17.7 12.9 11.6 5.0
Edison Insight | 28 April 2016 23 Sector: Financials Cenkos Securities (CNKS) Price: 145.0p Market cap: £82m INVESTMENT SUMMARY Forecast net debt (£m) N/A Forecast gearing ratio (%) N/A Cenkos' FY15 results showed revenues down 14% from the record FY14 level which was Market AIM boosted by the fees and trading activity associated with the £1.385bn flotation of AA plc. Share price graph (p) The level of fund-raising for clients nevertheless remained strong at £3bn (£2.8bn) with the 32 transactions including over £1bn raised for BCA Marketplace; the revenue mix was less rich than in 2014. The flexible cost structure with relatively low basic salaries (the total comp ratio was 59.6% vs 58.8%) reduced the impact of lower revenues and PBT was down 26% to £19.9m with EPS 23% lower at 27.2p. The FY15 dividend is 14p (-18%) and, including share buybacks relating to FY15/16, means Cenkos will have paid out virtually 100% of earnings over the two years.
INDUSTRY OUTLOOK
Company description While the market background remains uncertain, Cenkos has demonstrated resilience over Cenkos is a specialist, UK institutional time and, given its mix of revenues should be less exposed to the effect of continuing stockbroker, focused on growth companies and investment funds. Its pressure on institutional commissions and the potential impact of MiFID II than some peers. principal activities are primary and secondary fund raising, corporate advisory, research, trade execution and market making activities.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 0.0 3.9 (31.8) 2014 88.5 27.2 27.0 35.2 4.1 7.3 Relative* (1.5) (2.5) (25.1) 2015 76.5 20.0 19.9 27.2 5.3 3.1 * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Andrew Mitchell 2017e N/A N/A N/A N/A N/A N/A
Sector: Alternative energy Ceres Power Holdings (CWR) Price: 7.8p Market cap: £61m INVESTMENT SUMMARY Forecast net cash (£m) 6.6 Forecast gearing ratio (%) N/A Adoption of fuel cells generally remains limited because although the basic technology is Market AIM proven, it is not yet cost competitive. Ceres’s patented Steel Cell technology is an Share price graph (p) innovative solution to this cost problem, predicated on using non-exotic materials that can be processed in volumes using conventional manufacturing equipment and techniques. Ceres’s new high-speed print line has achieved a tenfold reduction in processing times, a key step in achieving the low-cost, high-volume production capability required for commercialisation. The technique also gives a better-quality deposition layer.
INDUSTRY OUTLOOK
Technology advances in the latest release (V3) of the Steel Cell platform have enabled Ceres to address new market applications and attract new potential partners. Net electrical Company description efficiency has reached 55%, significantly exceeding the 50% level at which the technology Ceres Power is a developer of becomes viable for commercial and light industrial scale applications and improving the low-cost, next generation fuel cell technology for use in decentralised economic case for the residential market. energy products that reduce operating costs, lower CO2 emissions, increase efficiency and improve energy security.
Y/E Jun Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 34.0 25.8 (17.9) 2014 1.2 (6.7) (7.7) (1.22) N/A N/A Relative* 32.0 18.0 (9.8) 2015 0.3 (9.7) (10.5) (1.19) N/A N/A * % Relative to local index Analyst 2016e 1.0 (11.2) (12.4) (1.40) N/A N/A Anne Margaret Crow 2017e 2.0 (10.8) (12.0) (1.35) N/A N/A
Edison Insight | 28 April 2016 24 Sector: Oil & gas Challenger Energy (CEL) Price: A$0.04 Market cap: A$13m INVESTMENT SUMMARY Forecast net debt (A$m) N/A Forecast gearing ratio (%) N/A Challenger (CEL) completed a capital raising of almost A$1m (before costs) in late March Market ASX 2016. A total of 32.7m shares were issued at A$0.03. The funds will be used for the Share price graph (A$) progression of the licence application process in South Africa, working capital and the cost of the offer. CEL, through its subsidiary Bundu, is the only junior company with interests in the Karoo Basin, South Africa. Shell and Chevron are active alongside CEL. The US-based EIA has estimated 390 Tcf of risked, technically recoverable gas resource in the Lower Permian ECCA Group shales in the basin.
INDUSTRY OUTLOOK
The power crisis in South Africa is getting worse, highlighting the need for new energy sources including gas, which remains the major focus for satisfying the country's energy Company description needs. Newbuild power economics continue to favour gas over coal or diesel in the long Challenger Energy is an ASX-listed term. Challenger's application area is proximate to major existing power transmission E&P with a 95% interest in an application for an exploration permit in infrastructure and the company is well positioned to proceed on award. the Karoo basin, South Africa, which is prospective for shale gas. It is awaiting award of a permit to start drilling.
Y/E Jun Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual (10.3) 16.7 (12.5) 2014 0.1 (1.2) (1.2) (0.4) N/A N/A Relative* (11.4) 9.4 (4.0) 2015 0.1 (1.2) (1.3) (0.2) N/A N/A * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Peter Chilton 2017e N/A N/A N/A N/A N/A N/A
Sector: Industrial support services China Water Affairs Group Limited (855) Price: HK$3.54 Market cap: HK$5380m INVESTMENT SUMMARY Forecast net debt (HK$m) 3616.0 Forecast gearing ratio (%) 49.0 Through a mixture of volume and price increases and inorganic growth, we expect China MarketHong Kong Stock Exchange Water Affairs (CWA) to grow operating profit by a CAGR of 17.8% over the next five years. Share price graph (HK$) CWA owns and operates water supply assets in 46 cities across China. China’s economy suffers from polluted water and water scarcity and only around 50% of households are connected to a water network. The Chinese government has become increasingly supportive of private companies developing the water sector and, for now, is happy to reward private firms with attractive ROEs. Favourable regulatory drivers, coupled with a well-regarded management team, have enabled CWA to deliver excellent earnings growth and we believe this will continue.
INDUSTRY OUTLOOK
Company description Water supply lags behind wastewater treatment in terms of private operator penetration. China Water Affairs Group owns and CWA estimates that private enterprises account for only 20% of the water supply industry, operates regulated water supply assets across 46 cities in mainland whereas the same figure for wastewater treatment is more like 60%. The fact that privatised China, serving eight million customers water supply has so far to catch up with water treatment offers another growth engine for in the residential, commercial and industrial sectors. CWA’s addressable market.
Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (HK$m) (HK$m) (HK$m) (c) (x) (x) % 1m 3m 12m Actual 7.6 6.9 (21.5) 2014 2747.0 1076.0 730.0 15.7 22.5 9.1 Relative* 3.6 (4.9) 2.1 2015 2859.0 1300.0 886.0 16.6 21.3 8.9 * % Relative to local index Analyst 2016e 3351.0 1613.0 1130.0 30.4 11.6 4.3 Jamie Aitkenhead 2017e 4080.0 1908.0 1407.0 36.1 9.8 3.5
Edison Insight | 28 April 2016 25 Sector: Financials Circle Holdings (CIRC) Price: 20.5p Market cap: £51m INVESTMENT SUMMARY Forecast net debt (£m) N/A Forecast gearing ratio (%) N/A Results for the 12 months to 31 December 2015 saw group revenues rise 15%, group Market AIM EBITDA losses more than halve to £4.9m (excl. Project Reset) with all business segments Share price graph (p) now EBITDA positive. Planning permission has been obtained for CircleBirmingham and construction work is planned to commence in 2016. Circle is examining a partnership with another healthcare provider to provide rehabilitation services which could add another value revenue stream to its activities. Other initiatives it is pursuing include further MSK contracts, a proton beam therapy treatment centre in London and the export of its expertise to China. Our forecasts are currently under review.
INDUSTRY OUTLOOK
Demand for the healthcare services that Circle provides in the UK is driven by patient Company description demand from an ageing population, tighter public finances, changes in technology and shift Circle Holdings plc is incorporated in to integrated healthcare. With its pioneering MSK contract at CircleBedfordshire Circle Jersey and listed on the AIM market of the London Stock Exchange. It is an believes that it is particularly well placed to provide integrated healthcare for the benefit of operator of both NHS and independent patients and the NHS. hospital facilities in the UK, and is extending its activities to the provision of other healthcare services.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 3.8 (17.2) (53.4) 2014 111.0 (10.4) (20.2) (4.3) N/A N/A Relative* 2.2 (22.3) (48.8) 2015 127.8 (7.4) (11.7) (4.7) N/A N/A * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Peter Thorne 2017e N/A N/A N/A N/A N/A N/A
Sector: General industrials Coats Group (COA) Price: 29.8p Market cap: £419m INVESTMENT SUMMARY Forecast net cash (US$m) 258.2 Forecast gearing ratio (%) N/A The Industrial and Craft divisions both delivered good increases in underlying profitability in Market LSE FY15. Although this was partly offset by adverse FX effects Coats reported a 13% uplift in Share price graph (p) reported group EBIT, with a 150bp margin improvement (to 9.4%). Interest costs came in lower y-o-y but a reversal in other finance costs (chiefly from FX translation gains to losses on parent company cash) resulted in headline PBT being slightly below the prior year. Coats retains a significant net cash position for future investment in the business and to meet potential legacy obligations. The AGM is scheduled for 18 May.
INDUSTRY OUTLOOK
Population growth is the ultimate trend driver for clothing and footwear demand. Increasing urbanisation, mobility and wealth are all features of this overall growth. Consumer Company description consumption will generally track GDP growth over time. Economic and demographic Coats Group is a leading producer of differences at a country level mean that the local characteristics of demand vary. Coats is industrial thread and consumer craft textiles with over 70 manufacturing the world’s leading industrial thread and consumer textile crafts business. sites internationally. Its divisions are Industrial – Apparel & Footwear (c 64%) and Speciality (c 16%) – and Crafts (20%) based on FY14 revenue.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 5.3 35.2 19.0 2014 1561.4 170.0 128.2 5.2 8.2 3.7 Relative* 3.7 26.9 30.7 2015 1489.5 183.0 126.8 5.0 8.5 6.8 * % Relative to local index Analyst 2016e 1528.6 187.8 129.8 5.3 8.0 4.7 Toby Thorrington 2017e 1578.4 200.1 138.8 5.9 7.2 3.7
Edison Insight | 28 April 2016 26 Sector: Aerospace & defence Cohort (CHRT) Price: 379.0p Market cap: £155m INVESTMENT SUMMARY Forecast net cash (£m) 8.5 Forecast gearing ratio (%) N/A With an April year end, it now appears the yet to be confirmed initial purchase of 57% of EID Market AIM in Portugal will make no meaningful FY16 contribution. Nevertheless, this remains a matter Share price graph (p) of timing and not value. The award of a new £17m ECS contract to SEA confirms the ongoing activities' solid progress. Defence trends are increasingly supportive, bolstered by the recent Strategic Defence and Security Review (SDSR) in the UK. The organic development should drive strong cash flow facilitating further value-creating bolt-ons. The recent share price decline appears to overlook the robust nature of expectations and provides a significant opportunity for investors.
INDUSTRY OUTLOOK
Cohort is heavily influenced by activities in defence and security (89% of FY15 sales). Company description These markets provide highly differentiated technologies and services with high barriers to Cohort is an AIM-listed defence and entry based on customer relationships, regulation and high-level security clearances. The security company operating across four divisions: MASS (31% of FY15e recent commitment by the UK government to spend at least 2% of GDP on defence sales); SEA (43%); SCS (16%); and provides greater confidence over the coming years. MCL (9%).
Y/E Apr Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 6.3 4.6 39.6 2014 71.6 8.8 8.3 19.1 19.8 42.1 Relative* 4.7 (1.9) 53.3 2015 99.9 11.0 10.2 20.5 18.5 7.4 * % Relative to local index Analyst 2016e 115.3 12.5 11.7 21.8 17.4 172.2 Andy Chambers 2017e 132.4 15.0 14.2 26.7 14.2 12.9
Sector: Pcare and household prd Comvita (CVT) Price: NZ$11.80 Market cap: NZ$471m INVESTMENT SUMMARY Forecast net debt (NZ$m) 23.4 Forecast gearing ratio (%) N/A Comvita (CVT) plans to leverage its premium brand positioning, exploit its established Market NZSX distribution channels and use its control of raw material sourcing as a key competitive Share price graph (NZ$) advantage. CVT’s five-year strategic plan is to build sales to NZ$400m with profit growth expected to outpace sales growth. This, together with continued exploitation of operating leverage, should help the company achieve its stated objective of y-o-y increases in ROCE above the FY15 level of c 12. In early March, it announced a JV with Capilano Honey (ASX: CZZ) (a honey sourcing operation) to joint venture a Manuka honey business in Australia. Our forecasts and our c NZ$9.20/share valuation are under review.
INDUSTRY OUTLOOK
Manuka honey has gained an international reputation for its medicinal qualities, both for Company description wound care and general health. Comvita is the largest manuka manufacturer and exporter Comvita manufactures and markets and has leading market positions in a number of countries including the US, UK, Australia manuka honey-based products and fresh olive leaf extract products. It sells and China. Investment in manuka honey continues apace in New Zealand to meet honey and olive leaf extract products increasing demand for raw manuka honey and manuka honey-derived products. for health, skin care and medical uses.
Y/E Mar / Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (NZ$m) (NZ$m) (NZ$m) (c) (x) (x) % 1m 3m 12m Actual 19.2 40.5 195.0 2014 115.3 15.8 12.6 25.5 46.3 32.5 Relative* 16.2 27.2 160.9 2015 152.7 22.8 16.3 29.9 39.5 21.0 * % Relative to local index Analyst 2016e 236.9 37.3 29.5 52.3 22.6 N/A Moira Daw 2017e 247.3 39.4 32.9 57.5 20.5 21.1
Edison Insight | 28 April 2016 27 Sector: Food & drink Cooks Global Foods (CGF) Price: NZ$0.11 Market cap: NZ$45m INVESTMENT SUMMARY Forecast net debt (NZ$m) N/A Forecast gearing ratio (%) N/A Cooks Global Foods (CGF) has finalised its recapitalisation plans, having received Market NZSX NZ$7.9m from China's Jiajiayue Group and an equivalent amount received or underwritten Share price graph (NZ$) from Cooks Investment Holdings. Of the new funds received, NZ$9m will go into supporting Esquires Coffee's growth in China, the Middle East, the UK, Ireland and North America, while NZ$6.8m has been allocated to acquire the majority of shares held by Cooks' largest shareholder, DSL Management. Given the delays in finalising the recapitalisation, the company’s rollout plans have been pushed out in the near to medium term. As at March end, the company had 87 Esquires Coffee stores globally, below its previous target for 120 stores. Our FY16e and FY17e forecasts are under review.
INDUSTRY OUTLOOK
Company description The global market for branded coffee chains is experiencing widespread growth, with a Cooks Global Foods owns the global number of leading companies such as Starbucks, Costa Coffee and Tim Hortons all looking rights to the Esquires Coffee House brand, with 87 stores currently to developing markets for growth, while at the same time seeing continued strong growth in operating in the UK, Ireland, Canada, their respective home markets. The branded coffee chain sector is growing at around 10% China and the Middle East via master franchise arrangements. pa in many countries, providing numerous opportunities for the company to expand.
Y/E Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (NZ$m) (NZ$m) (NZ$m) (c) (x) (x) % 1m 3m 12m Actual (1.8) (8.3) (31.3) 2014 4.5 (3.8) (4.0) (1.65) N/A N/A Relative* (4.2) (17.0) (39.2) 2015 9.2 (3.3) (4.0) (1.40) N/A N/A * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Finola Burke 2017e N/A N/A N/A N/A N/A N/A
Sector: Media & entertainment Creston (CRE) Price: 107.5p Market cap: £63m INVESTMENT SUMMARY Forecast net debt (£m) 0.4 Forecast gearing ratio (%) 0.0 CRE’s year-end trading update indicated FY16 revenue and earnings in line with indications Market LSE given in January and our expectations. However, the cash performance is significantly Share price graph (p) better than we had anticipated at over £1m. FY17 should benefit from more focused recent attention to overhead management after the less consistent trading in H216, with no trading improvement currently factored in. The valuation remains at a significant discount to other smaller marketing agencies and the shares carry a premium yield on a well-covered dividend. DBAY Advisors, represented on the board since February by Iain Ferguson (ex-Havas), has taken advantage of the lower price and increased its shareholding to 28.0%.
INDUSTRY OUTLOOK
Company description Client mood is reportedly showing signs of stabilising, although remains focused on cost Creston is an international marketing rather than top line growth. It is no longer enough to put promotional material in front of an communications group delivering services including advertising, CRM, audience. The technical demands of delivering integrated, multi-channel campaigns and digital and direct marketing, health measuring the impact in real time are considerable. The latest UK adspend forecast communications, local marketing, market research, PR and social media (WARC/AA) for 2016 are for growth of 5.6%, with higher projections from Carat (6.2%), marketing. Zenith Optimedia (9.2%) and GroupM (7.0%). Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 2.4 (12.2) (13.0) 2014 74.9 11.4 9.6 11.8 9.1 N/A Relative* 0.8 (17.7) (4.4) 2015 76.9 11.7 10.0 13.1 8.2 N/A * % Relative to local index Analyst 2016e 83.0 11.3 9.5 11.3 9.5 N/A Fiona Orford-Williams 2017e 85.0 12.2 10.5 12.4 8.7 N/A
Edison Insight | 28 April 2016 28 Sector: Financials DeA Capital (DEA) Price: €1.31 Market cap: €403m INVESTMENT SUMMARY Forecast net debt (€m) N/A Forecast gearing ratio (%) N/A DeA Capital is pursuing its strategy of exiting some of its direct private equity investments. It Market Borsa Italiana currently holds c.14% of own shares and is seeking an extension of its approval to buy back Share price graph (€) up to 20%. In alternative asset management DeA is launching new initiatives which should lead to growth of AUM in 2016-18. AUM at end 2015 was €9.5bn and NAV per share was €2.07. DPS of €0.12 was announced for 2015. DeA was planning to launch an Italian real estate fund on the Milan stock exchange, but recent volatile market conditions have resulted in a postponement. Our forecasts are under review.
INDUSTRY OUTLOOK
Loose monetary policy and the search for yield is generating interest in real estate, notably in Italy, where the number of transactions has started to increase. Company description DeA Capital, a De Agostini group company, is one of Italy’s leading players in alternative investments. It is active in private equity investments and asset management. At 31 December 2015, it had an investment portfolio of €455m and €9.5bn AUM.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 3.1 2.6 (32.0) 2014 27.4 (44.5) (42.3) (15.4) N/A 1.9 Relative* 3.2 4.2 (16.8) 2015 156.0 33.6 38.0 17.2 7.6 1.9 * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Peter Thorne 2017e N/A N/A N/A N/A N/A N/A
Sector: Alternative energy Deinove (DEINO) Price: €3.68 Market cap: €31m INVESTMENT SUMMARY Forecast net debt (€m) 2.1 Forecast gearing ratio (%) 211.0 Deinove made significant scientific and technical advances in 2015, signed important Market Alternext Paris commercial agreements (Tyton and Arbiom) and improved the financial positioning of the Share price graph (€) company. The FY15 results showed a net loss for the year of €6.4m (-2% vs FY14) in line with our forecasts. The net cash position of €12.4m at end December 2015, bolstered by grants, milestone payments, tax credits, the recent equity issue (€10.0m net) and the drawdown of the Kepler Cheuvreux facility (€4.6m), was ahead of our forecasts (€12.1m). The €12.4m is said to be sufficient to last until the end of 2017 without further equity drawdowns. During 2016 we expect Deinove to continue to advance towards commercial deployment across all its major research platforms but with a major focus on carotenoids. Following the FY16 results we updated our forecasts and expect the first commercial revenues in 2018. Company description INDUSTRY OUTLOOK Deinove designs, develops and markets technologies in biofuels and biochemistry by harnessing the Environmental concerns/mandates will continue to underpin growth in green chemistry and properties of the Deinococcus biofuels. bacterium.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (2.9) 0.5 (57.8) 2014 0.2 (6.5) (6.6) (98.6) N/A N/A Relative* (5.6) (4.5) (52.1) 2015 0.5 (7.3) (7.3) (81.5) N/A N/A * % Relative to local index Analyst 2016e 0.4 (7.5) (8.3) (82.4) N/A N/A Graeme Moyse 2017e 0.5 (7.5) (8.5) (84.7) N/A N/A
Edison Insight | 28 April 2016 29 Sector: Media & entertainment Ebiquity (EBQ) Price: 127.5p Market cap: £93m INVESTMENT SUMMARY Forecast net debt (£m) 26.0 Forecast gearing ratio (%) 52.0 Alongside audited results for the eight months to its new December year-end, management Market AIM provided relevant unaudited pro-forma data for calendar years 2015 and 2014. CY15 saw Share price graph (p) solid revenue growth of 10.8% (7.9% on like-for–like basis), while underlying operating profit, PBT and diluted EPS all grew substantially, with EPS rising 63.4% to 10.8p (CY14: 6.6p), although this increase was magnified by a strong Media Value Measurement segment in Q115 vs an uncharacteristic slower start in Q114, which dampened the CY14 results. We maintain our CY16 estimate and have initiated a CY17 estimate, which suggests 11.7p diluted EPS up 6.4% on our maintained CY16 11.0p estimate. EPS growth in the short-term is impacted as we have factored in a rise in tax charge for each of these years as the benefit of available tax losses is almost exhausted. AGM is to be held on 11 May. (In the table below, 2014 and 2015 show pro-forma data as supplied by the company.) Company description INDUSTRY OUTLOOK Ebiquity is an independent marketing performance specialist and a leading provider of a range of business critical Advertisers continue to focus on achieving better returns on their marketing investment. The data, analysis and consultancy growing influence of social media is changing the way that marketing departments view the services to advertisers and media owners on an international basis. overall media arena, especially regarding non-paid social media.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (5.9) (11.5) 0.4 2014 69.1 9.6 6.8 6.6 19.3 N/A Relative* (7.4) (16.9) 10.3 2015 76.6 14.2 11.2 10.8 11.8 N/A * % Relative to local index Analyst 2016e 82.0 15.7 12.5 11.0 11.6 N/A Martin Lister 2017e 88.5 17.0 13.9 11.7 10.9 N/A
Sector: Oil & gas Egdon Resources (EDR) Price: 7.8p Market cap: £17m INVESTMENT SUMMARY Forecast net debt (£m) N/A Forecast gearing ratio (%) N/A 2016 is an important year for Egdon’s UK shale gas business, with planning catalysts from Market AIM Third Energy and Cuadrilla likely to set the stage for Egdon's planning application at Springs Share price graph (p) Road. If achieved, this could make our valuation of the company's shale gas portfolio increasingly feasible. We see the shares as pricing in little of the opportunity in UK shale, with our last published standalone 29.6p/share (RENAV) valuation of Egdon’s conventional business sitting considerably higher than the current share price.
INDUSTRY OUTLOOK
The supportive stance taken by the UK government towards shale provides a stable fiscal and regulatory environment for its development. It is widely expected that we will see the first approval for a shale well to be drilled and fracked in 2016. Company description Egdon Resources is an AIM-listed onshore oil and gas exploration and production company. The group has conventional and unconventional assets in the UK and France, with its focus being the UK.
Y/E Jul Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (6.1) (6.1) (4.6) 2014 3.0 0.3 (1.5) (0.7) N/A 30.1 Relative* (7.5) (11.9) 4.8 2015 2.1 (2.8) (4.5) (2.1) N/A N/A * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Sanjeev Bahl 2017e N/A N/A N/A N/A N/A N/A
Edison Insight | 28 April 2016 30 Sector: Media & entertainment Entertainment One (ETO) Price: 184.4p Market cap: £788m INVESTMENT SUMMARY Forecast net debt (£m) 314.3 Forecast gearing ratio (%) 54.0 eOne has denied press speculation that ITV has approached the group. However, it serves Market LSE as a rude reminder of both the strategic value of an asset like eOne to other film and TV Share price graph (p) companies and the unjustified ratings gap between it and many of its peers. With the balance of the business now tilted towards higher growth TV and family, and with a stronger slate in film, we expect the year ahead to be a strong one; the share price gains that this speculation has provoked should be sustainable. Note: Net debt is stated inclusive of interim production financing. Excluding this, we forecast FY17 net debt of £165m.
INDUSTRY OUTLOOK
OTT (over-the-top) platforms are having a disruptive effect, with revenues forecast to grow from $17.9bn in 2013 to $55.4bn in 2019 (Strategy Analytics), helping to drive strong Company description demand for content. Premium content companies like eOne are well placed to satisfy the Entertainment One (eOne) is a leading strong global demand for entertainment content. international entertainment company that sources, selects and sells films and television content. Its library contains over 40,000 film and TV titles, 4,500 half-hours of TV programming and 45,000 music tracks.
Y/E Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 16.6 16.8 (32.3) 2014 823.0 92.8 78.4 18.4 10.0 N/A Relative* 14.8 9.6 (25.6) 2015 785.8 107.3 88.8 20.8 8.9 N/A * % Relative to local index Analyst 2016e 815.0 129.5 104.0 19.4 9.5 N/A Bridie Barrett 2017e 939.7 154.1 123.7 19.5 9.5 N/A
Sector: General industrials Epwin Group (EPWN) Price: 137.1p Market cap: £194m INVESTMENT SUMMARY Forecast net debt (£m) 17.0 Forecast gearing ratio (%) 21.0 FY15 was not without its challenges for Epwin but the company delivered some uplift in Market AIM underlying profit and EPS, a 50% DPS increase and healthy free cash flow. As well as Share price graph (p) making further operational business improvements and preparing for a new window systems launch, management also found time to make its first two acquisitions in the year, following the IPO in July 2014. We expect all of these elements to impact upon the financial performance in FY16 including a more significant step up in profitability. Our forecasts are currently under review.
INDUSTRY OUTLOOK
Epwin is exposed to both RMI (c 70% revenue) and newbuild (c 30%) in the UK housing market. Newbuild activity is clearly ahead y-o-y, while RMI demand has been more patchy. Company description Referencing a rising interest rate path, industry commentators have expressed some Epwin supplies functional caution in the short term. low-maintenance exterior PVC building products into a number of UK market segments and is a modest exporter. It has a vertically integrated model in windows and doors and a leading market position in roofline products.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 5.5 4.3 23.8 2013 255.3 21.3 14.5 10.1 13.6 14.0 Relative* 3.9 (2.2) 36.0 2014 259.5 24.5 18.0 11.2 12.2 8.9 * % Relative to local index Analyst 2015e 258.2 25.6 19.3 11.5 11.9 7.5 Toby Thorrington 2016e 295.5 32.1 24.2 13.8 9.9 6.4
Edison Insight | 28 April 2016 31 Sector: Technology EQS Group (EQS) Price: €32.00 Market cap: €38m INVESTMENT SUMMARY Forecast net debt (€m) 5.8 Forecast gearing ratio (%) 30.0 EQS Group’s FY15 figures reflected the impact of accelerated expansion to establish the Market Xetra group as a leading global provider of digital IR solutions. December’s Swiss acquisition Share price graph (€) provides market leadership in that territory, while the January 2016 purchase of Obsidian gives a strong base from which to leverage UK growth. Asia remains the region with the greatest potential to transform the group. The valuation remains at a marked discount to global software and B2B media peers, partly reflecting the earlier stage of corporate development, but not signalling a growing SaaS revenue stream.
INDUSTRY OUTLOOK
The scale of the Asian opportunity dwarves the potential for EQS in its existing geographies. It has already gained a foothold in HK, Singapore and Taiwan (and now in the UK). The Company description number of listed companies in HK, Shenzhen, Shanghai and Taipei all up over 4.0% in the EQS is a leading global provider of year to end March. Singapore and Taiwan show smaller increases, with mature European digital solutions for investor relations and corporate communications. Its and North American markets retrenching. Increasing regulation in APAC to meet solutions and services help 7,000 international investors’ transparency requirements means that listed companies will need to clients worldwide to fulfil complex domestic and international corporate buy in the expertise or develop it internally. information requirements.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 8.5 7.0 (1.5) 2014 16.4 3.7 3.4 182.94 17.5 9.2 Relative* 4.4 0.7 12.6 2015 18.4 3.5 3.1 115.20 27.8 7.6 * % Relative to local index Analyst 2016e 20.8 3.7 3.2 181.47 17.6 8.9 Fiona Orford-Williams 2017e 22.8 4.0 3.5 201.27 15.9 8.5
Sector: Technology eServGlobal (ESG) Price: 5.8p Market cap: £15m INVESTMENT SUMMARY Forecast net debt (A$m) 14.4 Forecast gearing ratio (%) 56.0 eServGlobal's AGM trading update confirmed that trading remained weak in Q116 but Market AIM should start to recover in Q216. The company continues to expect revenue growth in FY16 Share price graph (p) with a small positive EBITDA. It previously indicated break-even revenues of €19-20m (A$28-30m), but believes it could reduce that further this year. HomeSend is now focused on driving volume growth from its existing 3,110 corridors. Cash collection has improved and working capital will be boosted by the receipt of the escrow funds in April.
INDUSTRY OUTLOOK
eServGlobal's core business is focused on developing markets, where there is a higher prevalence of pre-paid contracts and unbanked citizens. Growth drivers include the shift to using the mobile phone for financial services and the increasing popularity of mobile Company description peer-to-peer payments. The international remittances market was worth $583bn in 2014 eServGlobal develops mobile software and is forecast to grow to $636bn by 2017 (source: World Bank). The HomeSend JV has solutions to support mobile financial services, with a focus on emerging the potential to reduce the cost of sending smaller sums of money cross border. markets. The company also has a share in the HomeSend international remittances hub, alongside MasterCard and BICS.
Y/E Oct Revenue EBITDA PBT EPS P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual 27.8 119.1 (65.2) 2014 31.3 2.6 (0.5) (0.20) N/A N/A Relative* 25.8 105.5 (61.7) 2015 25.9 (10.4) (17.7) (5.41) N/A N/A * % Relative to local index Analyst 2016e 31.0 1.1 (8.8) (2.68) N/A 2602.7 Katherine Thompson 2017e 33.1 2.5 (3.9) (1.23) N/A 15.6
Edison Insight | 28 April 2016 32 Sector: Technology Esker (ALESK) Price: €27.37 Market cap: €144m INVESTMENT SUMMARY Forecast net cash (€m) 6.9 Forecast gearing ratio (%) N/A Esker's FY15 results confirmed revenue growth of 27% to €58.5m, made up 13% organic Market Alternext Paris growth, an 8% impact from currency and 4% growth from the acquisitions of CalvaEDI and Share price graph (€) TermSync. The company reported operating profit of €9.1m (15.5% margin) and net income of €6.5m. The integration of the two acquisitions is on track, and both generated revenues at least in line with management's expectations. After paying for the acquisitions, net cash at the end of FY15 stood at €9m. Management continues to expect double digit revenue growth for FY16. We are reviewing our forecasts.
INDUSTRY OUTLOOK
Esker's DPA software operates across four areas: document delivery, accounts payable, accounts receivable and sales order processing. Competitors are different for each Company description business process, and consist of business process outsourcers and specialist DPA software Esker provides end-to-end document companies. Customers move to using DPA software to reduce paper-related costs and automation solutions, offering on-premise and on-demand delivery errors in processing, to speed up the cash conversion cycle, to improve process visibility models. The business generates 50% within the enterprise and to improve customer service. of revenues from Europe, 40% from the US and the remainder from Asia and Australia.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (6.2) (5.3) 9.5 2013 41.1 6.6 3.9 62.0 44.1 19.7 Relative* (8.8) (10.0) 24.3 2014 46.1 9.0 5.9 90.0 30.4 14.2 * % Relative to local index Analyst 2015e 58.5 14.2 10.3 147.0 18.6 9.3 Katherine Thompson 2016e 64.4 15.7 11.7 159.0 17.2 8.8
Sector: Mining Euromax Resources (EOX) Price: C$0.45 Market cap: C$53m INVESTMENT SUMMARY Forecast net debt (C$m) 9.6 Forecast gearing ratio (%) 86.0 Ilovica’s resource comprises 2.9Moz Au and 1.2bn lbs Cu, which is 5.0Moz of gold Market Toronto equivalent. A recently completed DFS envisages exploiting the resource via a conventional Share price graph (C$) 10Mtpa drill & blast, truck & shovel operation, followed by a consecutive flotation & cyanide leach process flow route. The study follows Euromax's mandating of four financial institutions to provide up to US$240m in finance for Ilovica, confirmation of German government guarantees for the financiers and an off-take agreement with Aurubis. Subsequently, Euromax has announced that it is to raise up to US$30m via a strategic alliance with EPC contractor Consolidated Contractors Company (CCC) plus an additional US$5m from an unnamed existing shareholder.
INDUSTRY OUTLOOK
Company description On the basis of the detail contained in the DFS, Edison's valuation of EOX has increased to Euromax Resources is a Canadian C$1.03 (fully diluted). NB The majority of its costs are denominated in Euros. Considered resource company that focuses on the acquisition and development of simply as resource, we estimate that Ilovica is worth US$52.0-78.8m. mineral-bearing assets in Southeast Europe. Its flagship asset, Ilovica in Macedonia, is at the pre-feasibility stage.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (C$m) (C$m) (C$m) (c) (x) (x) % 1m 3m 12m Actual (21.6) 13.8 26.4 2013 0.0 (5.3) (5.4) (5.8) N/A N/A Relative* (23.7) 1.6 39.4 2014 2.7 (6.4) (6.6) (5.7) N/A N/A * % Relative to local index Analyst 2015e 3.7 (7.9) (8.6) (5.6) N/A N/A Charles Gibson 2016e 0.0 (8.6) (8.8) (3.1) N/A N/A
Edison Insight | 28 April 2016 33 Sector: Media & entertainment Euromoney Institutional Investor (ERM) Price: 910.0p Market cap: £1167m INVESTMENT SUMMARY Forecast net cash (£m) 84.8 Forecast gearing ratio (%) N/A CEO Andrew Rashbass, in place since October 2015, set out his plans for stimulating the Market LSE group’s growth in March. His strategic review points to an evolutionary honing of the Share price graph (p) better-placed existing portfolio products and brands, rather than a drastic group reshaping. The changes are targeted at enhancing Euromoney’s credentials in B2B digital information, with asset management and price discovery markets key areas of focus. ERM has strong brands, high underlying levels of cash conversion and a good acquisition and integration record. Clear sight on driving the top line should enable the group to regain its traditional sector premium.
INDUSTRY OUTLOOK
The issues surrounding confidence in banking markets have been well rehearsed and the Company description impact of weak commodity markets is also built into market consensus. The revenue from Euromoney Institutional Investor is a Delegates is bearing the brunt of the low energy prices, while advertising continues to drift leading international B2B media group focused primarily on the international as expected. The activities addressed at the asset management markets have been much finance, metals and commodities more resilient to date, primarily coming through in subscription revenues. Should equity sectors. markets remain weak, there may be some further impact down the line, although US dollar strength is helpful in buoying revenues. Y/E Sep Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 3.8 (0.8) (20.9) 2014 406.6 122.7 116.2 70.6 12.9 10.4 Relative* 2.2 (7.0) (13.1) 2015 403.4 109.4 107.8 70.1 13.0 10.5 * % Relative to local index Analyst 2016e 390.0 102.8 101.0 64.5 14.1 11.2 Fiona Orford-Williams 2017e 397.5 108.3 106.6 68.0 13.4 11.0
Sector: Food & drink Evolva (EVE) Price: CHF0.66 Market cap: CHF263m INVESTMENT SUMMARY Forecast net cash (CHFm) 51.5 Forecast gearing ratio (%) N/A Evolva has an innovative fermentation platform focused on developing new production Market Swiss Stock Exchange methods for nutritional and consumer health products. Evolva's key programme for the Share price graph (CHF) stevia sweeteners, partnered with Cargill, has recently been delayed due to production issues encountered in the scale-up process. We estimate the delay will be c 18 months and hence we now expect launch during 2018. Evolva also has a vanillin project (partnered with IFF, on market) and projects for resveratrol, nootkatone, valencene (all on market) and saffron. It has various alliances, including with L'Oreal, Ajinomoto and Valent BioSciences. Evolva had a cash position of CHF83m at December 2015.
INDUSTRY OUTLOOK
The manufacturers of nutritional and consumer health products are always interested in Company description cheaper production methods, especially if the product is natural and has health benefits. Evolva is Swiss high tech fermentation Evolva is primarily targeting this market. company. It has a proprietary yeast technology platform, which it uses to create and manufacture high-value speciality molecules for nutritional and consumer products.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (CHFm) (CHFm) (CHFm) (CHFc) (x) (x) % 1m 3m 12m Actual (25.0) (22.4) (55.1) 2014 10.7 (19.4) (21.2) (6.4) N/A N/A Relative* (27.4) (20.8) (48.2) 2015 13.4 (30.3) (32.1) (8.0) N/A N/A * % Relative to local index Analyst 2016e 12.8 (33.8) (34.7) (8.7) N/A N/A Sara Welford 2017e 20.8 (30.9) (34.9) (8.8) N/A N/A
Edison Insight | 28 April 2016 34 Sector: Technology Expert System (EXSY) Price: €2.13 Market cap: €53m INVESTMENT SUMMARY Forecast net debt (€m) 7.7 Forecast gearing ratio (%) 35.0 As part of its continued internationalisation, Expert System announced in March 2016 that it Market Borsa Italiana has expanded its footprint in the United States with the addition of two new research and Share price graph (€) development labs in Washington, DC and Silicon Valley. In April 2016 it was named as a finalist for the 2016 SIIA CODiE Awards in the Best Text Analytics & Semantic Technology and Best Metadata Management categories, further demonstrating the depth of Expert System's technological capabilities.
INDUSTRY OUTLOOK
Natural language understanding (NLU) is a key part of understanding unstructured data. It can be applied to many verticals in a range of different applications. Enterprise search is just one application and Gartner estimates it had a market size of $1.7bn in 2013 and will Company description grow at 11.2% CAGR to $2.6bn in 2017. NB: FY14 was the first year that results were Expert System's patented technology prepared on a consolidated basis, making direct comparisons with FY13 difficult. extracts information from unstructured text using semantic-based techniques. It applies this to verticals including enterprise search, customer experience management, advertising and big data analytics.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 1.8 6.0 (4.6) 2013 11.1 2.0 0.5 0.8 266.3 16.2 Relative* 1.8 7.7 16.6 2014 13.0 2.3 0.6 0.1 2130.0 63.6 * % Relative to local index Analyst 2015e 19.0 1.3 (1.0) (3.1) N/A 22.1 Eric Opara 2016e 28.8 4.3 1.8 4.6 46.3 12.5
Sector: Property Fair Value REIT (FVI) Price: €6.81 Market cap: €96m INVESTMENT SUMMARY Forecast net debt (€m) N/A Forecast gearing ratio (%) N/A FY15 saw a strong profit improvement on both an IFRS basis and an underlying EPRA (or Market FRA FFO) basis. IFRS net attributable profit was €6.6m (2014: nil), or €6.4m (€0.52 per share) Share price graph (€) on an EPRA basis, up from €4.4m. EPRA basis NAV was €8.36 per share and the €0.25 per share dividend was fully covered by the German GAAP accumulated profit. 2015 earnings growth was not quite as strong as indicated by management guidance (between €6.9m and €7.2m on an EPRA basis) but since the beginning of the current year long-term leases have been agreed, reducing vacancies by a third. Management expects EPRA earnings of €10.5-10.8m this year before minority interests, and of €6.2-6.5m after minority interests, while targeting an unchanged dividend. The REIT equity ratio of 59.6% implies the capital strength for additional accretive acquisitions, despite the recent refinancing of the convertible bond with lower cost bank debt. We will reinstate our estimates soon. Company description INDUSTRY OUTLOOK Fair Value REIT (FVI) is a real estate investment trust focused on retail and office commercial properties in The German commercial real estate market benefits from continued low interest rates, a German regional centres. As at 31 dearth of attractive yield-generating investment alternatives and the comparative stability of December 2015 it managed c 272,000sqm spread across 40 the economy. properties, with a market value of €300m. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (1.5) (1.3) (16.2) 2014 30.1 14.7 4.4 47.2 14.4 5.9 Relative* (5.2) (7.1) (4.1) 2015 29.8 12.5 6.4 52.0 13.1 10.6 * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Martyn King 2017e N/A N/A N/A N/A N/A N/A
Edison Insight | 28 April 2016 35 Sector: General retailers Findel (FDL) Price: 170.0p Market cap: £147m INVESTMENT SUMMARY Forecast net debt (£m) 210.2 Forecast gearing ratio (%) 213.0 Findel's pre-close statement confirmed that the group will meet full-year earnings and net Market LSE debt expectations. Management has successfully addressed issues relating to stock Share price graph (p) shortages, credit management and marketing. Currency headwinds and a competitive market remain challenges for Express but Q4 product sales performance was encouraging. The project to restructure Education's logistics has started well and it has stabilised its market share in its UK Schools brands. We value Findel at c £3 per share.
INDUSTRY OUTLOOK
The ONS reports that retail sales volumes in February were 3.8% greater than in February 2015. Persistent price deflation meant that retail sales values increased only 1.4% annually. Online sales in February were 12.3% higher than in the equivalent period a year ago, Company description suggesting that the background for Express remains positive. The environment for Findel comprises three companies: the Education is likely to prove less supportive which is why management is focusing on home shopping business, Express Gifts; specialist online sports retailer, self-help measures to restore performance. Kitbag; and education supplies business Findel Education.
Y/E Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (9.2) (12.8) (25.9) 2014 402.2 43.3 24.8 23.7 7.2 5.5 Relative* (10.6) (18.2) (18.6) 2015 406.9 45.1 27.7 25.8 6.6 7.5 * % Relative to local index Analyst 2016e 406.1 44.3 25.0 24.2 7.0 66.7 David Stoddart 2017e 423.8 46.2 27.9 26.5 6.4 4.6
Sector: Technology Fusionex International (FXI) Price: 175.0p Market cap: £83m INVESTMENT SUMMARY Forecast net debt (RMm) N/A Forecast gearing ratio (%) N/A Big data software is forecast to show dramatic growth over the coming years and Market AIM Fusionex’s GIANT product has been built to address a large proportion of the market. The Share price graph (p) ongoing flow of contract wins show that GIANT is a widely applicable and credible product and the announcement at the start of March of the strategic alliance with Cloudera reinforces this further. The FY15 results showed that this is being reflected in the revenues, although the shift in sales mix from direct towards indirect has led to a significant increase in working capital. The recent trading update confirmed trading was in line with market expectations and this should go some way towards restoring the market's faith in the company.
INDUSTRY OUTLOOK
Company description Business intelligence newsflow, particularly in relation to big data, continues to be bullish Fusionex International is a software with more deals being done in the VC-funded space and larger software players continuing business providing data management, business intelligence and analytics to acquire. products, including GIANT, a big data analytics software.
Y/E Sep Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (RMm) (RMm) (RMm) (sen) (x) (x) % 1m 3m 12m Actual (4.9) (11.6) (47.8) 2014 57.1 25.8 21.4 42.08 23.2 16.2 Relative* (6.4) (17.1) (42.6) 2015 77.0 33.2 26.3 53.28 18.3 32.1 * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Ian Robertson 2017e N/A N/A N/A N/A N/A N/A
Edison Insight | 28 April 2016 36 Sector: Mining Galaxy Resources (GXY) Price: A$0.43 Market cap: A$544m INVESTMENT SUMMARY Forecast net debt (A$m) 10.5 Forecast gearing ratio (%) 9.0 Both mining and processing operations have commenced at Mt Cattlin. The immediate Market ASX focus on restart (through to early May 2016) is on the commissioning of various sections of Share price graph (A$) the processing circuit. The base case throughput rate is 800,000tpa ore by the end of June. First delivery of concentrate remains on target for July/August 2016. Under the terms of the Mt Cattlin Acquistion and Development agreement, GMM has now qualified for a 14% equity interest and 50% equity interest in the project. GXY will retain a 50% equity and operating interest. In exploration drilling at Mt Cattlin, the presence of spodumene in pegmatites at depth indicates scope for a large mineralising system, open in all directions.
INDUSTRY OUTLOOK
Company description Mitsubishi Corporation has a four-year contract, with an option for a one-year extension, to Galaxy Resources (GXY) has market up to 100% of the lithium concentrate produced at Mt Cattlin. Mitsubishi is one of the substantial in-house IP in lithium and a 40+ battery-materials customer base. world's largest lithium product traders. Its main focus is the development of its integrated Sal de Vida lithium and potash brine project in Argentina.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual 72.0 109.8 1333.3 2013 32.2 (27.4) (60.3) (8.2) N/A N/A Relative* 69.8 96.7 1472.2 2014 0.2 (5.2) (13.9) (1.3) N/A N/A * % Relative to local index Analyst 2015e 0.7 (2.3) (3.6) (0.3) N/A N/A Peter Chilton 2016e 4.1 1.1 0.7 0.1 430.0 432.8
Sector: Travel & leisure Gaming Realms (GMR) Price: 20.5p Market cap: £53m INVESTMENT SUMMARY Forecast net cash (£m) 0.7 Forecast gearing ratio (%) N/A Gaming Realms launched BGTGames.com in April 2016 as part of its previously Market AIM announced three-year agreement with FremantleMedia. The deal enables the development Share price graph (p) of gaming content under the 'Britain's Got Talent' and 'The X Factor' brands. The launch, which is being backed with a significant marketing campaign, has been timed to coincide with the start of this year's BGT series. The site includes a bespoke BGT branded version of Gaming Realms' leading game, Slingo and is designed to attract new players to the successful Slingo format.
INDUSTRY OUTLOOK
Over 70% of GMR's players are using mobile and tablet devices, well ahead of the industry average. Digital Spy estimates that total mobile data usage is growing at 70% pa, driven by Company description 4G proliferation, and that 25% of mobile time is spent playing games or listening to music, Gaming Realms creates, develops and according to InMobi. GMR is also hoping to expand the current UK online slot market of markets interactive next-generation online gambling games delivered via 1.73m players into the relatively untapped 12m adult social games market. mobile, tablet and desktop computers. It listed on AIM via a reverse takeover (of Pursuit Dynamics) in August 2013.
Y/E Sep / Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 5.1 0.0 (39.3) 2013 0.9 (2.3) (2.4) (6.7) N/A N/A Relative* 3.5 (6.2) (33.3) 2014 11.2 (7.8) (8.4) (5.0) N/A N/A * % Relative to local index Analyst 2015e 21.5 (4.0) (5.0) (2.2) N/A N/A Eric Opara 2016e 42.5 1.4 0.5 0.1 205.0 N/A
Edison Insight | 28 April 2016 37 Sector: Technology GB Group (GBG) Price: 288.8p Market cap: £358m INVESTMENT SUMMARY Forecast net cash (£m) 3.8 Forecast gearing ratio (%) N/A GB Group’s (GBG) CEO Richard Law has announced his intention to retire. He will remain Market AIM at GBG for as long as required to ensure a smooth transition to a new CEO once appointed. Share price graph (p) He will be leaving the group in good shape; 27% of revenues are now from the strategically important international markets and the year-end trading update points to strong momentum, with FY16 EBITA 11% ahead of our forecasts.
INDUSTRY OUTLOOK
Growth in internet trading, regulatory pressure and the need for money-laundering, age and anti-fraud checks are behind growing interest in increasingly complex and comprehensive verification of personal data. The scope and financial impact of global fraud and cyber crime is growing. The requirement of organisations and governments to invest in technologies and Company description compliance solutions to combat these issues should also increase to outpace this threat. GB Group has complementary identity (ID) intelligence offerings of verification, capture, maintenance and analysis, enabling companies to identify and understand their customers.
Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 10.6 16.4 54.4 2014 41.8 7.8 7.1 4.8 60.2 33.8 Relative* 8.9 9.2 69.6 2015 57.3 11.8 10.5 6.7 43.1 29.4 * % Relative to local index Analyst 2016e 76.0 13.4 11.8 7.3 39.6 28.4 Bridie Barrett 2017e 89.0 16.3 14.6 9.0 32.1 22.9
Sector: Technology GFT Group (GFT) Price: €22.12 Market cap: €582m INVESTMENT SUMMARY Forecast net debt (€m) 12.6 Forecast gearing ratio (%) 9.0 GFT has acquired WG Systems, which trades as Habber Tec Brazil, from Habber Tec Market FRA International Group for an undisclosed sum. Founded in 2000, Habber Tec Brazil Share price graph (€) specialises on the implementation and ongoing support of business process management (BPM), big data, analytics and mobile solutions and is Brazil’s largest IBM partner for BPM. It adds expertise in BPM integration and mobile solutions, especially in the fields of credit and digital banking applications. In 2015, it generated revenues of R22.4m (c €5.4m), of which financial services accounted for c 60%. FY16 revenues are expected to grow by c 29% to c R29m (c €7m). Habber Tec Brazil has c 105 employees, and therefore takes GFT's headcount to c 4,155, including 559 in Brazil. We will incorporate the transaction into our forecasts following the Q1 results on 12 May. In our view, if management can continue to maintain the momentum, the stock looks attractive, trading on c 17x our FY17e EPS. Company description INDUSTRY OUTLOOK GFT Group is a global technology services and recruitment business primarily focused on banks and GFT provides consulting and IT services, primarily to commercial and investment banks. It insurance companies. benefits from high levels of IT spending and complex business requirements in the financial services industry. It also benefits from favourable outsourcing trends in banking and has integrated near/farshore hubs in Spain, Poland and Brazil. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (1.2) (18.7) 22.3 2014 279.2 35.2 30.8 96.2 23.0 24.9 Relative* (4.9) (23.5) 40.0 2015 373.5 45.5 38.7 119.5 18.5 10.8 * % Relative to local index Analyst 2016e 410.0 48.6 40.7 120.6 18.3 12.0 Richard Jeans 2017e 451.0 53.3 45.4 125.8 17.6 10.9
Edison Insight | 28 April 2016 38 Sector: Investment companies GLI Finance (GLIF) Price: 31.6p Market cap: £73m INVESTMENT SUMMARY Forecast net debt (£m) 39.5 Forecast gearing ratio (%) 43.0 GLI Finance (GLI) is undertaking a strategic review to determine the best utilisation of its Market LSE human and capital resources. It has set its strategic objective as investing and operating in Share price graph (p) niche or complementary SME lending segments. It is only part way through its review and has already identified four electronic platforms which it believes have the ability to grow significantly. It has reiterated its intention to pay an annual dividend of 2.5p per share and for Q116 it declared a divided of 0.625p per share. It will hold an AGM on 19 May 2016 in which shareholders will be asked for approval for the company to be no longer classified as an investing company under AIM rules. Our detailed forecasts are currently under review.
INDUSTRY OUTLOOK
GLI's main exposure is to UK SMEs where economic trends are generally positive and bank Company description lending appetite remains subdued. There is considerable interest from institutional and retail GLI Finance (GLIF) is a Guernsey investors to invest in alternative finance loans, which could help GLI expand its asset domiciled company, which has equity in a number of specialist providers of management business (Amberton Asset Management) and grow its platforms. SME financing, including marketplace and balance sheet lenders, and aggregators.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 6.8 (11.9) (45.8) 2014 13.4 N/A 6.7 4.71 6.7 N/A Relative* 5.1 (17.3) (40.5) 2015 0.2 N/A (9.5) (4.62) N/A N/A * % Relative to local index Analyst 2016e 9.1 N/A 1.6 0.68 46.5 N/A Peter Thorne 2017e N/A N/A N/A N/A N/A N/A
Sector: Alternative energy Global Bioenergies (ALGBE) Price: €23.80 Market cap: €75m INVESTMENT SUMMARY Forecast net debt (€m) 4.5 Forecast gearing ratio (%) 87.0 Global Bioenergies (GBE) continues to progress towards commercialisation of its isobutene Market Alternext Paris programme. Having delivered first batches of commercial isobutene and liquid fuels to its Share price graph (€) partners ahead of schedule, GBE has announced its first commercial licensing deal. Its first joint venture with Cristal Union targets an industrial plant by 2018, which should underpin confidence in the business model. FY15 results were in line with our expectations and showed continued progress in scaling up. GBE reported an operating loss of €12m. Cash burn was €5.5m as capex is peaking now with the build of the second demo plant in Leuna, Germany. We estimate the company is funded into 2017. GBE has announced that it has achieved 99.77% purity on its isobutene, which enables it to access a wider range of applications.
INDUSTRY OUTLOOK Company description Global Bioenergies is in the scale-up Global Bioenergies is developing bioprocesses to convert renewable resources into some of stage to convert renewable resources into isobutene, the first of a number of the most widely used petrochemical building blocks. Its first successes have been in olefins that will be out-licensed to isobutene, butadiene and propylene, which it intends to replicate with other olefins, the key partners once the process is proved in an industrial pilot. molecules for the petrochemical industry, currently derived exclusively from fossil fuels.
Y/E Jun / Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 19.6 (1.7) (31.6) 2014 3.2 (9.0) (9.2) (2.93) N/A N/A Relative* 16.3 (6.5) (22.4) 2015 2.2 (11.0) (12.2) (3.96) N/A N/A * % Relative to local index Analyst 2016e 4.7 (9.4) (10.9) (2.93) N/A N/A Catharina Hillenbrand-Saponar 2017e 11.6 (3.3) (4.9) (1.25) N/A N/A
Edison Insight | 28 April 2016 39 Sector: Property Globalworth Real Estate Investments (GWI) Price: €5.07 Market cap: €320m INVESTMENT SUMMARY Forecast net debt (€m) 394.6 Forecast gearing ratio (%) 80.0 The Q415 trading update showed EPRA NAV per share increased 12% to €9.08 during Market AIM 2015. We estimate that EPRA net assets grew c 17% before the impact of share issuance. Share price graph (€) The appraised value of the portfolio including developments increased 55% to €931m, spread over 15 investments in Romania vs 11 at the end of 2014. Average occupancy also rose to 85.1% in 2015 vs 77.2% in 2014. All developments are progressing to plan and the flagship asset, Globalworth Tower in central Bucharest, is now complete and c 60% let. LTV was 44.3% as at 31 December 2015. We expect the full results to be released in June. Despite the progress reported, the shares have continued to drift lower on light volume, and are trading at a c 45% discount to NAV.
INDUSTRY OUTLOOK
Company description The Romanian economy is performing well with the IMF expecting 4.2% growth in 2016. Globalworth Real Estate Investments Demand for quality, modern commercial property (GWI's focus) continues to outstrip supply, is incorporated in Guernsey. It is a real estate investment company focused on creating potential for NAV to benefit from a convergence of property yields towards those opportunities in South-East Europe seen in more established CEE capitals. and the CEE, but primarily Romania, which accounts for the entire current portfolio.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (0.5) (12.1) (11.4) 2013 5.3 3.2 3.0 30.6 16.6 138.6 Relative* (2.0) (17.6) (2.6) 2014 12.9 (1.7) (9.4) (21.0) N/A N/A * % Relative to local index Analyst 2015e 28.1 15.4 (3.0) (5.3) N/A 15.4 Martyn King 2016e 40.7 28.4 9.2 14.5 35.0 10.2
Sector: Technology GO internet (GO) Price: €1.61 Market cap: €10m INVESTMENT SUMMARY Forecast net debt (€m) 6.1 Forecast gearing ratio (%) 121.0 GO internet’s (GO's) FY15 results reflect the steady expansion of its network. The rate of Market Borsa Italiana subscriber additions has slowed so far in FY16 which suggests GO is moderating marketing Share price graph (€) and network roll-out until it has secured additional funding. It has confirmed plans for a €4m capital increase and a €4m convertible bond, although the timing is not clear. In the meantime, GO’s majority shareholder, FC Gold, has issued a ‘Comfort Letter’ saying it will provide funding instalments up to €2m by 31 December 2016.
INDUSTRY OUTLOOK
The Italian broadband market is relatively underpenetrated and with no cable alternative to incumbent TI, opportunities exist for niche providers. GO internet, with its low-cost wireless service, is targeting the one million 'mobile-only' homes in the Emilia-Romagna and Marche Company description regions of Italy that are increasingly opting to relinquish their expensive fixed-line services. GO internet provides internet and telephone services using 4G wireless technology. The service is currently offered in the Emilia-Romagna and Marche regions of Italy, where GO has an exclusive right of use for 42MHz in the 3.5GHz frequency band (4G).
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (7.3) (22.7) (57.2) 2014 3.9 1.4 0.1 0.67 240.3 4.3 Relative* (7.3) (21.5) (47.7) 2015 5.1 2.0 0.3 5.07 31.8 4.7 * % Relative to local index Analyst 2016e 6.8 3.0 0.5 6.07 26.5 3.2 Bridie Barrett 2017e 8.4 3.9 0.8 9.30 17.3 2.5
Edison Insight | 28 April 2016 40 Sector: Oil & gas Green Dragon Gas (GDG) Price: 260.0p Market cap: £406m INVESTMENT SUMMARY Forecast net debt (US$m) N/A Forecast gearing ratio (%) N/A GDG's 2015 results continue to demonstrate strong revenue and cash performance, and a Market LSE maiden profit for the group. The company's focus remains on capital discipline, operational Share price graph (p) efficiency and maximising the returns from the existing well stock. Discretionary capex could accelerate development and 1P reserves growth, although this will require funding. RBL debt remains the most likely long-term funding route for GDG although this is linked to ODP submission, likely in H216 for GSS and GCZ. GDG is also considering equity and farm-outs to accelerate development and increase stock liquidity. Dividends are also not far off, with GDG announcing it will partially return cash flow to investors from fields that are net cash flow positive, rather than waterfall these automatically into further development/exploration. Our forecasts are under review.
INDUSTRY OUTLOOK Company description Green Dragon Gas is one of the Despite medium-term pricing pressure in the downstream sector in China, domestic CBM is largest independent companies involved in the production and sale of still likely to generate particularly attractive returns. CBM gas in China.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (11.9) 26.8 (24.4) 2014 33.8 11.4 (6.2) 0.0 N/A 827.1 Relative* (13.2) 19.0 (16.9) 2015 32.7 20.1 (0.1) 0.0 N/A 46.7 * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Sanjeev Bahl 2017e N/A N/A N/A N/A N/A N/A
Sector: Food & drink Greggs plc (GRG) Price: 1037.0p Market cap: £1049m INVESTMENT SUMMARY Forecast net cash (£m) 43.2 Forecast gearing ratio (%) N/A Greggs’ appeal lies in the combination of its relatively low-risk business model and its return Market LSE to strong earnings growth in the past two years. It is in the middle of a strategic plan that Share price graph (p) has delivered impressive financial results and has the financial strength to complete that programme. We value Greggs at 1,158p per share.
INDUSTRY OUTLOOK
Greggs is pursuing these self-improvement measures against the background of an expanding market. The Project Café2016 UK report from Allegra World Coffee Portal valued the total UK coffee shop market in 2015 at £7.9bn. That was 10% higher than in 2014. The branded segment that includes Greggs accounted for £3.3bn of this. Encouragingly, Allegra, which has studied this market for many years, estimates that it could reach £15bn by 2025. Company description Greggs is a UK-based bakery food on-the-go retailer. It owns approximately 1,650 shops, nine regional bakeries and two distribution centers. It has 45 franchised shops operating in travel and other convenience locations.
Y/E Jan Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (6.1) 4.3 (4.3) 2014 806.1 95.6 58.3 44.0 23.6 9.6 Relative* (7.5) (2.2) 5.1 2015 835.7 113.3 73.0 57.0 18.2 8.7 * % Relative to local index Analyst 2016e 881.8 122.0 77.1 60.1 17.3 9.1 David Stoddart 2017e 941.5 132.3 84.8 66.2 15.7 7.6
Edison Insight | 28 April 2016 41 Sector: Travel & leisure GVC Holdings (GVC) Price: 523.5p Market cap: £1528m INVESTMENT SUMMARY Forecast net debt (€m) N/A Forecast gearing ratio (%) N/A GVC’s 2015 final results showed revenue and adjusted EBITDA both up 10% to €248m and Market AIM €54m respectively, marking its fifth successive year of revenue, adjusted EBITDA and Share price graph (p) dividend growth. The accompanying trading update showed group wide revenues up 13% (ytd to 20 April on a constant currency basis), while also revealing that GVC has wasted no time in beginning the challenge of reinvigorating the bwin.party business. Cost synergies are on track and bwin.party brands are showing growth across all verticals including poker, which showed its first y-o-y quarterly growth in five years in Q1. We are currently reviewing our forecasts.
INDUSTRY OUTLOOK
The global online gambling market is forecast to grow at a CAGR of 8.7% (2014-2020) to Company description $53bn (H2 Gambling Capital). Sports betting is the largest segment and is forecast to grow GVC Holdings is a leading provider of at a CAGR of 6%, to $23.3bn. Industry consolidation is underway partly due to economies B2B and B2C services to the online gaming and sports betting markets. It of scale and new taxes/costs in regulating markets, including GVC/bwin and the proposed announced a recommended bid for mergers of Ladbrokes/Gala Coral and Betfair/Paddy Power. bwin.party digital entertainment (‘bwin.party’ or ‘bwin’) on 4 September.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 3.6 15.2 16.0 2014 224.8 49.2 41.3 61.4 10.7 N/A Relative* 2.0 8.1 27.4 2015 247.7 54.1 50.0 76.4 8.6 N/A * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Eric Opara 2017e N/A N/A N/A N/A N/A N/A
Sector: Oil & gas High Peak Royalties (HPR) Price: A$0.07 Market cap: A$11m INVESTMENT SUMMARY Forecast net debt (A$m) N/A Forecast gearing ratio (%) N/A HPR announced on 2 February that pre-conditions for the South Taranaki Energy Project Market ASX (STEP) transaction had not been met. HPR had entered into a participation agreement in Share price graph (A$) October 2015 with Mosman Oil and Gas (MSMN:AIM) to respectively acquire 30%/70% of the STEP assets from Origin (ORG:ASX). The agreement contained a price review event that was triggered and completion of sale was also subject to approvals from the NZ Petroleum and Minerals (NZPAM) for the transfer of permit title and Overseas Investment Office (OIO). HPR continues to look to partner with capable operators to secure royalties over high value producing assets and leverage its capital and structuring expertise.
INDUSTRY OUTLOOK
Oil prices have been volatile but have improved. HPR has commented that evaluating Company description royalty investment opportunities and carrying out due diligence in such a rapidly changing High Peak Royalties has been environment is challenging. However, the low oil price environment can create established to generate income from royalties. Currently all its royalties, opportunities. current and projected, relate to oil and gas permits. In the future, it may acquire royalty streams from other areas such as the mining sector.
Y/E Jun Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual 4.7 (10.7) (33.0) 2013 0.3 (0.7) (0.8) (0.6) N/A N/A Relative* 3.3 (16.2) (26.5) 2014 0.3 (1.0) (1.2) (2.6) N/A N/A * % Relative to local index Analyst 2015e N/A N/A N/A N/A N/A N/A Peter Chilton 2016e N/A N/A N/A N/A N/A N/A
Edison Insight | 28 April 2016 42 Sector: Support services Hogg Robinson Group (HRG) Price: 64.0p Market cap: £208m INVESTMENT SUMMARY Forecast net debt (£m) 49.0 Forecast gearing ratio (%) 79.0 Ahead of full-year results on 24 May, February's IMS confirmation of second-half trading Market LSE resilience should not surprise as Hogg Robinson Group (HRG) proved its mettle in the Share price graph (p) recession thanks to its predominantly managed income and strict cost control. In the four months to January, constant currency revenue was flat, much as in H1, in broadly unchanged conditions. Management continues to deliver on key initiatives despite market pressures, notably growth in managed travel and software-as-a-service (Fraedom), as well as restructuring and cash generation. The company is securely funded and committed to a progressive dividend policy (FY16e cover of 2.8x).
INDUSTRY OUTLOOK
While not correlating strictly with HRG’s business, international trade is a useful market Company description indicator in view of its influence on corporate travel and its reflection of business confidence. Hogg Robinson is an international IATA expects limited growth owing to political and economic risks. A structural move by corporate services company, specialising in travel, expenses and clients to online channels and automated servicing tools to make their travel arrangements data management. is viewed as positive over the long term by the major travel management companies as it gives clients what they want and should be cost-effective.
Y/E Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 3.2 (4.8) 41.4 2014 340.8 60.2 35.8 7.79 8.2 3.9 Relative* 1.6 (10.7) 55.4 2015 330.1 53.4 30.5 6.57 9.7 5.2 * % Relative to local index Analyst 2016e 321.0 55.5 32.0 7.00 9.1 5.0 Richard Finch 2017e 330.0 58.5 35.0 7.65 8.4 4.6
Sector: Oil & gas Hurricane Energy (HUR) Price: 14.0p Market cap: £89m INVESTMENT SUMMARY Forecast net cash (£m) 11.8 Forecast gearing ratio (%) N/A Hurricane's main asset is the 200mmbo Lancaster basement oil field West of Shetlands. A Market AIM key outcome of the company's funded 2016 well programme will be delineating the Share price graph (p) Lancaster resource base to be targeted for EPS development. Firming up of volumes, development concept and project economics should provide the basis for farm-out, taking the much anticipated Lancaster development through to EPS first-oil in 2019. A £52m fund raise, announced on 18 April, was carried out at a 46% premium to the market and will provide capital for the ‘Lancaster 7 wells’ drilling programme – a vertical Pilot Well and horizontal production test.
INDUSTRY OUTLOOK
Fractured basement is seen as an unusual play in the UK, although basement reservoirs Company description have been producing for decades, eg in Vietnam and Yemen. Hurricane recently Hurricane is an E&P focused on UKCS announced the appointments of former Petroceltic, Global Petroleum and Oyster Petroleum fractured basement exploration. It owns 100% in three licences, including chairman, Robert Arnott, as its new chairman, and former founder and CFO of Volga Gas, the 207mmboe Lancaster discovery. It Alistair Stobie, as its new CFO. is currently engaged in a farm-out process to fund an Early Production System (EPS).
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 25.8 41.8 0.0 2014 0.0 (8.5) (9.0) (1.4) N/A N/A Relative* 23.9 33.1 9.8 2015 0.0 (5.4) (5.5) (0.9) N/A N/A * % Relative to local index Analyst 2016e 0.0 (4.6) (4.5) (0.5) N/A N/A Sanjeev Bahl 2017e 0.0 (4.6) (4.6) (0.5) N/A N/A
Edison Insight | 28 April 2016 43 Sector: Technology ifa systems (IS8) Price: €10.59 Market cap: €29m INVESTMENT SUMMARY Forecast net debt (€m) N/A Forecast gearing ratio (%) N/A As the leader in the German market, ifa systems has an established position in the Market FRA expanding international market for ophthalmology software and clinical decision support Share price graph (€) systems. It is well placed to gain from the expected growth in this area in the US, Latin America, China and the Middle East. The successful offer for 50.1% of the shares by the Japanese optometry and ophthalmology leader, Topcon opens up interesting and exciting global opportunities for ifa and its remaining shareholders.
INDUSTRY OUTLOOK
The outlook for healthcare IT is strong and even though there may be some slippage in regulatory deadlines, the industry is set for continued solid growth - although specialist players with key market exposures could see growth significantly ahead of that of the Company description industry as a whole. As the leader in the German market, ifa systems has an established position in the expanding international market for ophthalmology software and clinical decision support 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 2.1 (0.9) (4.2) 2013 7.8 2.6 1.5 41.7 25.4 6.9 Relative* (1.7) (6.7) 9.6 2014 8.1 3.3 2.4 60.6 17.5 7.8 * % Relative to local index Analyst 2015e N/A N/A N/A N/A N/A N/A Ian Robertson 2016e N/A N/A N/A N/A N/A N/A
Sector: Financials IFG Group (IFG) Price: €2.18 Market cap: €230m INVESTMENT SUMMARY Forecast net cash (£m) 34.8 Forecast gearing ratio (%) N/A IFG’s focus on core businesses and its investment for franchise growth showed in the 2015 Market Irish Stock Exchange, LSE results with growth in clients, assets and revenues, as well as meaningful profit growth. Share price graph (€) James Hay appears to have reached an inflexion point where the benefits of past investment were clearly seen in margin expansion and strong revenue growth of 19%. 12,000 new SIPP accounts were added and cost growth was well below revenue growth at 10%, generating a 70% increase in adjusted operating profit. Saunderson House grew revenues by 12%, won 243 new clients in the year and continues to have good retention rates. We have increased our forecasts and fair value slightly.
INDUSTRY OUTLOOK
The UK SIPP market is expected to deliver long-term, double-digit growth, driven by an Company description ageing population, greater self-provision and higher tax rates. In the short term we see IFG provides financial services, evolving customer and regulatory requirements requiring investment and higher compliance comprising a platform for retirement wealth planning and personal advisory costs. business primarily operating in the UK. Through James Hay Partnership it is one of the largest UK platform providers.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 7.5 4.5 11.9 2014 65.1 10.3 7.8 5.61 30.9 22.4 Relative* 8.5 8.4 14.7 2015 71.3 14.0 11.5 8.26 21.0 13.2 * % Relative to local index Analyst 2016e 79.5 16.8 13.3 9.77 17.7 10.9 Andrew Mitchell 2017e 85.2 18.8 14.8 11.11 15.6 9.6
Edison Insight | 28 April 2016 44 Sector: General industrials Intelligent Energy Holdings (IEH) Price: 12.5p Market cap: £24m INVESTMENT SUMMARY Forecast net debt (£m) N/A Forecast gearing ratio (%) N/A Discussions regarding the securing of funding, which were originally expected to complete Market LSE by end of calendar Q116, are still ongoing. While there is no certainty that these Share price graph (p) negotiations will be successful, management expects to finalise them shortly. We place our estimates under review until there is greater clarity on the situation.
INDUSTRY OUTLOOK
Management is undertaking a material restructuring of the business in order to significantly reduce costs and cash burn. It is focusing activity on the most immediate and material market opportunities. These are primarily based on its power dense sub 1W to 20kW air cooled fuel cell technologies which are suitable for use in distributed power and generation systems and in auxiliary power units and range extenders for a range of markets including Company description drones and motive applications. Intelligent Energy develops efficient hydrogen fuel cell power systems for the distributed power and generation markets (DP&G division), global automotive (Motive division) and consumer electronics (CE division).
Y/E Sep Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (71.3) (65.3) (87.1) 2014 13.6 (52.4) (58.0) (30.4) N/A N/A Relative* (71.7) (67.4) (85.9) 2015 78.2 (48.8) (52.1) (21.5) N/A N/A * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Anne Margaret Crow 2017e N/A N/A N/A N/A N/A N/A
Sector: Consumer support services International Greetings (IGR) Price: 175.5p Market cap: £104m INVESTMENT SUMMARY Forecast net debt (£m) 26.0 Forecast gearing ratio (%) 37.0 The year-end trading update indicates that International Greetings (IGR) ended FY16 Market AIM strongly in all its geographic regions, with good momentum into the new financial year. Share price graph (p) FY16 earnings per share will be at least 13.0p (Edison forecast: 12.1p). Cash performance was also well ahead, with deleveraging comfortably outperforming our modelled outcome, which showed an end-March net debt figure of £26m. The full year dividend is to be recommended at 2.5p (our forecast: 2.0p). FY16 numbers and FY17 estimates will be revised up on publication of the full year numbers at end June, underlining the strong value in the shares at current levels.
INDUSTRY OUTLOOK
IGR operates in the global gift packaging market, which it estimates at £10bn at retail value, Company description equivalent to a trade value of around £3.2bn, giving it a c 7% share and making it the third International Greetings (IGR) is one of largest participant after American Greetings and Hallmark. In some of its sectors, overall the world's leading designers, innovators and manufacturers of gift volumes are showing limited growth and the low unit cost, high-volume nature of the packaging and greetings, social products makes maximising manufacturing efficiency key to building both margins and expression giftware, stationery and creative play products. market share. IGR's investments in China, the Netherlands and South Wales, and the planned investment in the US, give clear water over competitors on unit cost. 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 6.7 82.8 2014 224.5 16.4 8.1 9.1 19.3 7.4 Relative* 3.8 0.1 100.8 2015 229.0 16.9 9.6 11.8 14.9 5.7 * % Relative to local index Analyst 2016e 233.5 17.2 10.1 12.1 14.5 6.5 Fiona Orford-Williams 2017e 237.0 18.2 11.1 12.8 13.7 6.2
Edison Insight | 28 April 2016 45 Sector: Technology IQE (IQE) Price: 20.8p Market cap: £139m INVESTMENT SUMMARY Forecast net debt (£m) 25.5 Forecast gearing ratio (%) 17.0 IQE continues to make progress with regards to diversification. During March it received Market AIM record orders worth just over $3m, to be delivered over the next 12 months, for its indium Share price graph (p) antimonide and gallium antimonide substrate materials. These materials are used in a wide range of infrared detector technologies in consumer, defence, security, medical and industrial imaging applications. IQE has also joined a new consortium to establish a European-based production capability for mid-infrared photonics devices used for rapid detection of chemicals in liquids and gases. IQE's role will be to provide consortium partners and commercial customers with a volume source of epitaxial wafers.
INDUSTRY OUTLOOK
If the business progresses to plan, we should see revenues continue to diversify, cash Company description conversion improve and the balance sheet strengthen. With the company's rating at a IQE is the leading supplier of epitaxial substantial discount to its peers, we believe this should justify an upward re-rating in the compound semiconductor wafers globally. The principal applications shares. include radio frequency semiconductors, CPV solar cells and vertical cavity lasers.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 6.4 3.8 (7.8) 2014 112.0 27.0 16.2 2.42 8.6 9.1 Relative* 4.8 (2.7) 1.3 2015 114.0 29.0 17.6 2.60 8.0 6.6 * % Relative to local index Analyst 2016e 122.0 31.2 19.0 2.75 7.6 7.4 Anne Margaret Crow 2017e 127.8 34.5 21.9 3.16 6.6 4.3
Sector: Investment companies Is Yatirim (ISMEN) Price: TRY1.00 Market cap: TRY355m INVESTMENT SUMMARY Forecast net debt (TRYm) N/A Forecast gearing ratio (%) N/A Despite financial market volatility, Is Yatirim Menkul Degerler’s (ISY) investment banking Market BIST activities at its parent organisations held up well in 2015 on the back of good trading Share price graph (TRY) conditions, and actually increased profits by 8% y-o-y. However, there were a number of negatives in its subsidiary operations, which resulted in group net profits falling 36% to TRY40.5m for the year. ISY has a strong balance sheet and is committed to rewarding shareholders with high dividend payments. It has announced a dividend of Kr10.00 per share for 2015, which is lower than the Kr13.2 of the previous year but still represents a high yield of c.10%.
INDUSTRY OUTLOOK
The long-term potential for above-average growth in Turkish capital markets and ISY's Company description place in those markets remains; however, in the short term the markets will be affected by Is Yatirim Menkul Degerler (also many uncertainties. known as Is Investment) offers brokerage, corporate finance, investment advisory services and portfolio management services. It also advises on IPOs.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (TRYm) (TRYm) (TRYm) (Kr) (x) (x) % 1m 3m 12m Actual (6.5) (2.9) (9.4) 2014 372.4 N/A 100.5 17.7 5.6 N/A Relative* (11.0) (20.5) (11.6) 2015 377.5 N/A 33.7 11.4 8.8 N/A * % Relative to local index Analyst 2016e 415.9 N/A 56.5 13.8 7.2 N/A Peter Thorne 2017e 444.4 N/A 67.0 16.0 6.3 N/A
Edison Insight | 28 April 2016 46 Sector: General industrials Jersey Electricity (JEL) Price: 465.0p Market cap: £143m INVESTMENT SUMMARY Forecast net debt (£m) 37.4 Forecast gearing ratio (%) 24.0 Significant investment, particularly in interconnectors, has provided Jersey Electricity (JEL) Market LSE with a solid platform from which to deliver returns to shareholders and, at the same time, Share price graph (p) offer its customers attractive prices, improved security of supply and low-carbon electricity. FY15 operating profits rose by 39% vs FY14, which in turn had marked an improvement on the trough years of FY12 and FY13. Driving the improvement was a significant increase in the profitability of the core Energy business, where returns were boosted by a fall in electricity purchase costs, due to a rise in the use of cheaper imported electricity, and the additional return earned on the enlarged asset base. We expect a period of stable returns on an asset base that should continue to grow as JEL invests.
INDUSTRY OUTLOOK
Company description We expect the current regulatory regime to continue, enabling Jersey to earn a return of Jersey Electricity is the monopoly 6-7% on the electricity business asset base. supplier of electricity to the island of Jersey. It also operates businesses in retail, property and business services on the island.
Y/E Sep Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 0.0 (1.1) 15.5 2014 98.4 18.3 10.0 27.7 16.8 7.1 Relative* (1.5) (7.2) 26.9 2015 100.5 23.8 12.4 32.5 14.3 5.7 * % Relative to local index Analyst 2016e 101.7 23.9 12.1 31.5 14.8 6.0 Graeme Moyse 2017e 103.4 26.3 13.3 34.9 13.3 5.3
Sector: Technology K3 Business Technology Group (KBT) Price: 340.5p Market cap: £109m INVESTMENT SUMMARY Forecast net debt (£m) 5.8 Forecast gearing ratio (%) 8.0 K3 is acquiring DdD, a Danish point-of-sale (PoS) solution provider, for up to €10m/£7.9m Market AIM (€8.9m/£7.0m cash up-front and the remaining €1.1m/£0.9m contingent on performance Share price graph (p) post-acquisition). The company is raising £12.8m (net) from the issue of 4.1m shares at 330p per share to fund the deal and future product development. The acquisition adds proprietary retail software and should be complementary to K3’s existing retail software solutions. The deal, expected to be earnings enhancing in FY17, also expands K3’s presence in Northern Europe and offers cross-selling potential.
INDUSTRY OUTLOOK
K3 is Microsoft's biggest Dynamics partner in the UK, supplying the retail, distribution and manufacturing sectors. The company is seeing strong demand for its Retail AX solution Company description (ax¦is fashion), where it continues to invest in specialist product functionality. The K3 Business Technology provides Manufacturing & Distribution division is also seeing good demand for its SYSPRO and Microsoft- and Sage-based ERP solutions and managed services to hosting/managed services offerings. SMEs in the retail, distribution and manufacturing sectors.
Y/E Jun Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (2.7) (2.0) 51.0 2014 72.0 9.9 6.6 18.5 18.4 20.0 Relative* (4.2) (8.1) 65.9 2015 83.4 11.0 7.2 19.1 17.8 11.2 * % Relative to local index Analyst 2016e 87.5 13.5 9.4 23.3 14.6 12.2 Katherine Thompson 2017e 95.6 15.7 11.9 26.2 13.0 9.7
Edison Insight | 28 April 2016 47 Sector: Mining KEFI Minerals (KEFI) Price: 0.4p Market cap: £13m INVESTMENT SUMMARY Forecast net debt (£m) 3.3 Forecast gearing ratio (%) 31.0 Our valuation of KEFI has risen to 2.55p/sh (post-March equity funding) following the Market LSE announcement of the results of a PEA into the feasibility of an underground mine at Tulu Share price graph (p) Kapi to complement the initial open pit. Our valuation rises to 3.69p/sh in FY20 (equating to an EV of US$101/oz vs average discovery costs of less than US$10/oz overall) and could rise to 5.61p in the event that management can then leverage cash-flows into other value-enhancing exploration and development opportunities.
INDUSTRY OUTLOOK
KEFI intends to present a syndicate-approved financing plan at the company's AGM in June. To date, its preferred lenders have indicated non-binding terms for project finance including senior secured project loans of US$60m over six years. This follows Ethiopian Company description government confirmation of its plan to invest US$15-20m in return for a 20-25% minority KEFI Minerals has acquired and interest in the project and March's £1.75m equity raise, such that the only outstanding developed seven gold and base metal projects from its 31 licences in Turkey. funding tranche now is a streaming deal. Artvin is its flagship gold project and initial drilling was completed in January 2009. It also operates a gold exploration JV 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 25.0 37.1 (59.5) 2013 0.0 (0.9) (0.9) (0.4) N/A N/A Relative* 23.1 28.6 (55.5) 2014 0.0 (2.1) (2.6) (0.4) N/A N/A * % Relative to local index Analyst 2015e 0.0 (1.7) (1.8) (0.1) N/A N/A Charles Gibson 2016e 0.0 (2.0) (6.3) (0.2) N/A N/A
Sector: Technology Keywords Studios (KWS) Price: 261.0p Market cap: £141m INVESTMENT SUMMARY Forecast net cash (€m) 9.9 Forecast gearing ratio (%) N/A Keywords' 2015 full year results revealed a company transformed by a blend of strong Market AIM organic growth, supplemented by strategic M&A with revenues up 55% to €58.0m (c 20% Share price graph (p) organic). The company also announced three acquisitions in the last month including the purchase of localisation and audio company Synthesis for up to €18m, its largest to date. Its smaller acquisitions of Mindwalk and Ankama strengthen its capabilities in art production and community management respectively.
INDUSTRY OUTLOOK
The global video game market is estimated to be growing at a CAGR of 6.2% to 2018, and the market for outsourced services is growing ahead of the industry. We believe that Keywords' recent deals position it well to take advantage of the growth opportunities in the Company description sector. Success is increasingly being driven by developers’ ability to localise their content. Keywords Studios provides As a result, they are looking to external service providers to offer cost-efficient solutions that localisation, testing, artwork and community support services broaden games' appeal. exclusively to the video games industry. It provides services to 20 of the top 25 games developers.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 22.8 27.3 65.2 2014 37.3 6.0 5.1 8.5 38.7 61.5 Relative* 20.9 19.4 81.4 2015 58.0 9.5 8.0 12.5 26.3 33.8 * % Relative to local index Analyst 2016e 84.8 13.3 11.6 17.0 19.3 12.5 Eric Opara 2017e 98.9 15.8 13.9 20.2 16.3 11.9
Edison Insight | 28 April 2016 48 Sector: General industrials Kongsberg Automotive (KOA) Price: NOK6.48 Market cap: NOK2636m INVESTMENT SUMMARY Forecast net debt (€m) N/A Forecast gearing ratio (%) N/A Kongsberg Automotive’s (KA) Q116 results showed sales in line with guidance while Market Oslo operational improvements partly offset the increased R&D expenses as previously Share price graph (NOK) communicated. This continues to highlight the positioning of the group's transformation, with a focus on profitable growth businesses and investment in new product development. Q1 wins were €35m and a significant pipeline exists for Q2. With significant new project activity building up over the next two years particularly in new areas such as AMT, ABC couplings and seat comfort products. The disposal of the light duty cables business is also on schedule for completion during 2016, further refocusing the group.
INDUSTRY OUTLOOK
Kongsberg's exposure to the automotive and commercial vehicle markets is split 60% and Company description 40%, respectively. With some divergence by market and geography, KA is focused on Kongsberg Automotive is a global building a more global exposure, particularly towards BRIC countries. manufacturer of interior components (30% 2014 sales), driveline systems (26%), driver controls (19%) and fluid transfer products (25%), supplying the automotive and commercial vehicle markets.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (6.4) 11.5 5.4 2014 979.1 96.9 43.1 7.37 9.4 3.2 Relative* (6.6) 3.2 20.2 2015 1020.1 102.6 47.9 8.90 7.8 3.8 * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Roger Johnston 2017e N/A N/A N/A N/A N/A N/A
Sector: General industrials KTG Energie (KB7) Price: €9.53 Market cap: €68m INVESTMENT SUMMARY Forecast net debt (€m) 143.6 Forecast gearing ratio (%) 399.0 KTG is uniquely positioned in biogas as a profitable developer and operator with a Market FRA sustainable competitive advantage. A strong track record of organic growth and execution is Share price graph (€) now being complemented with acquisitions. This should drive revenue growth and margin expansion, with financing requirements remaining high. We note that the German credit rating agency Creditreform has downgraded KTG's rating to BB+ from BBB- (neg. watch) on the grounds of high leverage. This is not entirely unexpected, but shows that investors need to consider the balance sheet. The company reported solid FY14/15 results with an underlying EBITDA margin of 33%, 14% y-o-y EBITDA growth and an outlook in line with our expectations. Our fair value is €18 per share.
INDUSTRY OUTLOOK
Company description Biogas in Germany is regulated under the renewable energy law (EEG) of 2012 and 2014. KTG Energie develops and operates The broader context is the target of renewable accounting for 80% of gross electricity biogas facilities. The output is sold under the German renewable energy consumption by 2050 and 40-45% by 2025. The legislation governs priority offtake for all law at subsidised rates. renewable and feed-in tariffs, including biogas. It receives fixed feed-in tariffs for 20 years from commissioning. Output can also be fed directly into the gas grid or go into heating. Both are governed by the gas feed-in and combined heat and power laws. Y/E Oct Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (0.1) (12.6) (22.9) 2014 73.3 22.0 4.0 40.3 23.6 4.3 Relative* (3.8) (17.7) (11.7) 2015 92.8 25.0 4.6 40.5 23.5 2.4 * % Relative to local index Analyst 2016e 100.4 29.1 8.2 67.1 14.2 3.4 Catharina Hillenbrand-Saponar 2017e 107.9 31.3 10.0 81.9 11.6 3.1
Edison Insight | 28 April 2016 49 Sector: Consumer support services La Doria (LD) Price: €12.60 Market cap: €391m INVESTMENT SUMMARY Forecast net debt (€m) 111.0 Forecast gearing ratio (%) 46.0 La Doria is delivering on its overarching objective to reduce the volatility of the business and Market Borsa Italiana improve visibility. The updated three-year plan provides strategic continuity. The hot Share price graph (€) summer in Italy in 2015 resulted in unfounded fears of tomato overproduction at the start of the campaign, hence we forecast a fall in sales in 2016, although lower costs should mitigate the EBITDA impact. Q1 results are due to be published on 12 May.
INDUSTRY OUTLOOK
La Doria's strategic objectives, published as part of the updated three-year plan, remain broadly unchanged: the main priority is to expand the higher margin and less volatile parts of the business to reduce the dependence on the more unpredictable ‘red line’. There is a new target to develop the US market, which is a natural evolution of the strategy given the Company description company’s presence in the US, albeit small. The financial targets represent a small upgrade La Doria is the leading manufacturer of at the net profit level in relation to the previous three-year rolling plan. private-label preserved vegetables and fruit for the Italian (20% revenues) and international (80% revenues) market. It enjoys leading market share positions across its product ranges in the UK and Italy.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (3.1) 7.7 (12.6) 2014 631.4 60.0 44.0 80.5 15.7 7.2 Relative* (3.1) 9.4 6.9 2015 748.3 77.5 61.0 140.6 9.0 5.7 * % Relative to local index Analyst 2016e 684.7 68.2 51.8 116.9 10.8 9.4 Sara Welford 2017e 718.9 73.0 57.6 130.1 9.7 8.6
Sector: General industrials Leaf Resources (LER) Price: A$0.14 Market cap: A$18m INVESTMENT SUMMARY Forecast net cash (A$m) 1.2 Forecast gearing ratio (%) N/A Stage 1 of the joint development programme between LER and Monaghan Biosciences, Market ASX part of the Europe based Monaghan Mushrooms Group, has been completed. Both parties Share price graph (A$) have agreed to move to stage 2, the next step towards a bankable feasibility study for a commercial renewable chemical project. Stage 1 confirmed LER's Glycell pretreatment gave superior results to the conventional dilute acid process, hydrolysing 25% more cellulose from spent mushroom substrate within 24 hours. Both companies have opened confidential licencing/JV discussions with third parties with regard to offtake contracts for conversion of cellulosic sugars to specific renewable chemicals.
INDUSTRY OUTLOOK
There is global support for the establishment of biobased projects. In addition to MOUs Company description already signed, LER has identified other opportunities around the world. LER has recently The Glycell process, developed and been nominated as one of three finalists in the World Bio Markets' 'Breakthrough Bio-Based owned by Leaf Resources, is an intermediate-stage process in the Technology Platform' section of its Bio Business awards. conversion of biomass to bio-based chemicals, plastics and fuel.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual 0.0 3.8 (12.9) 2014 0.0 (1.6) (1.6) (2.4) N/A N/A Relative* (1.3) (2.6) (4.5) 2015 0.0 (2.2) (2.2) (1.6) N/A N/A * % Relative to local index Analyst 2016e 0.0 (2.0) (2.0) (1.5) N/A N/A Peter Chilton 2017e 0.0 (2.0) (2.0) (1.4) N/A N/A
Edison Insight | 28 April 2016 50 Sector: Oil & gas Liquefied Natural Gas Limited (LNGL) Price: A$0.58 Market cap: A$292m INVESTMENT SUMMARY Forecast net cash (A$m) 86.3 Forecast gearing ratio (%) N/A Liquefied Natural Gas Ltd (LNGL) has continued to progress the Magnolia project, with EPC Market ASX, OTC Pink contracts signed in recent months that put the project on a much firmer footing and Share price graph (A$) effectively fix costs for the development (now out to 31 December 2016). Although the contracts call for a higher capital cost than previously guided, Magnolia should still be at the lower end of LNG development costs and have lower operating costs, encouraging investment by tolling partners. We expect tolling agreements to be signed in 2016 to enable financial close (the FERC order has just been received). Given the low costs and continued need for global LNG supply, we continue to believe that Magnolia should proceed, albeit in a tougher environment. We have substantially remodelled the projects given the new information, resulting in a new NAV of A$1.0/share (US$2.8/ADR)
INDUSTRY OUTLOOK Company description LNG Ltd is an ASX-listed company devoted to the development of an LNG export terminal in the US, which is planned to reach financial close in mid-2015 and start production in 2018.
Y/E Jun Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual (1.7) (3.3) (86.1) 2014 0.0 (23.8) (24.7) (0.1) N/A N/A Relative* (3.0) (9.3) (84.8) 2015 0.0 (86.8) (86.3) (0.2) N/A N/A * % Relative to local index Analyst 2016e 0.0 (111.3) (110.9) (0.2) N/A N/A Will Forbes 2017e 135.1 93.0 92.1 0.2 290.0 N/A
Sector: Financials London Stock Exchange Group (LSE) Price: 2719.0p Market cap: £9477m INVESTMENT SUMMARY Forecast net debt (£m) N/A Forecast gearing ratio (%) N/A LSE has announced an agreed all share merger with Deutsche Börse which will result in Market LSE LSE shareholders owning 45.6% of the combined company and Deutsche Börse the Share price graph (p) remainder. The merger will create a leading Europe-based global infrastructure group and management plans to generate €450m of cost synergies from the merger, 20% of combined cost base, mostly in technology. The HQ will be in London and there will be listings in London and Frankfurt. The merger is subject to regulatory approval in many jurisdictions. The merger is expected to close by the end of 2016 or during Q1 2017. We are currently reviewing our forecasts.
INDUSTRY OUTLOOK
Financial markets are continuing their recovery from the crisis and regulatory pressures are Company description driving business towards LSE's combination of infrastructure businesses. LSE is Europe’s leading exchange group in cash equities. MTS is Europe’s largest electronic government bond market, LCH.Clearnet and CC&G offer post-trade services and FTSE Russell provides benchmark indices and related data services.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (4.9) 10.4 6.8 2014 1381.0 618.0 558.0 103.3 26.3 N/A Relative* (6.4) 3.6 17.3 2015 1419.0 769.0 710.0 129.4 21.0 N/A * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Peter Thorne 2017e N/A N/A N/A N/A N/A N/A
Edison Insight | 28 April 2016 51 Sector: General retailers Lookers (LOOK) Price: 144.9p Market cap: £574m INVESTMENT SUMMARY Forecast net debt (£m) 129.9 Forecast gearing ratio (%) 37.0 Lookers has a clear strategy, involving organic growth supplemented by a flow of Market LSE acquisitions. It has grown consistently, delivering record profits in each of the past seven Share price graph (p) years. Results for the year to December 2015 showed continued strong organic growth, with earnings up by 13%. The current year has started well, with continued benign trading conditions, while there will be a full contribution from last year's major Benfield acquisition. Meanwhile, the dynamics for the group's specialist parts business should turn favourable from 2017.
INDUSTRY OUTLOOK
Market dynamics suggest that larger motor dealership groups will continue to gain share in each of the key market segments (new cars, used cars, aftermarket), largely at the expense Company description of the independents, which still command some 60% of the franchise market. Global Lookers is a leading UK motor vehicle manufacturing overcapacity and current exchange rates indicate continued support from and specialist parts distributor. It operates more than 120 franchises, OEMs. Confidence was tempered by the VW scandal, but a 30% discount rating relative to representing 31 marques spread the FTSE All-share General Retailers index makes the sector attractive. across 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 (9.7) (8.9) (5.1) 2014 3043.0 87.0 65.0 13.21 11.0 10.2 Relative* (11.1) (14.5) 4.2 2015 3649.0 99.6 72.1 14.88 9.7 9.9 * % Relative to local index Analyst 2016e 4150.0 109.5 80.0 16.14 9.0 5.8 Nigel Harrison 2017e 4300.0 112.5 83.0 16.71 8.7 5.7
Sector: Basic industries Low & Bonar (LWB) Price: 63.0p Market cap: £207m INVESTMENT SUMMARY Forecast net debt (£m) 108.8 Forecast gearing ratio (%) 61.0 Mixed market conditions and FX movements provided a challenging backdrop to FY15 Market LSE trading, but Low & Bonar delivered the expected progress. Estimates were trimmed Share price graph (p) modestly, including a lower JV contribution. Improving profitability from core operations in FY16 is likely to come mainly from well-flagged internal initiatives, in our view and Low & Bonar should begin to demonstrate the benefits of strategic change to the group operating structure. AGM comments (31 March) noted a solid start to FY16 and unchanged guidance.
INDUSTRY OUTLOOK
Key strategic medium-term financial targets are currently for 10% operating margins and 12%+ return on capital employed. Organic group revenue growth may be supplemented by M&A. The onus is clearly on territories outside Europe to provide the growth engine. Company description Low & Bonar produces specialist performance materials for a variety of end-markets by combining polymers with specialty additives and pigments. It now reports as five global business units.
Y/E Nov Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 2.4 (1.6) 6.3 2014 410.6 45.0 25.2 5.4 11.7 6.0 Relative* 0.9 (7.7) 16.8 2015 395.8 45.8 26.5 5.5 11.5 5.9 * % Relative to local index Analyst 2016e 411.3 49.6 28.0 5.9 10.7 4.7 Toby Thorrington 2017e 426.9 51.7 29.9 6.4 9.8 4.1
Edison Insight | 28 April 2016 52 Sector: Property LSL Property Services (LSL) Price: 289.8p Market cap: £297m INVESTMENT SUMMARY Forecast net debt (£m) 60.7 Forecast gearing ratio (%) 46.0 LSL traded well in 2015. The increase of 2% in underlying operating profit to a record Market LSE £42.9m was a good result in what was a challenging year for the sector and a number of Share price graph (p) peers. Management has given a confident outlook for 2016, based on targeted internal initiatives, the ability of its brand to compete effectively, and potential further add-on acquisitions supported by its strong cash generating capacity rather than on any anticipation of a revival of housing transaction activity. The EGM statement shows the group trading well in Q1. Compared with Q114 revenues were ahead 16.9% overall; 19.9% in Estate Agency and 6.3% in Surveying. Accelerated buy-to-let activity ahead of 1 April stamp duty changes was a factor in Q1 and is expected to soften in Q2 with some further impact from EU referendum caution. The outlook for the year as a whole is in line with management expectations. Company description INDUSTRY OUTLOOK LSL Property Services is one of the UK's leading residential property services companies. It owns and Headline mortgage payments to earnings are better than long-run averages, and operates the second-largest UK estate employment and net immigration are both supportive. The medium-term impact of buy-to-let agency network, and a range of services for corporate (mortgage stamp duty and tax changes remains uncertain. lender) and retail clients.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (5.0) 15.6 (19.5) 2014 287.5 39.4 39.8 30.5 9.5 12.3 Relative* (6.5) 8.4 (11.6) 2015 300.6 48.5 40.5 31.5 9.2 8.1 * % Relative to local index Analyst 2016e 316.6 50.1 43.4 33.0 8.8 8.2 Martyn King 2017e 330.3 53.3 46.7 35.6 8.1 7.4
Sector: Property MedicX Fund Limited (MXF) Price: 89.5p Market cap: £336m INVESTMENT SUMMARY Forecast net debt (£m) 342.4 Forecast gearing ratio (%) 132.0 Further property acquisitions and continued yield compression saw the rent roll and Market LSE NAV/share increase further in Q116. The FY15 results showed strong underlying profit Share price graph (p) growth with operational gearing on target. A revised management fee will limit cost increases going forward. MXF is a long-term investor in a portfolio of modern primary care properties in the UK and the Republic of Ireland on long, quasi government-backed leases. Similar duration fixed-rate debt at modest (c 50%) gearing underpins secure cash flows to support the dividend. Barring unforeseen circumstances, dividends of 5.95p per share are indicated for the current year, a c 7% prospective yield.
INDUSTRY OUTLOOK
NHS planning suggests good growth prospects for the primary care property sector. A Company description recovery in NHS development approvals should support increasing rental growth, reflecting MedicX Fund is a specialist investor in underlying demand for new premises and land and build cost inflation. Similar opportunities primary care infrastructure. It holds a portfolio of 151 properties (including in the smaller Irish market offer a significantly higher rental yield. those under construction), let mainly to UK government-funded (NHS) tenants (90%) and pharmacies on GP surgery sites (8%).
Y/E Sep Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 2.9 6.6 6.6 2014 29.5 23.7 10.7 3.1 28.9 12.9 Relative* 1.3 (0.1) 17.0 2015 33.7 27.3 13.5 3.7 24.2 13.8 * % Relative to local index Analyst 2016e 36.2 29.7 14.2 3.8 23.6 11.6 Martyn King 2017e 40.0 33.2 15.4 4.1 21.8 9.8
Edison Insight | 28 April 2016 53 Sector: Technology Migme (MIG) Price: A$0.69 Market cap: A$162m INVESTMENT SUMMARY Forecast net debt (A$m) 2.2 Forecast gearing ratio (%) 1583.0 migme (MIG) is a global digital media company focused on the emerging markets of Market ASX Indonesia, the Philippines and India. At 31 December 2015 monthly active users (MAUs) Share price graph (A$) totalled 32 million (December 2014: 10 million). MIG has announced its social e-commerce strategy, which it plans to launch in H216. MIG is still seen by the market as an early-stage company and we therefore expect that until the path to profitability becomes more certain, there will be a significant gap between share price and value. We have included the A$6.99m share placement to Meitu which increases our confidence in our revenue forecasts. We believe that there is a significant gap between the pricing of MIG now and the pricing of MIG’s peer group at a similar stage in their life cycle.
INDUSTRY OUTLOOK
Company description MIG’s investment case is based on the premise that there is room for more than one social migme (MIG) is a social entertainment media platform in the emerging markets of Indonesia and India. There is a precedent in platform targeting the world’s next wave of internet users – the 3.6 billion China, where in large regions two or three exist in parallel. The large and fast-growing people in emerging markets. The mobile markets in Indonesia and India have a high propensity to use social media, and service offers free chat, content and blogging services to acquire new there may be room for a new entrant. Given the size of the addressable market, if MIG users. succeeds in executing on strategy the rewards could be significant. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual 4.5 (23.3) 5.3 2014 2.0 (28.6) (16.0) (5.95) N/A N/A Relative* 3.2 (28.1) 15.6 2015 12.3 (21.0) (21.0) (7.33) N/A N/A * % Relative to local index Analyst 2016e 46.0 (16.3) (16.5) (3.77) N/A N/A Moira Daw 2017e 103.9 9.9 9.7 2.20 31.4 17.9
Sector: Mining Mineral Commodities (MRC) Price: A$0.14 Market cap: A$57m INVESTMENT SUMMARY Forecast net debt (US$m) N/A Forecast gearing ratio (%) N/A Mineral Commodities (MRC) reported profit after tax of US$10.6m for the year ending 31 Market ASX December 2015 on US$46.2m product sales from the Tormin mineral sands operation. This Share price graph (A$) compares with a profit of US$8.4m and revenue of US$35.0m in 2014. The company declared a maiden dividend of A$0.01/share on diluted EPS of US$2.61/share. During the year, MRC completed the Tailings Scavenger Plant and the Tailings Return System and expects to complete the Garnet Separation Plant by June 2016, which will contribute to significant production growth. MRC is positioned to take advantage of improved zircon prices and has the potential to increase ilmenite sales. The company is also commencing exploration on its offshore prospecting area with the objective of extending heavy mineral sand resources.
INDUSTRY OUTLOOK Company description Mineral Commodities is a growing After a significant downturn, the mineral sands industry appears to be forming a new base producer of zircon/rutile non-magnetic concentrate and ilmenite and garnet as demand and prices stabilise. by-products from its Tormin resource on the Atlantic coast of South Africa. It also owns a large ilmenite deposit, Xolobeni.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 21.7 40.0 7.7 2014 35.0 7.7 3.9 2.0 4.9 4.7 Relative* 20.2 31.3 18.1 2015 46.5 17.7 13.1 2.6 3.8 4.4 * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Peter Chilton 2017e N/A N/A N/A N/A N/A N/A
Edison Insight | 28 April 2016 54 Sector: Technology Mitula Group (MUA) Price: A$0.96 Market cap: A$200m INVESTMENT SUMMARY Forecast net cash (A$m) 29.4 Forecast gearing ratio (%) N/A Mitula (MUA) is a leading aggregator of online classified listings, operating in the global Market ASX online advertising market. Its specific growth techniques, together with existing scale and a Share price graph (A$) focus on higher-growth markets, should drive medium-term growth ahead of the sector, we believe. The company listed on ASX in July 2015, raising A$26.52m gross at an offer price of A$0.75/share. MUA is already profitable, has met its prospectus guidance for CY15, is on track to meet its 2016 fiscal year prospectus forecasts, and has made its first post-IPO acquisition, buying Spain-based real estate classifieds aggregator, Nuroa Internet SL for ~€3m (A$4.47m).
INDUSTRY OUTLOOK
According to eMarketer, the global online advertising market is forecast to grow at a Company description compound rate of 13% over the next four years and accounts for 39% of total advertising Mitula Group is a leading online expenditure by 2019, up from 27% in 2014. Global search advertising is forecast to grow to classifieds aggregator, with 74 vertical search websites in 44 countries across US$130bn by 2019, from an estimated US$82bn in 2015. However, eMarketer forecasts real estate, employment, motoring, and growth rates in emerging markets to be higher and it is important to note that MUA’s focus in some countries, vacation rentals. These sites are in 18 different in Latin America and emerging markets such as Indonesia and India will expose it to higher languages and operate under either the Mitula or Nestoria brands. growth rates than the global average. Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual (3.0) 6.1 N/A 2014 N/A N/A N/A N/A N/A 20.6 Relative* (4.3) (0.5) N/A 2015 20.6 9.5 7.5 3.02 31.8 11.8 * % Relative to local index Analyst 2016e 32.2 15.4 15.9 5.69 16.9 9.8 Finola Burke 2017e 42.8 20.8 21.6 7.65 12.5 N/A
Sector: Mining MMG (1208) Price: HK$1.76 Market cap: HK$9311m INVESTMENT SUMMARY Forecast net debt (US$m) 9833.0 Forecast gearing ratio (%) 414.0 MMG's Dugald River project is located in north-west Queensland. It has a mineral resource Market HKSE of 57.3Mt at 13.2% zinc, 2% lead and 35g/t silver. The updated development plan Share price graph (HK$) incorporates a mining rate of 1.5Mtpa for annual production of 160,000 tonnes of zinc in concentrate, 18,000 tonnes of lead in concentrate and 981,000 oz of contained silver per annum. Construction of remaining infrastructure is to commence in 2016 with first concentrate production expected in the first half of CY2018. Remaining capital expenditure is US$750m plus interest costs. MMG is continuing to review project fundamentals and seek further efficiencies in the project development. MMG predicts the lower AUD and recent competitive bids from construction contactors will favourably impact final costs.
INDUSTRY OUTLOOK
Company description Both copper and zinc may have made a price low in mid January 2016; they have now MMG is a mid-tier global resources increased to around US$2.25/lb and US$0.85/lb, respectively. company that explores, develops and mines base metal deposits around the world. Its headquarters are in Melbourne, Australia, and it is listed on the Hong Kong Stock Exchange.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (2.8) 26.6 (44.1) 2014 2480.0 781.0 164.0 2.0 11.3 1.6 Relative* (6.4) 12.5 (27.3) 2015 1951.0 421.0 (314.0) (4.6) N/A 3.2 * % Relative to local index Analyst 2016e 2404.0 1194.5 (65.0) (1.7) N/A 1.0 Peter Chilton 2017e 4000.0 2422.3 815.0 6.5 3.5 0.5
Edison Insight | 28 April 2016 55 Sector: Oil & gas Mosman Oil and Gas (MSMN) Price: 0.7p Market cap: £2m INVESTMENT SUMMARY Forecast net cash (A$m) 1.5 Forecast gearing ratio (%) N/A Mosman is engaged in activities in Australia and New Zealand. As a result of the prevailing Market LSE oil environment, the company has cancelled its proposed acquisition of the STEP project in Share price graph (p) New Zealand from Origin. It is also reviewing its projects (it exited the Officer and Otway basins recently) and has taken steps to conserve the cash reserves it holds (in excess of A$5m as of 18 February and it sold excess working capital in March) and will "evaluate other suitable opportunities to enhance shareholder value as appropriate."
INDUSTRY OUTLOOK
The market remains suppressed, with a multitude of challenges that are exacerbated in small E&Ps, funding being the major challenge.
Company description Mosman Oil & Gas is engaged in exploration activities in New Zealand and has built an exciting portfolio of exploration assets in Australia, with particular focus on the Amadeus Basin. The STEP acquisition has the potential to be transformational.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual (9.7) (67.1) (86.0) 2013 0.0 (0.7) (0.7) (9.8) N/A N/A Relative* (11.1) (69.1) (84.6) 2014 0.0 (1.8) (1.8) (4.1) N/A N/A * % Relative to local index Analyst 2015e 0.0 (2.8) (2.8) (4.6) N/A N/A Will Forbes 2016e N/A N/A N/A N/A N/A N/A
Sector: General industrials National Grid (NG) Price: 952.8p Market cap: £35696m INVESTMENT SUMMARY Forecast net debt (£m) 25407.0 Forecast gearing ratio (%) 214.0 National Grid's last results demonstrated continued execution on incentive outperformance Market LSE in the UK. US rate case filings are on track. The company has announced its intention to Share price graph (p) dispose of a majority stake in its UK gas distribution business, which should contribute to lifting asset growth to its targeted 5% pa. It has recently been mentioned as a potential bidder for US transmission operator ITC group, alongside other potential bidders. UK energy policy having refocused on security of supply is a positive for long-term RAB growth. With a solid operational outlook in the UK and improving US ROE through rate filings, we believe that National Grid shares continue to offer investors an attractive combination of growth and yield.
INDUSTRY OUTLOOK
Company description With visibility on the allowed rate of returns by Ofgem in the UK until 2021 and potential National Grid owns and operates capex upside from the UK government's Electricity Market Reform, National Grid is well regulated electricity and gas network assets in both the UK and US. Its positioned to play a key part to ensure security of supply and support the development of unregulated assets consist of the Grain new renewable generation. LNG import terminal, interconnectors, a metering business and a property business.
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) 1.2 7.8 2014 15002.0 5080.0 2584.0 54.0 17.6 8.0 Relative* (3.7) (5.1) 18.4 2015 15201.0 5345.0 2876.0 58.1 16.4 6.7 * % Relative to local index Analyst 2016e 15668.0 5519.0 2970.0 59.8 15.9 7.7 Roger Johnston 2017e 16318.0 5888.0 3148.0 62.7 15.2 6.7
Edison Insight | 28 April 2016 56 Sector: Travel & leisure Nektan (NKTN) Price: 69.0p Market cap: £17m INVESTMENT SUMMARY Forecast net debt (£m) 11.0 Forecast gearing ratio (%) 375.0 Nektan’s Q3 trading update shows strong revenue growth, albeit from a much lower base Market AIM than we hoped last year. We have reintroduced FY16 forecasts (EBITDA loss of £5.6m Share price graph (p) versus our October 2015 target of £0.2m profit). With Q316 revenue 115% higher than Q216 and following a cost efficiency programme, we believe that a positive EBITDA run rate is within sight. Nektan's ReSpin JV also continues to make good operational progress. The company completed a £2.93m fundraising at the end of March to support continued growth across the group.
INDUSTRY OUTLOOK
Mobile gambling is forecast to grow at 27.5% pa between 2014 and 2018, to $19bn (H2 Gambling Capital), by which time it will account for c 40% of global online gambling Company description revenues. A broad range of media and leisure businesses are looking at ways to engage Nektan is a leading international B2B their customers with mobile gaming. In the US, c 40% of the 651,000 installed base of slot mobile gaming content developer and platform provider. It operates both machines could be suitable for Respin's mobile-based, bolt-on products, which increase regulated real money and freemium machine takings. games. Its Respin JV provides US casinos with mobile-based in venue technology and products.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (9.8) (35.5) (58.8) 2014 1.9 (3.5) (3.7) (22.3) N/A N/A Relative* (11.2) (39.5) (54.8) 2015 0.5 (5.1) (6.9) (33.4) N/A N/A * % Relative to local index Analyst 2016e 6.2 (5.6) (9.7) (41.6) N/A N/A Eric Opara 2017e N/A N/A N/A N/A N/A N/A
Sector: Technology NetDimensions (NETD) Price: 61.5p Market cap: £32m INVESTMENT SUMMARY Forecast net cash (US$m) 11.0 Forecast gearing ratio (%) N/A NetDimensions grew revenues by 12% in FY15 to $25.4m and the adjusted loss was better Market AIM than we expected at $0.7m (we forecast a $2.5m loss). Secure SaaS revenues grew at a Share price graph (p) robust 26%, albeit down from 36% in FY14. The focus on high-consequence industries has led to a shift to larger customers with the average deal size nearly doubling to $210k. The positive trend continiued into FY16, with Q1 revenues in-line with management expectations along with a substantially improved EBITDA loss. We are maintaining our sales forecasts, but have edged up gross margins. Hence, our FY16 forecast loss falls by $0.4m. The industry outlook remains favourable and the group’s US peers have rebounded recently, in the wake of a two-year bear market. These peers continue to trade at significant EV/sales premiums and hence we believe NETD shares could warrant a significant re-rating.
INDUSTRY OUTLOOK Company description NetDimensions provides talent and NETD's software helps deliver corporate training and develop talent. Its learning learning management systems to global enterprises. Its solutions allow management system (LMS) is popular in regulated industries with stringent compliance organisations to deliver personalised requirements for employee training and NETD also offers Performance and Analytics learning, share knowledge, enhance performance, foster collaboration and modules. MarketsandMarkets, the market research firm, forecasts the global talent manage compliance. management systems market to grow 16.6% pa from $5.3bn in 2014 to $11.4bn in 2019. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 13.9 2.5 (24.5) 2014 22.7 (3.3) (3.5) (9.4) N/A N/A Relative* 12.1 (3.9) (17.1) 2015 25.4 (0.5) (0.7) (2.2) N/A N/A * % Relative to local index Analyst 2016e 28.2 (0.4) (0.6) (0.9) N/A N/A Richard Jeans 2017e 32.0 1.7 1.4 2.0 43.9 22.9
Edison Insight | 28 April 2016 57 Sector: Construction & blding mat. Norcros (NXR) Price: 176.5p Market cap: £108m INVESTMENT SUMMARY Forecast net debt (£m) 31.9 Forecast gearing ratio (%) 59.0 FY16 was a year of strategic and financial progress for Norcros, with improved profit Market LSE contributions from both reporting regions and two acquisitions completed. Having acquired Share price graph (p) Croydex in June, Norcros announced its second FY16 deal, Abode Home Products at the year end, with a good strategic fit with Vado. A year-end trading update stated that underlying group EBIT is likely to be “marginally ahead” of market expectations. We have raised our FY17 and FY18 PBT and EPS expectations by c 3% to reflect the Abode acquisition, with no other changes to existing estimates.
INDUSTRY OUTLOOK
In the UK, the residential new-build sector has rebounded well and there is impetus for this to continue or even step up. RMI spending has not recovered at the same rate, but we Company description believe that sustained progress in real average incomes and confidence in asset prices will Norcros is a leading supplier of support ongoing progress. The South African economy is struggling in the short term, but showers, tiles, taps and related fittings and accessories for bathrooms, wider distribution of wealth and an emerging middle class should benefit consumer washrooms and other commercial spending over time. environments. It has operations in the UK and South Africa, with some export activity from both countries.
Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 5.4 (3.8) 3.8 2014 218.7 22.9 12.9 22.8 7.7 7.6 Relative* 3.8 (9.8) 14.0 2015 222.1 24.3 14.0 18.0 9.8 6.4 * % Relative to local index Analyst 2016e 240.6 28.3 17.5 21.1 8.4 4.7 Toby Thorrington 2017e 263.6 30.9 19.5 23.2 7.6 4.7
Sector: Oil & gas Northern Petroleum (NOP) Price: 2.8p Market cap: £4m INVESTMENT SUMMARY Forecast net debt (US$m) N/A Forecast gearing ratio (%) N/A Northern Petroleum (NOP) continues to concentrate on its 'reef edge' development plays in Market AIM Canada. In November, the group bolstered its position in the region in acquiring a package Share price graph (p) of c 28,000 acres in the Rainbow area of Northwest Alberta. A winter work programme is nearing completion that has already more than doubled production to 432boed in March. Northern hopes to sustain these rates over 2016 with additional work being carried out in April. Importantly, the work will also support the return of a c $1.4m abandonment deposit over the coming months. To fund the $0.25m Rainbow acquisition, Northern raised £1.2m from existing shareholders along with £0.4m via an open offer. Beyond Canada, the group continues to progress its exploration and appraisal portfolio in Italy. Our forecasts are under review.
INDUSTRY OUTLOOK Company description Northern Petroleum is an oil and gas With established infrastructure and supportive legislation, investors can expect sustained company that acquires low-cost exploration, production and newsflow from Northern's new focus in Canada, while retaining upside in Italy and further development assets. It has exploration, afield. appraisal and development assets in Canada, Italy, French Guiana, the UK and Australia.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 10.2 (8.2) (38.8) 2014 2.7 (7.1) (8.8) (9.1) N/A N/A Relative* 8.5 (13.9) (32.8) 2015 0.3 (3.7) (4.4) (2.6) N/A N/A * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Ian McLelland 2017e N/A N/A N/A N/A N/A N/A
Edison Insight | 28 April 2016 58 Sector: Financials Numis Corporation (NUM) Price: 206.0p Market cap: £231m INVESTMENT SUMMARY Forecast net debt (£m) N/A Forecast gearing ratio (%) N/A Numis is a leading UK-focused broker and corporate adviser, differentiated from peers by its Market LSE diversified client base and strong capital position. It has been materially increasing the Share price graph (p) number (185) and average size of its clients, growing its FTSE 250 presence strongly, and the broad sector diversity should generate reasonably stable earnings. The company has made a good start to FY16 with 10 IPOs and 17 other equity transactions to the end of March and a number which were due to complete April and beyond. Revenue and profits for the half year to 31 March are expected to be above H115 and half year results will be announced on Friday, 6 May.
INDUSTRY OUTLOOK
Numis has seen good growth in its portfolio of corporate clients. Delivery of the pipeline Company description from these customers is dependent on market conditions, which remain uncertain. Recent Numis has grown to become one of market equity issuance and AIM market trading stats have been mixed. the UK's leading institutional stockbrokers and corporate advisors. It employs c 200 staff, and has 185 corporate clients. In 2015 it completed 38 equity issuance transactions and a further 31 separate advisory mandates. Y/E Sep Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 3.4 (5.5) (18.7) 2014 92.9 24.3 30.5 21.98 9.4 N/A Relative* 1.8 (11.4) (10.7) 2015 98.0 28.9 32.7 23.49 8.8 N/A * % Relative to local index Analyst 2016e 102.5 30.1 34.3 23.78 8.7 N/A Andrew Mitchell 2017e 105.8 32.1 36.5 25.22 8.2 N/A
Sector: Mining Orosur Mining (OMI) Price: 9.8p Market cap: £10m INVESTMENT SUMMARY Forecast net cash (US$m) 3.2 Forecast gearing ratio (%) N/A Orosur’s Q316 results demonstrate a return to profitability at San Gregorio in line with Market AIM, Toronto realistic guidance provided by the company at the start of FY16. Gold production is ahead of Share price graph (p) budget (27.9koz ytd), making the upper bound of its 30-35koz FY16 guidance look eminently achievable. All-in sustaining costs are, as guided, now below US$1,000/oz (Q316: US$978/oz) and projected to be around this level through to year-end. Cost savings extend to development capex, with San Gregorio Deeps (SGD) due to be mined using Arenal Deeps mining equipment when production ceases at this operation in Q416.
INDUSTRY OUTLOOK
We adjust our model for ytd production data and an estimate of 7,083oz gold to achieve the upper end of its 30-35koz production guidance. We also adjust for revised FY17 guidance, Company description from 41.1koz to 35koz of gold produced at an average AISC cost of production of Orosur Mining owns (100%) and US$960/oz. We adjust our annual capex estimate from US$5.4m to US$3.5m. We retain operates its San Gregorio gold mine in Uruguay. It also explores for gold close our previous forecast of US$3.2m pa for exploration expenditure. On the basis of these to San Gregorio and in Chile at the revisions, we reduce our DDF valuation by 7% (due mainly to lower gold production in advanced Pantanillo Norte heap-leach and the Anillo properties. FY17e) from £0.28 to £0.26 per share, (10% discount rate). At a flat gold price of US$1,200/oz, this becomes £0.17. Y/E May Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 44.4 85.7 16.4 2014 80.4 23.9 4.5 6.6 2.1 0.5 Relative* 42.2 74.2 27.9 2015 65.9 10.7 (6.2) (56.3) N/A 1.1 * % Relative to local index Analyst 2016e 42.4 9.8 2.8 0.9 15.5 2.0 Tom Hayes 2017e 44.1 18.8 7.6 5.7 2.5 0.8
Edison Insight | 28 April 2016 59 Sector: Financials OTC Markets Group (OTCM) Price: US$16.64 Market cap: US$188m INVESTMENT SUMMARY Forecast net cash (US$m) 25.0 Forecast gearing ratio (%) N/A OTC Markets Group (OTCM) provides regulated marketplaces offering a cost-effective Market OTC QX solution for targeting US investors. Net revenues for 2015 rose 19% y-o-y, with Corporate Share price graph (US$) Services revenue rising 77% largely due to new OTCQB subscribers. OTCQB is its market for venture companies. Net income for the year rose 30% y-o-y. The company has cash in its balance sheet and an increasing dividend, yields c.6.8% (including a special dividend) and is trading below our DCF valuation.
INDUSTRY OUTLOOK
Regulatory trends have been positive for OTCM, easing regulations on international issuers in 2008 and prospectively on domestic issuers with the "JOBS" Act. The success of its OTCQB initiative to attract entrepreneurial and development-stage companies and create a Company description US version of the AIM market in London is most encouraging. OTC Markets Group (OTCM) operates open, transparent and connected financial marketplaces for 10,000 US and global securities. OTC Link ATS is operated by OTC Link LLC, a FINRA/SIPC member and SEC-regulated ATS.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 0.8 9.1 6.0 2014 42.2 14.4 12.9 68.58 24.3 N/A Relative* (1.2) (0.5) 6.8 2015 49.9 18.6 16.9 88.32 18.8 N/A * % Relative to local index Analyst 2016e 52.3 20.1 18.4 93.63 17.8 N/A Peter Thorne 2017e 54.5 21.3 19.6 99.09 16.8 N/A
Sector: Mining Pan African Resources (PAF) Price: 14.5p Market cap: £266m INVESTMENT SUMMARY Forecast net cash (£m) 0.4 Forecast gearing ratio (%) N/A PAF's H116 results were ahead of Edison's expectations, with strong performances at the Market AIM BTRP and the ETRP complementing a solid recovery in the underground head grade at Share price graph (p) Evander (effectively portending its exit from the low grade mining cycle). Gold sold increased 17.4% vs H115, to 101,797oz and cash costs of production fell 25.7% to US$740/oz, indicating good cost control as well as rand depreciation.
INDUSTRY OUTLOOK
Management guidance is for output of c 209koz of precious metals in FY16 (vs Edison's 214koz) cf a longer-term target of 250koz pa, with expansion potential at Evander South and Elikhulu (among others). Forecasts currently exclude Uitkomst, control of which passed to PAF on 1st April, but which is expected to be immediately earnings enhancing, and the Company description Shanduka Gold transaction consideration (see our March update note). Our valuation of Pan African Resources has five major PAF is 25.33p at Edison's long-term gold prices or 19.59p at US$1,234/oz (real). PAF also assets in South Africa: Barberton Mines, the Barberton Tailings has the sector's third highest forecast dividend yield globally. Retreatment Project, Evander Gold Mines, the Evander Tailings Retreatment Project and Phoenix Platinum.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 16.0 64.6 26.1 2014 154.2 44.2 34.0 1.46 9.9 5.8 Relative* 14.2 54.4 38.5 2015 140.4 28.4 16.0 0.64 22.7 10.2 * % Relative to local index Analyst 2016e 166.7 55.0 42.8 1.74 8.3 5.4 Charles Gibson 2017e 198.9 92.1 83.0 3.08 4.7 3.0
Edison Insight | 28 April 2016 60 Sector: General industrials paragon (PGN) Price: €26.70 Market cap: €110m INVESTMENT SUMMARY Forecast net debt (€m) 43.1 Forecast gearing ratio (%) 242.0 paragon’s full year results highlighted the substantial progress the group has made in both Market Xetra its historic core businesses and the new divisions. With record sales, operating profit and an Share price graph (€) order book in excess of €1bn, the group has significant visibility over the next five years. 2016 is likely to be a year of more moderate growth ahead of a planned ramp-up in electromobility that will accelerate from 2017. With further potential catalysts anticipated as new product launches come to market, we believe that paragon is clearly aligned to automotive megatrends.
INDUSTRY OUTLOOK
paragon’s core business has been built on a strategy of identifying emerging trends and developing systems ahead of, as opposed to in response to, requests from OEMs. This has Company description led to significant success in automotive, accounting for 95% of 2014 revenues, 80% of paragon designs and manufactures which were derived from strong German OEMs. With the same R&D and systems approach advanced automotive electronics solutions as a direct supplier to the being used to rapidly expand in electromobility, we forecast that 27% of revenue will come automotive industry. Products include: from non-automotive markets by 2017. sensors; acoustics; cockpit; electromobility, and body kinematics.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 7.3 (19.1) 62.2 2014 79.0 10.5 4.3 67.0 39.9 10.6 Relative* 3.4 (23.8) 85.5 2015 95.0 14.1 5.0 83.0 32.2 6.7 * % Relative to local index Analyst 2016e 105.6 15.8 7.4 120.0 22.3 6.9 Roger Johnston 2017e 134.7 19.9 11.4 186.0 14.4 7.3
Sector: Financials Park Group (PKG) Price: 73.0p Market cap: £134m INVESTMENT SUMMARY Forecast net cash (£m) 27.3 Forecast gearing ratio (%) N/A The trading update for the financial year (which ended on 31 March) indicated that the Market AIM positive momentum of H1 had continued. Sales for the consumer business were up 7% on Share price graph (p) the previous year and early orders for Christmas 2016 are also ahead of last year so far. Consumer credit sales continue to reduce, as has been the trend for several years, and are expected to be under £4m for the year from £20m last year. This has contributed to a fall of £2m across the Corporate division, which saw revenue growth of £14m from incentive and reward products. With consumer credit now contributing under 1% of group billings, revenue growth in other businesses is likely to outweigh further reduction there. The free float has increased significantly with the placing by the founder and retiring non-executive chairman of his remaining stake (50m shares). Laura Carstensen has been chosen as the new non-executive Chairman and will succeed on 3 June. She joined the board in 2013. Company description INDUSTRY OUTLOOK Park Group is a financial services business. It is one of the UK’s leading multi-retailer gift voucher and prepaid Supported by e-commerce initiatives, Park continues to expand its Corporate and gift card businesses, focused on the Consumer offering into a recovering market. corporate gift and consumer markets. Sales are generated via e-commerce, a direct sales force and agents.
Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (2.3) (1.0) 32.1 2014 269.6 9.7 10.0 4.3 17.0 N/A Relative* (3.9) (7.2) 45.1 2015 293.3 11.5 11.5 4.8 15.2 N/A * % Relative to local index Analyst 2016e 297.1 12.4 12.7 5.5 13.3 N/A Martyn King 2017e 316.0 13.3 13.7 5.9 12.4 N/A
Edison Insight | 28 April 2016 61 Sector: Technology Paysafe Group (PAYS) Price: 379.6p Market cap: £1826m INVESTMENT SUMMARY Forecast net debt (US$m) 260.5 Forecast gearing ratio (%) 21.0 Paysafe’s results confirmed that the group generated strong growth in FY15 and that Market LSE integration of Skrill is well underway. We have raised our forecasts for FY16/17 to reflect Share price graph (p) stronger growth; even with higher reinvestment into the business we also upgrade our EBITDA and EPS forecasts for both years. With net debt on track to be substantially reduced over the next two years, Paysafe has a strong position from which to fund organic and acquisitive growth and shareholder returns.
INDUSTRY OUTLOOK
The payment processing business should continue to benefit from the growth in customer transactions. Online retail sales are forecast to continue to show strong growth, for example Forrester predicts US e-commerce revenue CAGR of 10% from 2014-19, as more retail Company description sales shift from on premise, mail order or telephone to online. The Digital Wallet business Paysafe Group is a global payment continues to benefit from growth in online gambling and could further benefit from solutions specialist operating in three areas: payment processing, eWallets opportunities in the newly regulated US market. and prepaid services.
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 (10.6) (5.2) 39.3 2014 365.0 82.9 69.2 22.0 24.6 35.2 Relative* (12.0) (11.1) 53.0 2015 613.4 152.6 118.8 25.6 21.2 23.6 * % Relative to local index Analyst 2016e 911.9 259.9 207.6 34.8 15.6 10.7 Katherine Thompson 2017e 997.4 284.1 229.7 38.1 14.2 9.1
Sector: General industrials Powerflute (POWR) Price: 80.0p Market cap: £233m INVESTMENT SUMMARY Forecast net debt (€m) 16.4 Forecast gearing ratio (%) 14.0 FY15 results came in well ahead of our last published estimates and slightly above the Market AIM €53-55m EBITDA range flagged in a December IMS. A strong y-o-y uplift from Packaging Share price graph (p) Papers was complemented by a full year contribution from Cores & Coreboard (acquired in December 2014). This fed through into a strong cash performance and net debt ended FY15 at €37.1m, c $24m down on the year. Market conditions were favourable in FY15 and, despite some noted headwinds, another successful year is anticipated in FY16.
INDUSTRY OUTLOOK
Powerflute aims to build a portfolio of niche paper and packaging businesses. It has demonstrated financial and operational judgement in transactions and now needs to take the group to the next level. Typical target companies will have turnover of €150-200m Company description and/or produce in excess of 300,000 tonnes of product. At any one time, the portfolio is Powerflute is a holding company unlikely to exceed five businesses to maintain the operational focus overseen by the established to acquire and improve underperforming businesses and executive board. assets in the broadly defined international paper and packaging sector.
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) (6.4) 41.6 2014 150.1 22.3 13.3 3.8 26.5 15.2 Relative* (4.5) (12.2) 55.5 2015 357.2 56.1 39.7 9.8 10.3 5.9 * % Relative to local index Analyst 2016e 362.1 52.5 36.0 8.6 11.7 5.5 Toby Thorrington 2017e 369.3 52.7 36.6 8.8 11.4 5.5
Edison Insight | 28 April 2016 62 Sector: Travel & leisure PPHE Hotel Group (PPH) Price: 812.5p Market cap: £343m INVESTMENT SUMMARY Forecast net debt (£m) 454.0 Forecast gearing ratio (%) 159.0 Amid heightened concern about European travel uncertainties, PPHE continues to please. Market LSE Its notably upbeat outlook comment complemented 2015 EBITDA well ahead of Share price graph (p) expectations and a clear pointer to substantial hidden reserves (management’s indicative ‘fair value’ adjustment on book value properties of c £8.90 per share). There was reassurance in confirmation of momentum and justifiable enthusiasm about transformative investment (over 1,000 new rooms this year with abundant opportunity at attractive funding rates). Despite recent price strength, PPHE’s valuation is low in terms of EV/EBITDA and is at a marked discount to real asset value.
INDUSTRY OUTLOOK
Security and geopolitical developments are necessarily a concern, with the Brussels attacks Company description compounding uncertainty. Post-Paris, RevPAR in the London market was down 4% in PPHE Hotel Group (formerly Park Q116, according to STR Global, and GL, London’s largest hotel owner-operator has Plaza Hotels) is an integrated owner and operator of four-star, boutique and reported "a cautious outlook." While supply additions and an economic downturn are an deluxe hotels in gateway cities and inherent risk, there is reassurance in the capital’s long-term resilience, as newly recognised regional centres, predominantly in Europe. in its award as top destination for 2016, according to TripAdvisor users.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 1.8 29.2 43.1 2014 217.0 76.1 28.6 68.9 11.8 4.5 Relative* 0.3 21.2 57.1 2015 218.7 80.1 31.8 76.1 10.7 4.1 * % Relative to local index Analyst 2016e 239.0 85.0 29.5 70.2 11.6 4.1 Richard Finch 2017e 278.0 98.0 41.5 98.8 8.2 3.6
Sector: Property Primary Health Properties (PHP) Price: 104.8p Market cap: £625m INVESTMENT SUMMARY Forecast net debt (£m) N/A Forecast gearing ratio (%) N/A On 13 April PHP completed a 150m share issue at 100p, a 14% premium to EPRA NAV at Market LSE the year-end of 87.7p. The issue exceeded the target of £120m as a result of strong Share price graph (p) demand. Management indicated in the prospectus that proceeds will be used to pay down revolving debt facilities and to continue to grow the investment portfolio, staying within gearing limits deemed conservative by the board and growing the dividend. The capital raise is accretive to NAV and we are reviewing our forecasts to account for its effects on earnings and dividend cover.
INDUSTRY OUTLOOK
There is political and financial support for NHS planning that should soon see an acceleration of new development spending on the sort of modern primary care facilities that Company description PHP and peers provide the finance for. Primary Health Properties is a long-term investor in primary healthcare property in the UK, principally let long term to GPs and NHS organisations backed by the UK government.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 0.5 (2.8) 5.7 2014 60.0 52.5 18.2 4.1 25.6 9.5 Relative* (1.1) (8.9) 16.1 2015 63.1 55.5 21.7 4.9 21.4 8.2 * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Martyn King 2017e N/A N/A N/A N/A N/A N/A
Edison Insight | 28 April 2016 63 Sector: Technology Prodware (ALPRO) Price: €6.50 Market cap: €53m INVESTMENT SUMMARY Forecast net debt (€m) 45.5 Forecast gearing ratio (%) 40.0 FY15 revenues were €181.8m, marginally ahead of our forecast €179.0m and adjusted Market Alternext Paris operating profit of €15.4m was ahead of our forecast €14.9m. We are encouraged by the Share price graph (€) underlying growth, 7% like-for-like in revenues, and by the exceeding of expectations. The core Francophone markets continue to grow strongly and Israel and Spain have shown significant advances. However, the realignment of the German and Benelux operations remains a drag on overall growth. The launch of a 2016-2020 development programme, with its target of €300m revenues for 2020, and Prodware Academy, show management's desire to focus on driving growth over the coming years. The shares trade at marked and, in our view, unjustified multiples discounts to Europe-listed comparators.
INDUSTRY OUTLOOK
Company description Although the wider economic outlook across Europe remains uncertain, Prodware's Founded in 1989, Prodware exposure to the SME software markets and to the provision of hosted solutions should specialises in the creation, integration and hosting of management software mean that it shows underlying growth in excess of the wider economy and software for businesses. It is a Gold Partner of industry. Microsoft in the EMEA zone with almost 1,700 employees supporting 20,000 clients in 14 countries.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 4.8 (7.8) (4.7) 2013 176.4 28.5 14.2 195.0 3.3 2.1 Relative* 1.9 (12.4) 8.2 2014 174.8 27.7 9.9 118.4 5.5 4.0 * % Relative to local index Analyst 2015e 179.0 30.3 12.9 144.2 4.5 3.1 Ian Robertson 2016e 190.6 35.3 16.4 177.9 3.7 1.9
Sector: Technology PSI (PSAN) Price: €13.32 Market cap: €209m INVESTMENT SUMMARY Forecast net cash (€m) 40.2 Forecast gearing ratio (%) N/A PSI's FY15 results were in line with expectations with EBIT increasing by 44.2% to €11.1m. Market FRA Order intake was also robust, up 9% y-o-y and this has continued into the new year with Q1 Share price graph (€) orders up 13%. However, guidance was cautious reflecting the current turbulent economic and currency environment and the risk of cyclical softening in demand from the domestic gas market. This prompted a 17% reduction to our FY16 EPS estimate. We still believe that PSI’s long-term margin expansion strategy remains intact, while the valuation only appears to be pricing in partial success on this front. In our view the risk/reward trade-off is positive.
INDUSTRY OUTLOOK
The reduced guidance reflects the volatile geopolitical and economic picture, as well as currency volatility. Structurally however, we believe that PSI remains very well placed Company description across a range of industries. The successful migration to a more product centric business PSI develops and integrates software model with a common core platform is key to unlocking value through enabling margins to control systems: electricity, gas, oil, water solutions; production planning, expand. control, logistics software; monitoring and operating solutions for critical transport, public safety, environmental and disaster prevention.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (5.2) 2.3 10.5 2014 175.4 11.1 5.9 27.5 48.4 7.6 Relative* (8.7) (3.7) 26.5 2015 183.7 15.3 9.6 49.1 27.1 12.0 * % Relative to local index Analyst 2016e 192.8 16.4 11.2 58.6 22.7 15.3 Dan Ridsdale 2017e 201.4 19.4 14.2 74.3 17.9 12.5
Edison Insight | 28 April 2016 64 Sector: Oil & gas Pura Vida Energy (PVD) Price: A$0.03 Market cap: A$8m INVESTMENT SUMMARY Forecast net debt (A$m) 0.5 Forecast gearing ratio (%) 13.0 Along with its international E&P peers, Pura Vida (PVD) is looking to preserve its cash Market ASX reserves while progressing its exploration assets for possible future drilling. The results of Share price graph (A$) the 2015 unsuccessful well in the Mazagan licence are being analysed, and are expected to be completed in Q116. The technical focus is on maturing prospects for the second well in the permit, although no timing has been firmed up as yet (a deadline of September 2016 was set at the time of the farm-out). The second well should benefit from falling rig rates, although we note PVD is fully carried on the two wells (to a cap of $215m). With Freeport having spent an estimated $137m, this leaves $78m of the carry left – which given rig costs, should be enough to fully carry the second well we think, especially if it is shallow.
INDUSTRY OUTLOOK
Company description Pura Vida has a varied African exploration portfolio and is currently drilling the MZ-1 well in Morocco and undertaking 3D seismic in Madagascar. It has executed farm-outs to increase shareholder exposure to world-class exploration.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual 23.1 14.3 (93.0) 2014 14.8 1.0 (0.2) (0.2) N/A N/A Relative* 21.5 7.2 (92.4) 2015 0.1 (18.6) (16.2) (10.6) N/A N/A * % Relative to local index Analyst 2016e 0.0 (5.0) (4.9) (3.2) N/A N/A Will Forbes 2017e N/A N/A N/A N/A N/A N/A
Sector: Aerospace & defence QinetiQ Group (QQ) Price: 224.3p Market cap: £1316m INVESTMENT SUMMARY Forecast net cash (£m) 203.8 Forecast gearing ratio (%) N/A QinetiQ’s pre-close statement highlighted that the company is on course to achieve full year Market LSE expectations. In addition to contract wins, the statement also highlighted the key outcomes Share price graph (p) from the Single Source Regulations Office (SSRO) baseline profit rate review. While this provides a level of certainty in the short term, further development of the rate for outer years is yet to be finalised consistent with management’s guidance for a moderation of margins in EMEA Services, as modelled in our forecasts. With results due on 26 May, we expect the group to further articulate its strategic evolution to enhance customer focus and competitiveness.
INDUSTRY OUTLOOK
The UK business is underpinned by some good long-term contracts such as the LTPA. New Company description non-DoD products in the Global Products division are not yet increasing at a high enough QinetiQ provides technical support rate to fully offset conflict-related declines, although there are initial signs of stabilisation. services to customers in the global aerospace, defence and security markets. Following the disposal of its US Services business, the group will operate through two divisions: EMEA Services and Global Products.
Y/E Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (3.8) (4.6) 10.4 2014 782.6 144.9 101.2 13.8 16.3 10.3 Relative* (5.3) (10.5) 21.2 2015 763.8 135.6 107.8 15.2 14.8 10.2 * % Relative to local index Analyst 2016e 776.6 130.5 105.5 15.4 14.6 12.5 Roger Johnston 2017e 784.0 129.1 103.9 15.5 14.5 12.3
Edison Insight | 28 April 2016 65 Sector: Basic industries Quadrise Fuels Int. (QFI) Price: 13.2p Market cap: £107m INVESTMENT SUMMARY Forecast net cash (£m) 2.7 Forecast gearing ratio (%) N/A Quadrise recently commenced the shipment of equipment to the refinery designated to Market AIM produce MSAR for Maersk's LONO (Letter of No Objection) trials and started the associated Share price graph (p) construction work. Installation and commissioning of the MSAR manufacturing unit is on track for completion during calendar H116. Fuel availability is targeted for mid-calendar 2016, ahead of LONO trials lasting up to 10 months, followed by potential commercial roll-out during calendar 2017.
INDUSTRY OUTLOOK
Quadrise is finalising terms, to be executed shortly with the Saudi client, for a semi-commercial scale ‘production-to-combustion’ demonstration. The target date for the combustion trial has been set. The trial is expected to start in autumn 2016 and to be Company description completed by spring 2017. The programme with a global oil major is ongoing, with the next Quadrise Fuels International is the step a project in a large oil refining complex, likely to be triggered by confirmation of results licensor of an oil-in-water emulsion fuel technology enabling refiners to from the LONO programme. manufacture and market MSAR for use as a low-cost substitute for heavy fuel oil in the marine bunker and power generation sectors.
Y/E Jun Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 9.3 15.2 0.0 2014 0.0 (2.3) (2.4) (0.3) N/A N/A Relative* 7.6 8.1 9.8 2015 0.1 (2.6) (2.7) (0.3) N/A N/A * % Relative to local index Analyst 2016e 1.2 (5.1) (5.1) (0.6) N/A N/A Anne Margaret Crow 2017e 10.1 (0.9) (1.0) (0.1) N/A N/A
Sector: Media & entertainment Quarto (QRT) Price: 245.0p Market cap: £48m INVESTMENT SUMMARY Forecast net debt (US$m) 53.5 Forecast gearing ratio (%) 84.0 At the start of its 41st year of operations, QRT delivered a strong FY15 performance. Market LSE Revenue and margin were both ahead, there was notable progress on debt reduction and a Share price graph (p) step-up in the dividend. With the activists off the share register as of November 2015 (the shares were placed with a spread of institutions), the board structure is also now being normalised, with two independent non-executive appointments (one to take the chair). Investment in content, talent, sales and marketing and systems underpin the growth now coming through, with acquisitions likely to supplement organic progress. A JV in Sharjah for books in Arabic and the setting up of a dedicated internal innovation resource are indicative of a management team in the front foot.
INDUSTRY OUTLOOK
Company description US figures show that over Jan-Nov 2015, overall publishers' book sales were down 2.6%, Quarto is the leading global illustrated with trade sales up 1.2%. Demand from the broader trade market, though, does not book publishing and distribution group, with five complementary businesses: necessarily describe Quarto's trading environment, given its focus on high-quality illustrated Quarto International Co-editions, titles. The book distribution and retail sectors remain in a state of upheaval, with Quarto Publishing USA, Quarto Publishing UK, Quarto Hong Kong and non-traditional retail outlets becoming an increasing element of the mix. The mood at the Books & Gifts Direct. recent London Book Fair was upbeat, with plenty of deals signed. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (6.1) 17.8 26.3 2014 171.3 17.0 11.9 44.1 7.9 1.4 Relative* (7.6) 10.5 38.7 2015 182.2 18.4 14.1 49.5 7.1 1.3 * % Relative to local index Analyst 2016e 187.0 19.2 15.0 53.1 6.6 1.3 Fiona Orford-Williams 2017e 192.5 19.7 15.8 55.4 6.3 1.3
Edison Insight | 28 April 2016 66 Sector: Travel & leisure Rank Group (RNK) Price: 240.0p Market cap: £938m INVESTMENT SUMMARY Forecast net debt (£m) 42.0 Forecast gearing ratio (%) 12.0 The successful launch of Rank's new digital platform, on time and budget, marked a key Market LSE milestone and a major step towards its goal of a full omni-channel produce suite (Update Share price graph (p) note 11 March). Digital channels are the key growth driver for Rank and the platform offers new products and functionality, enabling Rank to further leverage its land-based gaming brands. The next share price catalyst is the Q3 trading update in mid-May.
INDUSTRY OUTLOOK
The UK land-based gambling industry is worth c £5.4m (source: Gambling Commission), with casino revenue up 4.5% in FY15 but bingo down 1.5%. More recent reports (eg Mintel) suggest some recent modest bingo revival helped by the 2014 duty cut. The UK online gambling industry is worth almost £3.5m pa and consolidation is underway in online sports Company description betting. The new Living Wage (April 2016) adds some cost pressures, already in our Rank is the UK’s largest multi-channel forecasts and the Budget 2016 proposed extension of RGD (gaming duty) to free bets is a casino operator with Grosvenor Casinos and the second largest modest extra burden, but only from FY18. multi-channel bingo operator with Mecca. It is also the fourth largest bingo operator in Spain and has two casinos in Belgium.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (6.5) (14.3) 26.3 2014 707.7 116.0 62.5 12.4 19.4 17.0 Relative* (7.9) (19.6) 38.7 2015 738.3 126.3 74.1 14.6 16.4 6.4 * % Relative to local index Analyst 2016e 756.0 130.0 79.0 15.7 15.3 7.6 Jane Anscombe 2017e 785.0 136.0 84.0 16.7 14.4 7.2
Sector: Mining Rare Earth Minerals (REM) Price: 0.6p Market cap: £44m INVESTMENT SUMMARY Forecast net debt (£m) N/A Forecast gearing ratio (%) N/A Bacanora (REM’s JV partner on the Sonora Lithium Project) has now filed its full PFS. The Market LSE PFS provides crucial detail concerning the mine schedule and material that is sourced Share price graph (p) outside of the La Ventana mineral claims over which REM has no ownership. The mine schedule details that the first ores from claims that REM has a 30% direct ownership (El Sauz, El Sauz 1, El Sauz 2, Fleur, Fleur 1) are planned for extraction starting Year 5 (3.9% of total material moved), increasing to a peak of 45.4% in Year 11. This then reduces to a minimum in Year 14 of 4.4%, before increasing to a second peak of 38.6% in Year 19. We are currently revising our financial model for this schedule and assessing its value to REM.
INDUSTRY OUTLOOK
REM has exposure to other lithium companies through equity holdings in European Lithium Company description Holding's Cinovec Li-Sn project (9.79% equity interest) on the Czech-German border, and Rare Earth Minerals (REM) is a also Lithium America’s (LAC) projects (1.35% equity interest) situated in the US and minerals investment company with direct and indirect interests in lithium Argentina (where LAC has entered into a 50/50 JV with Chilean diversified major - SQM). and rare earth projects. REM’s primary REM has also made an investment of C$300k for 15.5% of MacArthur River Resource's value proposition is a 40.06% effective interest in the Sonora Lithium Project share capital. REM has a 30% free-carry in Yangibana to completion of a BFS. concessions in Northern Mexico.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 19.0 (19.6) (48.5) 2013 0.0 1.5 1.5 0.05 12.0 N/A Relative* 17.2 (24.6) (43.4) 2014 0.0 (3.1) (3.5) (0.07) N/A N/A * % Relative to local index Analyst 2015e N/A N/A N/A N/A N/A N/A Tom Hayes 2016e N/A N/A N/A N/A N/A N/A
Edison Insight | 28 April 2016 67 Sector: Investment companies Raven Russia (RUS) Price: 32.5p Market cap: £222m INVESTMENT SUMMARY Forecast net debt (US$m) 697.4 Forecast gearing ratio (%) Raven worked hard in 2015 to mitigate the impact of a harsh trading environment. Market LSE Management focused on maintaining income at the best level achievable, in whatever Share price graph (p) currency the market will allow, while protecting cash balances. It ended the year with $202m in cash, a significant share of the current market cap. Underlying profits provided management the room for continued distributions while maintaining the balance sheet prudence necessary for Raven to participate in the upside when conditions improve. A rouble/oil price recovery or the easing of sanctions are potential catalysts.
INDUSTRY OUTLOOK
Although oil prices have recovered slightly in 2016 the IMF expects the Russian economy to continue to contract in 2016 (-1.9%) before returning to growth in 2017. Demand/supply Company description conditions in the Moscow warehouse market appear to be improving with new build falling Guernsey based Raven Russia is away. listed on the main Market of the LSE and invests, for the long term, in modern, high quality warehouse properties in Russia, with the aim of delivering progressive distributions to shareholders.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 9.2 (7.8) (36.3) 2014 257.6 N/A 75.1 8.94 5.2 2.0 Relative* 7.6 (13.5) (30.0) 2015 219.7 N/A 64.9 7.94 5.8 2.3 * % Relative to local index Analyst 2016e 192.4 N/A 37.1 5.01 9.3 2.5 Martyn King 2017e 181.2 N/A 30.2 4.09 11.3 2.7
Sector: Technology Real Estate Investar Group (REV) Price: A$0.06 Market cap: A$3m INVESTMENT SUMMARY Forecast net cash (A$m) 3.9 Forecast gearing ratio (%) N/A Real Estate Investar (REV) floated on the ASX on 10 December 2015, raising A$5m (25m Market ASX shares at A$0.20 per share) to fund market growth and product development. REV offers Share price graph (A$) integrated online software tools for real estate investors in Australia and New Zealand on a software-as-a-service (SaaS) basis. REV’s unique product, underpinned by strong relationships with strategic partners, has a membership base of ~155,000 (January 2016). Of this, ~2,700 are paying subscribers, which is 0.15% of all investment property owners in Australia and NZ and 0.4% of owners with more than one investment property. Further market share gains, an increase in conversion of members into subscribers and adding new high-margin products could provide material upside to the current share price.
INDUSTRY OUTLOOK
Company description REV is exposed to the key drivers of the property market, which include population, interest Real Estate Investar (REV) provides rates and taxation policies. The government’s forecast CAGR for Australia’s population to integrated online services to Australian and New Zealand property investors to 2023 is 1.2% and NZ is expected to experience growth rates of ~1%. A sudden spike in assist them to identify and manage interest rates could have a negative impact on demand for residential property. A favourable suitable properties. income tax policy is also an important driver of demand. Other factors such as FX, slower than-expected user growth and China’s investment restriction may also dampen demand. 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 (45.5) (53.8) N/A 2014 N/A N/A N/A N/A N/A N/A Relative* (46.2) (56.7) N/A 2015 4.0 (0.8) (1.1) (2.5) N/A N/A * % Relative to local index Analyst 2016e 5.2 (0.8) (0.9) (0.7) N/A 3.4 Finola Burke 2017e 9.6 0.5 0.5 0.2 30.0 N/A
Edison Insight | 28 April 2016 68 Sector: Financials Record (REC) Price: 26.9p Market cap: £60m INVESTMENT SUMMARY Forecast net debt (£m) N/A Forecast gearing ratio (%) N/A Record's results for the six months to 30 September 2015 reported a 9% y-o-y increase in Market LSE underlying PBT and operating margin of 33%. Assets under management equivalent Share price graph (p) (AUME) amounted to $53.3bn, down from $56.6bn at June.The interim dividend was raised to 0.825p, from 0.75p last year. The capital and cash positions remain strong. Record continues to see interest in its hedging strategies and a high level of client engagement. We made small changes to our FY16 and FY17 forecasts following the publication of these results. A Q416 trading update on 22 April 2016 stated that AUME had risen to $53.7bn at 31 March 2016, with client outflows of $1.5bn and exchange rate and market movements adding $1.7bn.
INDUSTRY OUTLOOK
Company description The emergence of a strengthening US dollar could provide a material opportunity for Record Record is a specialist currency in the large US market. US investors holding assets denominated in foreign currencies have manager, providing currency hedging and return seeking mandates to benefited from the weakness of the US dollar on a trade-weighted basis since 2001; institutional clients. Services include hedging could protect these gains.The much expected rise in US interest rates occurred in passive and dynamic hedging and return seeking currency strategies via December 2015, but since then market sentiment over concerns on the strength of the funds or segregated accounts. global economy has lowered expectations about the pace of further US rate rises. 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 8.0 (22.7) 2014 20.3 7.1 6.9 2.48 10.8 N/A Relative* 0.8 1.4 (15.1) 2015 20.9 7.7 7.5 2.66 10.1 N/A * % Relative to local index Analyst 2016e 20.4 6.7 6.5 2.40 11.2 N/A Peter Thorne 2017e 19.5 6.2 6.0 2.18 12.3 N/A
Sector: Technology Rex Bionics (RXB) Price: 36.5p Market cap: £7m INVESTMENT SUMMARY Forecast net cash (£m) 2.4 Forecast gearing ratio (%) N/A In its March trading update, Rex Bionics (RXB) confirmed it is on track to sell more units in Market LSE H216 than the three units it sold in H116. In the US, initial demos have confirmed customer Share price graph (p) interest and the capability of its marketing partner, EnableMe. RXB recently agreed the terms of a Materiel Transfer Agreement with the US Army Medical Research and Materiel Command to develop a programme of design modifications to the REX robotic mobility aid that will allow it to be used for early ambulation of patients with lower limb loss. The RAPPER II trial is progressing well, with 31 volunteers and two new centres recruited.
INDUSTRY OUTLOOK
There are two target markets for Rex: rehab centres and personal use. Physiotherapy centres can use Rex to enable patients with mobility problems (such as those with SCI, Company description stroke, MS) to stand upright and move. However, the largest opportunity is devices for Rex Bionics develops and produces personal use, but for this to be successful it is likely that clinical trials will need to exoskeletons to help assist in the rehabilitation and improve the mobility demonstrate a clear medical and economic benefit. of patients with spinal cord injury (SCI) and other lower limb mobility problems.
Y/E Nov / Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (16.1) (16.1) (41.6) 2013 0.0 (0.5) (0.5) (1.4) N/A N/A Relative* (17.4) (21.3) (35.9) 2015 0.2 (4.7) (4.8) (46.9) N/A N/A * % Relative to local index Analyst 2016e 0.9 (5.3) (5.3) (33.2) N/A N/A Katherine Thompson 2017e 5.0 (5.0) (5.5) (30.7) N/A N/A
Edison Insight | 28 April 2016 69 Sector: Support services RM2 International (RM2) Price: 33.0p Market cap: £131m INVESTMENT SUMMARY Forecast net debt (US$m) N/A Forecast gearing ratio (%) N/A As reported with H115 results, manufacturing activity and the number of contracted Market AIM customers continued to grow. So far in FY16, RM2 has announced a pallet supply Share price graph (p) agreement with Loblaw (Canada’s largest retailer), a strategic pallet manufacturing agreement with Zhenshi Holding Group (a large fibreglass producer) and, latterly, the appointment of a new COO Kevin Mazula who brings a range of managerial experience to the group. Our estimates are under review.
INDUSTRY OUTLOOK
The investment proposition is for a significant outlay of capital in the next two or three years to build a large pallet pool generating recurring income flows from three to five-year contracts, primarily in North America. This is expected to form the platform for further Company description international growth. RM2 is entering international pallet markets with an innovative glass fibre composite pallet designed and manufactured in house. The company is targeting the generation of pallet service revenues under three- to five-year contracts.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (15.4) (1.5) (43.1) 2013 0.1 (18.3) (42.2) (33.7) N/A N/A Relative* (16.7) (7.6) (37.5) 2014 2.0 (33.7) (42.7) (13.3) N/A N/A * % Relative to local index Analyst 2015e N/A N/A N/A N/A N/A N/A Toby Thorrington 2016e N/A N/A N/A N/A N/A N/A
Sector: Oil & gas Rockhopper Exploration (RKH) Price: 31.5p Market cap: £144m INVESTMENT SUMMARY Forecast net cash (US$m) 64.9 Forecast gearing ratio (%) N/A Rockhopper (RKH) has announced it is to purchase a stake in the Abu Sennan asset from Market AIM Beach Energy. This is a rekindling of the deal first Share price graph (p) announced in August 2015 (then cancelled due to pre-emption). The deal agreed has better headline prices ($11.9m/$2.7/boe 2P+2C vs $22m/$4.5/boe) and, despite the lower commodity prices, returns metrics (IRR of 23% vs 22%). The acquisition gives Rockhopper valuable low-cost production and exposure to appraisal and exploration at Abu Sennan and El Qa’a Plain. Until closing, we do not include the proposed deal in the NAV, but our modelling indicates that it would add $15m or 2.3p/share. We have remodelled Sea Lion to account for larger volumes indicated by Premier, which increases the core NAV to 90p/share. This indicates notable Company description upside for investors with a long-term outlook. Rockhopper is a London-listed E&P with fully funded development of Sea INDUSTRY OUTLOOK Lion, a 400mmbbl field in the Falklands. It also holds production, development and exploration assets in the Mediterranean.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 7.7 3.3 (52.3) 2014 1.9 (5.8) (7.4) (2.5) N/A N/A Relative* 6.0 (3.1) (47.6) 2015 4.0 (38.2) (39.9) 5.3 8.5 N/A * % Relative to local index Analyst 2016e 10.3 (2.7) (9.4) (1.8) N/A N/A Will Forbes 2017e 13.9 (3.4) (16.8) (3.4) N/A N/A
Edison Insight | 28 April 2016 70 Sector: Aerospace & defence Rolls-Royce (RR) Price: 684.0p Market cap: £12577m INVESTMENT SUMMARY Forecast net debt (£m) 607.0 Forecast gearing ratio (%) 12.0 Rolls-Royce’s (RR) slightly better than expected FY15 results soothed market nerves as it Market LSE continues to work through its current investment phase. The current shortfall in cash flow is Share price graph (p) being addressed. We believe the strength of the core civil engine model should ultimately reassert itself, lifting equity value towards significantly higher cash valuations. New management appears to be providing a more cohesive approach to the market, with increased disclosure levels, and is aiming to simplify messages with measurable milestones. RR needs to build a conviction that it can convert its growing order backlog into real cash.
INDUSTRY OUTLOOK
Widebody aircraft deliveries are rising sharply through the end of the decade, with Company description Rolls-Royce’s increasing market share the driver of longer-term cash generation growth. Rolls-Royce designs, develops, Older aircraft utilisation rates are dropping as new, more efficient aircraft are delivered, and manufactures and services power systems for air, land and sea use. It is a reduced share in regional and corporate jet markets also currently act as a drag on one of the world’s leading aero performance. Offshore marine markets are depressed by lower oil & gas investment levels, engines suppliers for large civil aircraft and business jets, and second in but naval, power, nuclear and defence markets remain more stable at present. RR is clearly military engines and services. focused on managing underlying operational performance to ensure cash realisation. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (1.5) 26.0 (32.9) 2014 13864.0 2312.0 1617.0 65.3 10.5 8.1 Relative* (3.0) 18.2 (26.3) 2015 13354.0 2108.0 1432.0 58.7 11.7 10.7 * % Relative to local index Analyst 2016e 13175.0 1341.0 607.0 24.4 28.0 10.9 Andy Chambers 2017e 13464.0 1592.0 833.0 33.5 20.4 8.5
Sector: Financials S&U (SUS) Price: 2177.5p Market cap: £259m INVESTMENT SUMMARY Forecast net debt (£m) N/A Forecast gearing ratio (%) N/A S&U fundamentally changed with the sale of its Home Credit business last year (one-off Market LSE gain £50.5m in H115 followed by a £1.25 special dividend, returning £15m of the proceeds Share price graph (p) to shareholders). FY16 results showed PBT from continuing operations up 32% at £19.5m and ahead of our expectation. Growth prospects for the continuing Advantage, subprime motor finance, business remain good and the level of impairments remains stable at the reduced post financial crisis level. The capital released by the Home Credit business is earmarked for further growth at Advantage and potentially acquisition(s) and/ or a new venture in a related area. We are reviewing our estimates.
INDUSTRY OUTLOOK
The non-standard auto market is likely to remain strong for some years, albeit with Company description increased competition. S&U and competitors all report good demand and excellent asset Following the disposal of its home quality. collect business S&U is a niche motor finance provider to the non-standard UK market. It has over 30,000 customers up 28% on FY15.
Y/E Jan Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (4.2) (0.5) 8.3 2015 36.1 17.0 14.8 99.0 22.0 N/A Relative* (5.7) (6.6) 19.0 2016 45.2 21.7 19.5 132.4 16.4 N/A * % Relative to local index Analyst 2017e N/A N/A N/A N/A N/A N/A Andrew Mitchell 2018e N/A N/A N/A N/A N/A N/A
Edison Insight | 28 April 2016 71 Sector: Technology SCISYS (SSY) Price: 71.0p Market cap: £21m INVESTMENT SUMMARY Forecast net cash (£m) 0.3 Forecast gearing ratio (%) N/A FY15 results reveal that the difficult H1 is firmly behind it, as SCISYS bounced back with a Market AIM strong H2. In H1, SCISYS was hit by difficulties in a major fixed-price development project, Share price graph (p) but this was fully resolved in October. The group has a healthy order book of £37.2m, c 23% ahead of a year earlier, of which £25.8m is scheduled for delivery in FY16, and the group has a healthy pipeline of new business. While the interim dividend was suspended to conserve cash, the company has reinstated dividends with a final payment of 1.78p, which is 11% ahead of the previous year’s total payout. SCISYS has a medium-term goal to return the business to 8%+ operating margins, which leaves the shares looking attractive trading on c 10x our maintained FY17e earnings (based on a 6.6% margin).
INDUSTRY OUTLOOK
Company description SCISYS is a specialist provider of high-value IT solutions, focusing on specialist markets of SCISYS provides a range of space, media and broadcast, and defence sectors, along with other public and private professional services in support of the planning, development and use of sector enterprises. In recent years, weakness across the group's significant public sector computer systems in the space, customer base, notably in the environment sector, has been offset by strong performances media/broadcast and defence sectors, as well as to other public and private from the space and defence areas while management is keen to add critical mass to the sector enterprises. Media & Broadcast division and expand the offering beyond radio play out systems. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 4.4 2.2 (15.0) 2014 40.4 4.2 3.2 8.2 8.7 4.3 Relative* 2.8 (4.2) (6.6) 2015 36.1 1.5 0.6 1.3 54.6 13.1 * % Relative to local index Analyst 2016e 38.0 3.3 2.3 6.2 11.5 6.7 Richard Jeans 2017e 39.9 3.7 2.7 7.0 10.1 6.1
Sector: Food & drink SeaDragon (SEAZ) Price: NZ$0.01 Market cap: NZ$44m INVESTMENT SUMMARY Forecast net cash (NZ$m) 0.9 Forecast gearing ratio (%) N/A SeaDragon (SEA) is a final-stage fish oil processor based in Nelson, New Zealand. Its Market NZSX existing 300 tonne (t) capacity plant produces omega-2 oils for the global dietary Share price graph (NZ$) supplements market. 2015Management reported in January 2016 that it had completed the first commercial production run through its new Omega-3 factory with satisfactory results. The H116 results saw revenue double and improved margins compared with the pcp. The recent capital raise of NZ$10.009m (NZ$0.008 per share) provides funding to enable SEA to begin producing value-add products. The relationship with Comvita which includes an equity investment of 13.14% (18.77% assuming the exercise of 1,251,142,517 options) and a product supply agreement is seen as strategically important.
INDUSTRY OUTLOOK
Company description New Zealand-sourced fish oils are expected to occupy a high-value niche with demand for SeaDragon Marine Oils produces squalene and omega-3 oils remaining strong. Worldwide omega-3 production is c 110,000 specialist fish oils including squalene and omega-3, which are supplied to tonnes, with market growth averaging 5-10% globally. New market opportunities for manufacturers and marketers of SeaDragon include the functional and fortified foods, beverages, cosmetics and dietary supplements in Australasia and worldwide. pharmaceutical markets. SeaDragon is well placed with its focus on sustainable fisheries and New Zealand-sourced products. Y/E Jun / Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (NZ$m) (NZ$m) (NZ$m) (c) (x) (x) % 1m 3m 12m Actual 7.7 (6.7) (24.3) 2014 3.1 1.0 0.4 0.0 N/A N/A Relative* 5.0 (15.5) (33.1) 2015 6.3 (2.2) (2.8) (0.2) N/A N/A * % Relative to local index Analyst 2016e 12.3 0.2 (0.7) 0.0 N/A N/A Moira Daw 2017e 27.5 5.8 4.6 0.1 10.0 7.6
Edison Insight | 28 April 2016 72 Sector: Basic industries Sealegs Corporation (SLG) Price: NZ$0.11 Market cap: NZ$15m INVESTMENT SUMMARY Forecast net cash (NZ$m) 1.5 Forecast gearing ratio (%) N/A Sealegs (SLG) has changed its focus to developing a licensing strategy for its higher-margin Market NZSX amphibious enablement systems (AES) and B2B sales to hull manufacturers. This change Share price graph (NZ$) of focus has been driven by the CEO David McKee Wright, who was appointed in November 2014. We see this as a significant game-changer for Sealegs. The company announced in early April that it had formed a development partnership with Amphibious Systems LLC, an established US manufacturer. Sealegs and Amphibious Systems will jointly develop new amphibious technologies for Sealegs to distribute and sell worldwide. This follows the successful delivery of five highly specialised Sealegs amphibious craft to Malaysia’s Eastern Sabah Security Command (ESSCOM) in March.
INDUSTRY OUTLOOK
Company description Both recreational and professional boat markets are significant, although estimates of the Sealegs Corporation is a manufacturer addressable market for Sealegs’ boats and technology kits are complicated by the lack of of amphibious craft and amphibious marine systems. The company is reliable market data for both the recreational and professional market. It is a truism of the based in Auckland, New Zealand, and marine sector that the smaller the vessel, the more opaque market data and information sells its products worldwide. become.
Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (NZ$m) (NZ$m) (NZ$m) (c) (x) (x) % 1m 3m 12m Actual 48.7 10.0 0.0 2014 16.8 (0.3) (0.7) (0.6) N/A N/A Relative* 45.0 (0.4) (11.6) 2015 17.3 (1.3) (1.7) (1.4) N/A 13.0 * % Relative to local index Analyst 2016e 18.4 0.4 0.2 0.1 110.0 31.8 Finola Burke 2017e 20.3 1.2 0.9 0.6 18.3 12.5
Sector: Financials Secure Trust Bank (STB) Price: 2808.5p Market cap: £511m INVESTMENT SUMMARY Forecast net debt (£m) N/A Forecast gearing ratio (%) N/A Secure Trust Bank is an established ‘challenger’ with a record of organic profitable growth. Market AIM The Everyday Loans Group sale provides substantial regulatory capital for organic and Share price graph (p) potentially inorganic growth. The move into mortgages will further diversify lending. Despite a record of rapid loan book expansion, an ROE/COE valuation model suggests the market is reluctant to make full allowance for profitable employment of the surplus.
INDUSTRY OUTLOOK
With the large incumbent banks facing pressure on capital and focusing on core activities specialist/challenger banks such as STB have significant room for growth while still only accounting for a relatively small slice of the market. This allows for both a selective approach and rapid growth. Company description Secure Trust Bank is a high-growth, well-funded, strongly capitalised retail bank. Its lending is focused on niches in the UK personal market with selective expansion into SME finance.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (1.5) (9.9) (3.0) 2014 63.7 N/A 17.5 156.0 18.0 N/A Relative* (3.0) (15.5) 6.6 2015 92.1 N/A 24.8 170.0 16.5 N/A * % Relative to local index Analyst 2016e 123.8 N/A 33.9 156.0 18.0 N/A Andrew Mitchell 2017e 147.1 N/A 49.8 217.0 12.9 N/A
Edison Insight | 28 April 2016 73 Sector: Technology Seeing Machines (SEE) Price: 4.5p Market cap: £48m INVESTMENT SUMMARY Forecast net cash (A$m) 6.7 Forecast gearing ratio (%) N/A H1 revenue rose sixfold to A$29.3m, including A$21.9m from the front-loaded four-year Market AIM, ISDX licensing deal with Caterpillar. Excluding the CAT deal, revenue growth was 77%, including Share price graph (p) 52% from DSS mining and initial sales from SM Fleet. The new SM Fleet product had some teething issues, with revenue behind target, but the pipeline remains strong. SM has secured a follow-on order to deliver a second-generation driver monitoring system (DMS) to a global carmaker, in partnership with Takata; this is expected to deploy into more than 10 higher-volume 2018 vehicle models. SM is investigating spinning off its automotive OEM business. SM has raised c £6.7m in a placing with VS Industry, a public company in Malaysia and Hong Kong. We continue to believe there is significant upside potential in our numbers from FY17e, if SM can execute effectively in the Fleet and OEM sectors.
INDUSTRY OUTLOOK Company description Seeing Machines is a technology SM specialises in operator performance and safety through real-time monitoring and company focused on designing vision-based human machine intervention. The group’s IP is based around three sets of algorithms – head tracking, eye interfaces. aperture and eye gaze. SM is focusing on five safety-related areas: mining, commercial road transport, consumer automotive, rail and simulators (including aviation). It is also seeking business in consumer electronics through licensing/royalty relationships. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual (7.7) (10.0) (18.2) 2014 16.8 (2.4) (2.5) (0.4) N/A N/A Relative* (9.1) (15.6) (10.1) 2015 19.0 (9.1) (9.4) (1.2) N/A N/A * % Relative to local index Analyst 2016e 44.1 0.8 0.7 0.0 N/A N/A Richard Jeans 2017e 42.0 (8.4) (8.7) (1.0) N/A N/A
Sector: Engineering Severfield (SFR) Price: 52.5p Market cap: £156m INVESTMENT SUMMARY Forecast net cash (£m) 9.2 Forecast gearing ratio (%) N/A An in-line trading update (16 February) stated that the UK and Indian JV operations and the Market LSE group overall are performing as outlined in the H116 results. Both regions have seen Share price graph (p) improved order book positions with a 33% increase in the UK since the beginning of November being particularly noteworthy. While some cautionary industry comments were reiterated, we consider that the UK order position is a strongly positive development. A Capital Markets event (21 April) served to demonstrate the actions that the company has and is continuing to take to improve margins.
INDUSTRY OUTLOOK
The primary strategic aim is to maintain Severfield’s position as the leading UK structural steelwork supplier. An Indian JV (established in 2010) is operational and targeting similar Company description sectors to those served in the UK. Management has valued the Indian construction market Severfield is a leading UK structural at c £100bn pa, with a very low penetration of steel structures currently. steelwork fabricator operating across a broad range of market sectors. An Indian facility currently undertakes structural steelwork projects for the local market and is fully operational.
Y/E Dec / Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (5.4) (12.9) (20.2) 2014 231.3 12.0 4.0 0.88 59.7 74.0 Relative* (6.9) (18.3) (12.3) 2015 201.5 13.6 8.3 2.31 22.7 13.7 * % Relative to local index Analyst 2016e 232.1 17.9 11.8 3.25 16.2 9.7 Toby Thorrington 2017e 244.1 21.7 15.7 4.35 12.1 8.1
Edison Insight | 28 April 2016 74 Sector: Financials Share plc (SHRE) Price: 28.5p Market cap: £41m INVESTMENT SUMMARY Forecast net cash (£m) 8.9 Forecast gearing ratio (%) N/A In its first quarter trading update Share announced that heads of agreement had been Market AIM signed for a major new partnership set to add materially to revenue and profit in 2017. It Share price graph (p) also reported that trading remained in line with management expectations. Q1 saw subdued investor activity and revenues were down 3%, or flat excluding interest income. Within this, dealing commission was up 1% and fee income down 1% (each c 46% of revenue). Interest income was down 33% but only accounts for 8% of revenue. The company's market share by revenue was 7.50% in Q1 vs 7.17% in Q415. Share is investing significantly in IT to meet future customer requirements. This will hold back 2016 profits but should provide a platform for longer-term growth. Supporting the investment, at year-end Share had no debt and capital of 3.6x the FCA requirement.
INDUSTRY OUTLOOK Company description Share plc owns the Share Centre and We expect long-term market growth reflecting demographic, economic and social changes. Sharefunds. The Share Centre is a self-select retail stockbroker that also Near-term profits are likely to be affected by the investment programme and the fluctuating offers share services for corporates level of retail investor trading activity. and employees. A high proportion of income is from stable fee and interest income.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 5.6 1.8 (26.5) 2014 15.0 0.5 1.6 0.99 28.8 N/A Relative* 3.9 (4.5) (19.2) 2015 14.1 (0.8) 0.6 0.40 71.3 N/A * % Relative to local index Analyst 2016e 14.6 (1.6) (0.8) (0.43) N/A N/A Andrew Mitchell 2017e 16.1 (0.5) 0.3 0.18 158.3 N/A
Sector: Mining Silver Wheaton (SLW) Price: C$23.33 Market cap: C$10280m INVESTMENT SUMMARY Forecast net debt (US$m) 395.8 Forecast gearing ratio (%) 8.0 Notwithstanding a maiden contribution from Antamina, a strong performance at SLW's gold Market NYSE, TSX division in Q415 was complemented by an equally impressive performance at its silver Share price graph (C$) division, with records set for both production and sales, as each of its cornerstone assets (Salobo, Penasquito, San Dimas and Antamina) performed in tandem. Excluding impairments, Q415 was SLW's best quarter since Q314 (when Ag was US$18.98/oz).
INDUSTRY OUTLOOK
We have updated our forecasts to reflect the effects of SLW's bought-deal, which raised US$632.5m via the issue of 38.1m shares in April. Contingent on eventual success against the CRA, we forecast a value per share for SLW of US$42.30, or C$54.40, in FY19, representing a total IRR to investors of c 42% in US$ terms over four years. In the Company description meantime, SLW is trading on near-term financial ratios that make it the cheapest of its peers Silver Wheaton (SLW) is the world’s and, frequently, cheaper than the miners themselves, despite being associated with pre-eminent pure precious metals streaming company with 24 precious materially less risk. NB Q1 results are scheduled for 9 May. metals streaming agreements relating to assets in Mexico, Peru, Canada, Brazil, Chile, Argentina, Sweden, Greece, Portugal, the US and Guyana.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 0.2 55.6 0.2 2014 620.2 431.2 268.8 74.0 24.2 14.8 Relative* (2.6) 39.0 10.5 2015 648.7 426.2 223.6 53.0 33.7 16.2 * % Relative to local index Analyst 2016e 835.3 540.7 293.4 68.0 26.3 13.8 Charles Gibson 2017e 1091.5 794.4 584.2 133.0 13.4 9.9
Edison Insight | 28 April 2016 75 Sector: Technology SinnerSchrader (SZZ) Price: €4.35 Market cap: €50m INVESTMENT SUMMARY Forecast net cash (€m) 6.6 Forecast gearing ratio (%) N/A Strong new business wins led to a 21% increase in like-for-like revenues in Q2 for Market FRA, NYSE Euronext SinnerSchrader (SZZ) and, despite the pressure this can put on staffing, margins were fairly Share price graph (€) firm. With ‘significant tenders’ underway, management is confident of reaching full year guidance, a doubling of net profit. We expect the current c 30% FY16e P/E discount to peers to narrow.
INDUSTRY OUTLOOK
As the largest e-commerce agency in Germany, SinnerSchrader has a strong franchise and is well positioned to capture its share of the expanding market for digital agency services.
Company description SinnerSchrader is a leading European independent digital agency that helps companies use the internet to sell and market goods and services.
Y/E Aug Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (2.0) 4.3 42.2 2014 48.6 5.4 4.6 27.8 15.6 18.2 Relative* (5.7) (1.9) 62.6 2015 47.7 5.3 4.2 25.1 17.3 21.9 * % Relative to local index Analyst 2016e 50.5 6.0 5.2 30.5 14.3 10.7 Bridie Barrett 2017e 53.9 6.6 5.6 32.7 13.3 8.2
Sector: Technology SLI Systems (SLIZ) Price: NZ$1.10 Market cap: NZ$68m INVESTMENT SUMMARY Forecast net cash (NZ$m) 4.4 Forecast gearing ratio (%) N/A SLI Systems has appointed veteran Silicon Valley executive Chris Brubaker as Chief Market NZSX Marketing Officer. Brubaker, who joins SLI immediately, will focus on driving excellence in Share price graph (NZ$) worldwide marketing execution to assist the company’s ongoing revenue growth and operating income improvement. He brings more than fifteen years’ marketing and executive leadership experience to the position. SLI had NZ$5.6m cash on hand at 31 December and expects to break even without requiring additional capital. We are forecasting FY16 EPS of (1.0)c.
INDUSTRY OUTLOOK
Mobile search and business analytics are becoming key industry drivers for SLI Systems. e-Retailers are increasingly aware that effective search and merchandising can have a Company description significant impact on revenue and profitability and therefore deserve specialised focus. SLI Systems' core products are Mobile search is particularly difficult and it is the appreciation of this fact by retailers that e-commerce site search and navigation tools that learn from should lead to growth in the independent site search industry. customer behaviours to improve the relevance of search results and therefore increase sales conversion.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (NZ$m) (NZ$m) (NZ$m) (c) (x) (x) % 1m 3m 12m Actual (2.7) 48.7 (1.8) 2014 22.4 (5.4) (5.4) (8.5) N/A N/A Relative* (5.1) 34.6 (13.1) 2015 28.6 (6.5) (6.7) (10.7) N/A N/A * % Relative to local index Analyst 2016e 36.6 (0.3) (0.6) (1.0) N/A N/A Finola Burke 2017e 46.2 4.1 3.7 6.0 18.3 39.6
Edison Insight | 28 April 2016 76 Sector: Consumer support services Snoozebox (ZZZ) Price: 1.6p Market cap: £5m INVESTMENT SUMMARY Forecast net debt (£m) N/A Forecast gearing ratio (%) N/A Snoozebox has announced a comprehensive review aimed at securing a more sustainable Market AIM financial footing. Its initial conclusion is a focus on deployment of rooms on semi-permanent Share price graph (p) contracts rather than at events, given likely better returns. However, a relatively weak pipeline and longer than expected lead times suggest a decline in revenue this year. Management guidance is for an adjusted EBITDA loss of £5.5m for 2015 and net debt of £1.9m at March 2016. It believes that the company has sufficient working capital in the short term. Overheads are being reduced, including the resignation of the CEO, and an amendment to debt servicing obligations is being sought. We are reviewing forecasts.
INDUSTRY OUTLOOK
The UK outdoor leisure market, the company’s focus to date, is large and visible with over Company description 1,000 annual events of three days or more. There are also significant one-off events, such As the UK leader in portable hotel as the recent Rugby World Cup. There is invariably no hotel accommodation at or near the accommodation, Snoozebox serves high-spec en-suite bedrooms to the event premises, yet strong demand from sponsors, visitors, VIPs, event organisers and events market. A less sophisticated participants. version is available for longer periods, typically for staff lodging in the public and private sectors.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (38.1) (67.5) (82.2) 2013 6.7 (4.8) (6.1) (6.8) N/A N/A Relative* (39.1) (69.5) (80.4) 2014 2.8 (3.6) (5.2) (2.9) N/A N/A * % Relative to local index Analyst 2015e N/A N/A N/A N/A N/A N/A Richard Finch 2016e N/A N/A N/A N/A N/A N/A
Sector: Technology SNP AG (SHF) Price: €29.55 Market cap: €110m INVESTMENT SUMMARY Forecast net debt (€m) 3.5 Forecast gearing ratio (%) 18.0 FY15 revenues jumped 84.5% to €56.2m, including 56% organic growth. The operating Market FRA margin dipped in Q4, largely due to the establishment of a training programme in the US Share price graph (€) which, along with costs associated with the recent acquisitions, are expected to hold down the near-term operating margin by 300-400bp. Nevertheless, we still expect margins to trend higher over the medium term. The training programmes in the US and Germany are each expected to produce around 40 new fully trained IT consultants in 2016, and should lift total headcount towards 700 at the end of the year. Given the buoyant backdrop, we continue to believe the shares look attractive trading on c 17x our edged-up FY17 earnings.
INDUSTRY OUTLOOK
SNP helps businesses tailor and improve their ERP landscapes. Its proprietary software Company description includes the only off-the-shelf transformation product in SNP Transformation Backbone with SNP Schneider-Neureither & Partner SAP Landscape Transformation Software (T-B), which automates the process of combining, (SNP) is a software and consulting business focused on supporting upgrading or carving out data from ERP systems. Activity remains brisk at SNP, with customers in implementing change, utilisation rates very high, as the company continues to benefit from favourable structural and rapidly and economically tailoring IT landscapes to new situations. growth drivers, a partnership with SAP, along with its elevated profile in wake of the landmark Hewlett-Packard deal of 2015. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual (8.1) 14.4 93.8 2014 30.5 0.9 (0.1) (13.9) N/A N/A Relative* (11.5) 7.7 121.7 2015 56.2 5.5 3.4 58.8 50.3 N/A * % Relative to local index Analyst 2016e 75.2 9.1 6.9 124.1 23.8 N/A Richard Jeans 2017e 88.4 11.8 9.6 173.2 17.1 N/A
Edison Insight | 28 April 2016 77 Sector: General industrials Solid State (SOLI) Price: 340.0p Market cap: £28m INVESTMENT SUMMARY Forecast net debt (£m) 2.4 Forecast gearing ratio (%) 17.0 Our FY16 estimates show the group repeating the record profit levels achieved in FY15. Market AIM This is attributable to Ginsbury Electronics, acquired in April 2015, the development of new Share price graph (p) products and new franchise contracts, combined with an emphasis on margin improvement. The absence of MoJ revenues is expected to result in a year-on-year revenue decline during FY17e, but does not have an adverse impact on expected profitability as the initial revenues were at low margin.
INDUSTRY OUTLOOK
Recent activities provide concrete examples of this progress. Steatite has started to ship next-generation ticketing machines and is working on a project involving fully equipped cabinets of servers for an aerospace application, which is a higher level of integration than Company description formerly. Solid State Supplies has been awarded franchises with three new counterparties: Solid State is a high value-add GSI, Kemet and GigaDevices. manufacturer and specialist design-in distributor specialising in industrial/ruggedised computers, electronic components, antennas, microwave systems, secure comms systems and battery power solutions.
Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (6.9) (37.6) (52.8) 2014 32.1 2.8 2.4 28.4 12.0 11.4 Relative* (8.3) (41.5) (48.1) 2015 36.6 3.8 3.2 36.3 9.4 10.5 * % Relative to local index Analyst 2016e 44.0 3.8 3.2 34.7 9.8 8.4 Anne Margaret Crow 2017e 39.6 4.0 3.4 36.1 9.4 5.8
Sector: Media & entertainment SpaceandPeople (SAL) Price: 59.0p Market cap: £12m INVESTMENT SUMMARY Forecast net cash (£m) 1.3 Forecast gearing ratio (%) N/A SpaceandPeople (SAL) has had a transitional year in terms of both its client base and its Market AIM products and services. With the Network Rail contract and the more recent British Land Share price graph (p) wins, there is plenty of promise for future growth, clearly more than offsetting lower revenues from Retail Merchandising Units. Headline FY15 numbers were also affected by the translational effect on German revenues and slower-than-hoped build in revenues from S&P+. This is all factored into the rating, which remains at a discount to other small marketing services businesses, despite the premium yield.
INDUSTRY OUTLOOK
2015 was a strong year for the retail shopping centre property market, well ahead of the long-term average, although not matching the prior year. The best centres are doing well Company description and there has been renewed interest in secondary schemes where rents are rebased and The SpaceandPeople Group is a yields are not yet reflecting improving occupation. Network Rail has ambitious targets for leading international destination media and retail solutions specialist, developing its retail credentials and estimated that retail sales across its managed network representing over 750 venues with a were up 4% over Christmas. It estimates that up to a quarter of its footfall is from people not weekly footfall of 70m, including shopping centres, theme parks, garden at stations to catch trains, but to meet up and/or to shop. centres, retail parks and airports.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (1.7) 3.5 1.7 2014 15.4 1.6 1.2 3.9 15.1 6.7 Relative* (3.2) (2.9) 11.7 2015 13.8 1.5 1.1 4.3 13.7 59.9 * % Relative to local index Analyst 2016e 14.2 2.0 1.5 5.3 11.1 7.2 Fiona Orford-Williams 2017e 14.8 2.3 1.7 6.0 9.8 4.9
Edison Insight | 28 April 2016 78 Sector: Technology StatPro Group (SOG) Price: 74.0p Market cap: £48m INVESTMENT SUMMARY Forecast net debt (£m) 7.2 Forecast gearing ratio (%) 19.0 StatPro Revolution's annualised recurring revenues jumped 46% over 2015 to £7.8m. The Market AIM group made two acquisitions in Q1, including Investor Analytics, a US-based provider of Share price graph (p) cloud-based risk analytics solutions, which boosts cloud revenues to 34% of the pro forma total. Also, the company has repurchased 4.25% of its shares, which we estimate will give a small boost to EPS. The group’s multi-tenanted cloud solutions enjoy significant advantages over traditional software and we believe there is an increasing potential for positive earnings surprises, as StatPro moves to late-stage cloud transition. StatPro Performance model – the last component in the group’s switch to the cloud – will be launched commercially in September. Hence with StatPro’s US-based financial software peers and SaaS companies trading on lofty multiples, we continue to believe there is significant upside in the shares.
INDUSTRY OUTLOOK Company description StatPro Group provides cloud-based StatPro's products are targeted at the global wealth management industry. There has been portfolio analytics solutions to the global investment community. an improving outlook for fund managers with assets under management up 8% at a record $74tn in 2014 according to Boston Consulting Group. In addition, competitive, cost and regulatory pressures all require asset managers to maintain and upgrade their reporting and risk management systems. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (0.7) 0.7 (7.5) 2014 32.0 4.4 2.6 2.7 27.4 6.5 Relative* (2.2) (5.6) 1.6 2015 30.2 4.0 2.6 2.6 28.5 7.6 * % Relative to local index Analyst 2016e 34.4 4.3 2.5 2.7 27.4 6.5 Richard Jeans 2017e 36.4 5.2 3.4 3.6 20.6 5.2
Sector: Support services Stobart Group (STOB) Price: 105.0p Market cap: £362m INVESTMENT SUMMARY Forecast net debt (£m) 36.6 Forecast gearing ratio (%) 11.0 The pre-close trading statement announced in early March suggested trading remained in Market LSE line with expectations, with the Infrastructure division particularly strong helped by the Share price graph (p) investment property portfolio. The Speke property transaction in December was a recent example of actions to enhance the value of the portfolio. The group remains confident of achieving the long-term strategic targets and creating value in its two growth divisions, Energy and Aviation. The Infrastructure division is now looking to realise value from the rest of its properties, either individually or as a portfolio. This will help finance the two growth divisions, pay dividends and allow the board to consider distributing surplus cash. Final results are due on 12 May 2016.
INDUSTRY OUTLOOK
Company description After disposing of the majority of Eddie Stobart Logistics, the group will be an infrastructure Stobart consists of two divisions: and support service firm operating in the energy (biomass), aviation and rail sectors. Infrastructure and Support Services operating across Aviation, Energy, Rail and Investments.
Y/E Feb Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 5.0 3.5 (2.3) 2014 99.2 23.0 5.8 1.6 65.6 10.7 Relative* 3.4 (3.0) 7.3 2015 116.7 18.3 9.8 2.8 37.5 N/A * % Relative to local index Analyst 2016e 125.1 18.7 9.9 2.6 40.4 N/A Neil Basten 2017e 139.9 22.1 13.1 3.6 29.2 18.6
Edison Insight | 28 April 2016 79 Sector: Travel & leisure Stride Gaming (STR) Price: 235.0p Market cap: £121m INVESTMENT SUMMARY Forecast net cash (£m) 0.9 Forecast gearing ratio (%) N/A Stride's February update showed that trading in the early part of the financial year (August Market AIM year end) started well. The UK Gambling Commission outlined a number of new regulations Share price graph (p) in April relating to how bingo and casino sites display their terms and conditions relating to promotions. The changes are expected to increase transparency for customers, but are not expected to have a material effect on game playing.
INDUSTRY OUTLOOK
Bingo is the fourth largest online gambling vertical (after sports, casino and poker), estimated to be worth €1.8bn in 2014, with a higher growth rate than the wider gaming market at 10.1%. H2GC estimates that the market will be worth €2.3bn by 2018, growing at c 7% pa. The market for social games is global and estimated to reach $17.4bn by 2019, up Company description from $5.4bn in 2012, a CAGR of 16.1% (source: Transparency Market Research). Within Stride Gaming is an online gaming this, Eilers Research estimates that the 2014 market for casino-style games was worth operator in the bingo-led and social gaming markets, using proprietary and about $2.8bn; it is forecast to grow to $4.4bn by 2017. purchased software to provide online bingo and related gaming and social activities to players. Stride Gaming only operates in regulated markets.
Y/E Aug Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (1.1) 0.0 N/A 2014 8.5 1.2 1.2 4.0 58.8 N/A Relative* (2.6) (6.2) N/A 2015 27.8 7.3 7.2 14.0 16.8 22.4 * % Relative to local index Analyst 2016e 45.0 11.3 10.1 16.3 14.4 13.8 Eric Opara 2017e 48.8 12.8 11.3 18.1 13.0 10.0
Sector: Media & entertainment STV Group (STVG) Price: 380.0p Market cap: £150m INVESTMENT SUMMARY Forecast net debt (£m) 24.3 Forecast gearing ratio (%) 172.0 STV is on track for a good first half with growth across the board, particularly in digital and Market LSE production. On a 9.5x FY16e P/E, with dividend support, the share offers good value. Share price graph (p) Furthermore, the valuation of the defined pension deficits will conclude in this quarter, which should clarify STV’s cash commitments for the next three years and may pave the way for special dividends further out.
INDUSTRY OUTLOOK
With audiences and profits from ITV, the UK's largest commercial channel fairly stable, UK TV companies are increasingly focused on leveraging their brands elsewhere through spin-off channels, digital players, and by exploiting their production capabilities in a buoyant market for TV content. Companies with the strongest brands, experience and resources to Company description invest in these initiatives should outperform. STV is Scotland's digital media company. It holds the Channel 3 (ITV) commercial television licences for Scotland and creates and distributes programmes across all platforms, including broadcast and catch-up TV, online, mobile and connected devices.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (11.6) (23.2) 8.6 2014 120.4 21.5 17.3 37.6 10.1 7.1 Relative* (13.0) (28.0) 19.3 2015 116.5 22.9 19.1 38.8 9.8 7.5 * % Relative to local index Analyst 2016e 127.0 24.5 20.8 42.1 9.0 7.6 Bridie Barrett 2017e 134.7 26.2 22.8 45.9 8.3 6.0
Edison Insight | 28 April 2016 80 Sector: Industrial support services Tenon (TEN) Price: NZ$2.63 Market cap: NZ$170m INVESTMENT SUMMARY Forecast net debt (US$m) N/A Forecast gearing ratio (%) N/A Tenon is undertaking a strategic business review to identify a path to increase shareholder Market NZAX value. Peer group comparisons suggest a valuation range in excess of NZ$4.51 based on Share price graph (NZ$) calendarised 2015 multiples, and higher still on estimates beyond this. Our analysis suggests a very positive outlook for its core US markets; the company is set to deliver faster earnings growth and H116 results (15 February) delivered EBITDA (excluding strategic review costs) almost double that in H115. Our estimates are under review.
INDUSTRY OUTLOOK
The decline in the US housing market is well documented, with peak-to-trough falls of around 70% in new housing starts (National Association of House Builders), 24% in remodelling activity (Harvard’s Joint Center of Housing Studies) and c 40% in existing home Company description transactions (National Association of Realtors). Activity levels have improved gradually over Tenon is a leading mouldings and the last 18 months or so, but are still below historical averages or what might now be millwork manufacturer and distributor primarily for the North American considered to be a steady or mid-cycle rate. housing market. It sources products and materials globally, including from its traditional New Zealand base, which serves Asia-Pacific and Europe.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 3.5 (2.6) 31.5 2014 396.0 11.0 4.0 4.2 43.0 16.9 Relative* 1.0 (11.8) 16.3 2015 406.0 13.0 6.0 9.9 18.3 29.5 * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Peter Chilton 2017e N/A N/A N/A N/A N/A N/A
Sector: Technology Thin Film Electronics (THIN) Price: NOK4.27 Market cap: NOK2887m INVESTMENT SUMMARY Forecast net cash (US$m) 16.2 Forecast gearing ratio (%) N/A In recent months Thinfilm (THIN) has announced a slew of pilot orders and partnerships Market Oslo with leading brands, consultants and packaging companies, including global drinks giant Share price graph (NOK) Diageo, labels leader Xerox and a major global FMCG producer. On a six to nine-month horizon, we expect Thinfilm to translate this into strong growth in order volumes leading to a likely uptick in earnings forecasts and the stock valuation.
INDUSTRY OUTLOOK
Thinfilm is the global leader in printed electronics, which is a low cost and highly scalable method of creating smart labels for the Internet of Things. The company is currently focused on three areas: NFC labels, most notably NFC OpenSense, which is on pilot trial with a number of major brands, memory labels, which are in production and sensor and display Company description labels, where it has developed prototypes. The ability of printed electronics to add Thin Film Electronics (Thinfilm) intelligence to low-cost, high-volume products opens a wide range of potential applications commercialises printed electronics and owns key patents for printing that could present an even greater market opportunity. rewritable, non-volatile memory and printable NFC circuits. It also licenses technology from others to develop complete printed systems.
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 22.0 63.0 (33.3) 2014 4.5 (23.6) (24.2) (4.9) N/A N/A Relative* 21.7 50.8 (23.9) 2015 4.4 (29.2) (28.3) (5.3) N/A N/A * % Relative to local index Analyst 2016e 12.2 (30.4) (32.0) (4.7) N/A N/A Anna Bossong 2017e 71.5 (15.3) (18.9) (2.4) N/A N/A
Edison Insight | 28 April 2016 81 Sector: Travel & leisure Thunderbird Resorts (TBIRD) Price: US$0.23 Market cap: US$6m INVESTMENT SUMMARY Forecast net debt (US$m) N/A Forecast gearing ratio (%) N/A Thunderbird's 2015 Annual Report shows adj. EBITDA up 31% to $3.07m on revenue of Market Euronext Amsterdam $41.3m (5% down but 4% up at constant currency). Monthly reports indicate that Q116 Share price graph (US$) revenue trends are similar. The group has materially reduced corporate costs and net debt was $29m at 31 December 2015, down from $41m at end 2014, but remains a burden. Management is continuing to investigate strategic options. It has announced the proposed sale and lease back of its Fiesta Lima hotel/casino property (which could materially reduce debt) and has sold its Panama office for a net $0.5m. Our forecasts remain under review.
INDUSTRY OUTLOOK
Peru's economic recovery remains weak with GDP up 2.8% in 2015, with 3.5% forecast for 2016 (source: LatinFocus). The smaller Nicaragua economy grew at 3.9% n 2015 with 4.1% Company description forecast for 2016. The Peruvian Sol fell by over 12% vs the US$ in 2015 and continued to Thunderbird is a Latin-American fall in Q116, although there has been some strengthening since 1 March. The Nicaragua gaming operator with casino, slot parlour and hotel operations in Peru cordoba slipped 3.5% against the US$ in 2015. and Nicaragua, with approximately 2,000 gaming positions. It sold its Costa Rica operations in February 2015.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 0.0 (23.3) (47.7) 2014 56.2 5.3 (4.8) (0.27) N/A 0.7 Relative* (1.9) (28.8) (41.5) 2015 41.3 3.1 (1.2) (0.10) N/A 2.9 * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Jane Anscombe 2017e N/A N/A N/A N/A N/A N/A
Sector: General industrials Tourism Holdings (THL) Price: NZ$2.60 Market cap: NZ$298m INVESTMENT SUMMARY Forecast net debt (NZ$m) 87.2 Forecast gearing ratio (%) 50.0 THL’s H116 NPAT of NZ$8.2m was 45% more than the previous corresponding period. It Market NZSX lifted its guidance for FY16 from NPAT of NZ$22m to NPAT of c NZ$24m and confirmed Share price graph (NZ$) that it expected to meet its FY19 NPAT guidance of NZ$30m. THL reported that the tourism markets in its key markets of New Zealand and Australia remain strong and that ongoing focus on cost reduction, improved efficiency and innovative ways to reduce capital employed are expected to drive ROCE. The company expects to achieve its long-term average ROCE of 14% in FY16.
INDUSTRY OUTLOOK
THL rents its fleet of c 3,700 motorhomes to free independent travellers (FITs) in New Zealand, Australia, the UK and the US. Growth in the FIT component of the travel market is Company description expected to remain strong and to grow quickly because technology is allowing a greater Tourism Holdings listed on the NZX in proportion of travellers to 'roam free'. The outlook for international arrivals into New Zealand 1986. It is the largest motorhome rental operator in the world with a fleet remains strong with visitor arrivals up c 5% year to date. of c 3,700 motorhomes designed to meet the needs of the free independent traveller (FIT) market.
Y/E Jun Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (NZ$m) (NZ$m) (NZ$m) (c) (x) (x) % 1m 3m 12m Actual (1.1) 19.3 57.6 2014 226.7 61.3 19.8 9.5 27.4 5.4 Relative* (3.6) 8.0 39.4 2015 237.3 65.6 31.4 17.0 15.3 8.8 * % Relative to local index Analyst 2016e 270.0 76.2 38.8 20.2 12.9 7.0 Moira Daw 2017e 271.1 78.4 40.1 21.8 11.9 3.7
Edison Insight | 28 April 2016 82 Sector: Industrial support services TP Group (TPG) Price: 3.5p Market cap: £15m INVESTMENT SUMMARY Forecast net cash (£m) 6.0 Forecast gearing ratio (%) N/A Management has successfully addressed the inherited losses ahead of plan, and is now Market AIM embarking on driving a more growth oriented business focused on high integrity support, Share price graph (p) services and solutions. Management action and a robust aerospace and defence performance delivered the break-even adjusted EBITDA. The removal of speculative development and losses, combined with improved returns from a growing top line should ensure a more accurate reflection of underlying economic value. Despite valuing the still loss-making energy related businesses at zero, our sum-of-parts based calculation now returns a value of 8.8p per share.
INDUSTRY OUTLOOK
TP Group has transitioned its structure to four capability based divisions: TPG Maritime Company description (54% of FY15 sales), Engineering (35%), Design & Technology (4%) and Managed TP Group (previously Corac Group) is Solutions (7%), primarily for the aerospace, defence, energy and maritime markets. These a specialist engineering, technical and managed services group, structured provide the opportunity to grow revenues with existing blue-chip customers and through around two market facing divisions: access to adjacencies in both the UK and export markets, including selective acquisitions. Aerospace & Defence (54% of FY14 sales) and Energy & Process (46%).
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 21.7 64.7 (17.7) 2013 19.3 (3.0) (4.3) (1.1) N/A N/A Relative* 19.9 54.5 (9.6) 2014 21.7 (2.1) (3.4) (0.8) N/A N/A * % Relative to local index Analyst 2015e 20.5 0.0 (1.2) 0.0 N/A N/A Roger Johnston 2016e 22.7 0.7 (0.2) 0.1 35.0 24.6
Sector: Technology Track Group (TRCK) Price: US$6.00 Market cap: US$62m INVESTMENT SUMMARY Forecast net debt (US$m) 26.7 Forecast gearing ratio (%) 236.0 Track Group has restructured its business through FY15 to create an end-to-end offender Market OTC Bulletin Board monitoring service. Several large contracts support organic growth and management Share price graph (US$) continues to consider further acquisitions to expand the service offering. Q116 revenues of $6.3m (+36.7% y-o-y) showed progress towards FY16 guidance. With debt refinanced and supply-chain processes streamlined, the business is in a stronger position to drive revenue growth, margins and cash flow.
INDUSTRY OUTLOOK
There are over 300,000 offenders currently being electronically monitored in the US compared to just 4,914 in 2007 (CAGR 70%). The main adoption driver is recent prison reform legislation in the US and other countries intended to reduce prison overcrowding. Company description Tighter budgets provide an incentive for governments to accept EM as an evidence-based Track Group develops and provides alternative to incarceration, reducing recidivism and promoting the secure reintegration of end-to-end tracking solutions that combine real-time tracking devices and offenders into society, rather than keeping them incarcerated at over 6x the annual cost. monitoring services with advanced data analytics for the global criminal justice market.
Y/E Sep Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual (4.8) (14.3) (37.8) 2014 12.3 (2.0) (5.4) (54.4) N/A N/A Relative* (6.7) (21.9) (37.3) 2015 20.8 0.8 (6.1) (59.8) N/A N/A * % Relative to local index Analyst 2016e 28.1 4.2 (3.6) (35.2) N/A 30.9 Katherine Thompson 2017e 42.0 10.8 2.8 27.2 22.1 10.1
Edison Insight | 28 April 2016 83 Sector: Food & drink Treatt (TET) Price: 179.5p Market cap: £93m INVESTMENT SUMMARY Forecast net debt (£m) 5.6 Forecast gearing ratio (%) 14.0 Treatt had yet another strong year in FY15: the good performance was broad-based, Market LSE spanning beverages, core flavours and fragrances and personal care. FY16 started steadily, Share price graph (p) and management is confident of building “a successful, strong business for the long term.” We believe this will continue to be reflected during H1. A decision has been made regarding the UK business and there will be a full site relocation over the next three years or so. We continue to view Treatt as a good-value opportunity in the highly rated and high-growth ingredients space. H116 results are due to be published on 17 May.
INDUSTRY OUTLOOK
Annual growth rates for the global flavours, fragrance and ingredients sector are expected to be low single digits in 2013-18 (source: IAL Consultants). Craft beer in particular has Company description proved to be a fast-growing new market for Treatt. This trend should continue for some time Treatt provides innovative ingredient as the multinational beverage companies are now getting involved in the space. solutions from its manufacturing bases in Europe, N America and Africa, 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 1.4 1.1 26.9 2014 79.2 9.0 7.1 10.3 17.4 26.1 Relative* (0.2) (5.1) 39.3 2015 85.9 10.1 8.1 12.3 14.6 10.7 * % Relative to local index Analyst 2016e 85.9 10.6 8.5 12.4 14.5 8.9 Sara Welford 2017e 89.4 11.5 9.1 13.3 13.5 9.6
Sector: Engineering Trifast (TRI) Price: 138.5p Market cap: £162m INVESTMENT SUMMARY Forecast net debt (£m) 17.7 Forecast gearing ratio (%) 24.0 Trifast has an impressive record since management restructuring seven years ago, Market LSE restoring confidence both internally and across the group's supplier and customer base. Share price graph (p) Organic progress is being delivered without conceding margin, while acquisitions extend the product, geographical and customer spread, providing numerous cross-selling opportunities. Continental aspirations are greatly enhanced by recent core acquisitions based in Italy and, more recently, in Germany. The pre-close trading update (19 April) confirmed another sound year's trading, with profits indicated at the upper end of market expectations.
INDUSTRY OUTLOOK
The global specialist industrial fasteners market is valued at around £25bn. Successful manufacturers and distributors responded to the shift in manufacturing to lower-cost regions Company description by developing their own local facilities and/or supply routes. They have also created Trifast is a leading global designer, effective logistical services and shifted the emphasis towards more complex products to manufacturer and distributor of industrial fasteners. Principal increase value. A recent increase in M&A activity in the sectors looks set to continue in the operations are in the UK, South-East immediate future. Asia and Continental Europe, while there is a modest, but growing, presence in North America.
Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 11.0 28.2 30.1 2014 129.8 10.8 9.2 5.96 23.2 12.7 Relative* 9.3 20.3 42.8 2015 154.7 16.5 14.3 8.68 16.0 23.2 * % Relative to local index Analyst 2016e 158.0 17.6 15.4 9.21 15.0 11.1 Nigel Harrison 2017e 170.0 18.9 16.5 9.86 14.0 12.0
Edison Insight | 28 April 2016 84 Sector: Mining True North Gems (TGX) Price: C$0.15 Market cap: C$46m INVESTMENT SUMMARY Forecast net cash (C$m) 0.7 Forecast gearing ratio (%) N/A TGX’s update on mine construction highlights that on-site infrastructure is very near Market CV completion, processing plant equipment is basically installed, other than for some Share price graph (C$) non-critical wiring and heating arrangements for the main plant building. Further, the pit has been prepared and stockpiles formed from which wet commissioning of the processing facilities can take place. The Nuuk located beneficiation facility is still to be completed and a building available for retrofitting with upgrading equipment is being sourced. Design approvals for the Nuuk facility have been received.
INDUSTRY OUTLOOK
A key risk to our valuation is that TGX is still to source sufficient off-take for its products. While the agreement with Chinastone goes some way to removing this risk, further off-takes Company description are needed. The overall gemstone equity market has seen a rally consistent with its mining True North Gems is developing its peers; as long as gemstone prices mirror this market rise, we expect TGX to be able to 85.4%-owned (65% upon completion of the mine by its JV partner LNSG) acquire new off-take partners to take all of Aappaluttoq’s material. TGX has engaged and exploitation (mining) permitted Endeavour Financial to help advise it through the commissioning phase and into production Aappaluttoq ruby and pink sapphire mine in Greenland. and will ‘assess and execute additional financing’ to help boost TGX’s working capital.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (C$m) (C$m) (C$m) (c) (x) (x) % 1m 3m 12m Actual 0.0 (6.3) (14.3) 2013 0.0 (1.6) (1.7) (0.7) N/A N/A Relative* (2.7) (16.3) (5.5) 2014 0.0 (1.2) (1.4) (0.5) N/A N/A * % Relative to local index Analyst 2015e 0.0 (5.2) (5.2) (1.1) N/A N/A Tom Hayes 2016e 48.8 37.5 35.0 7.3 2.1 1.3
Sector: Financials Tungsten Corporation (TUNG) Price: 57.0p Market cap: £72m INVESTMENT SUMMARY Forecast net debt (£m) N/A Forecast gearing ratio (%) N/A Tungsten aims to transform its business in the next two years, to achieve EBITDA Market LSE break-even on a run-rate basis by the end of FY17, from a loss of £24.8m in FY15. It Share price graph (p) intends to do this by turning around its loss-making e-invoicing network business, selling its loss-making bank and reducing one-off costs in its other activities. In the key e-invoicing division it intends to reprice its services to the buyers on the network, increase the number of suppliers and re-engineer its processes to achieve the operational gearing potentially inherent in this activity. It believes that it now has sufficient funding to see the group through to break-even after raising £16.7m (net) in May 2015 and the proposed sale of its bank for c £30m. At a capital markets day in February 2016 it elaborated on some of the measures it will undertake to achieve its financial targets. On 18 April 2016 Tungsten announced that an experienced banking specialist from HSBC had joined Tungsten Network to drive the Company description finance business forward. Tungsten Corporation operates a global e-invoicing network, as well as INDUSTRY OUTLOOK providing value-added services such as spend analytics to help buyers on The potential to sell invoice financing to suppliers on its network remains. Tungsten faces its network save money, and invoice financing to suppliers to enable them competition for invoice financing - not just from the traditional suppliers but also from other to receive early payment on their invoices. e-invoicing organisations. Y/E Apr Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (2.2) (7.3) (68.4) 2014 10.8 (10.2) (11.1) (18.6) N/A N/A Relative* (3.7) (13.1) (65.3) 2015 23.1 (24.8) (27.3) (26.3) N/A N/A * % Relative to local index Analyst 2016e 27.7 (18.0) (26.3) (21.2) N/A N/A Peter Thorne 2017e 34.6 (9.8) (7.7) (6.1) N/A N/A
Edison Insight | 28 April 2016 85 Sector: Technology TXT e-solutions (TXT) Price: €7.72 Market cap: €100m INVESTMENT SUMMARY Forecast net cash (€m) 7.2 Forecast gearing ratio (%) N/A TXT reported strong FY15 revenue growth of 13%, with growth from both divisions (TXT Market Borsa Italiana STAR Perform +12.4%, TXT Next +14.2%). EBITDA was 2.6% and normalised EPS 7.9% ahead Share price graph (€) of our forecast. The planned acquisition of PACE for up to €7.5m in cash adds higher-margin aerospace software capability and accelerates TXT Next’s quest to expand its addressable market outside of Italy. We have incorporated PACE into our estimates, forecasting normalised EPS growth of 16% in FY16 and 9% in FY17. Even after paying for the acquisition, we forecast a net cash position of €7.2m at the end of FY16.
INDUSTRY OUTLOOK
The supply chain management software market is growing at c 10% pa and splits into two broad areas: supply chain planning (SCP) and supply chain execution software. TXT Company description Perform specialises in SCP software, a market that was worth c $3.7bn in 2014 (source: TXT e-solutions has two divisions: TXT Gartner). TXT Next is a beneficiary of the trend to outsource IT, which gives the customer Perform provides software solutions for supply chain management in the greater flexibility on cost and better access to specialist skills. international retail & consumer-driven industrial sectors; and TXT Next provides IT, consulting and R&D services to Italian 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 (0.4) 7.3 (13.1) 2014 54.4 5.3 4.0 28.0 27.6 16.4 Relative* (0.4) 9.0 6.3 2015 61.5 6.7 5.7 40.0 19.3 37.4 * % Relative to local index Analyst 2016e 70.3 7.9 7.1 47.0 16.4 9.8 Katherine Thompson 2017e 74.5 8.5 7.7 51.0 15.1 12.4
Sector: Construction & blding mat. Tyman (TYMN) Price: 283.2p Market cap: £480m INVESTMENT SUMMARY Forecast net debt (£m) 156.4 Forecast gearing ratio (%) 52.0 Tyman had flagged weaker Q3 trading - and we trimmed estimates in November - but in the Market LSE event FY15 results were in line with our post H115 expectations. This was chiefly due to a Share price graph (p) better outturn from AmesburyTruth (partly aided by FX). Other cash flow lines (eg working capital, net capex) were also relatively favourable and Tyman ended the year with £82m net debt. The acquisition of Giesse for c £61m was announced on 8 March and expands Schlegel’s product portfolio and geographic footprint. Tyman’s AGM will take place on 13 May.
INDUSTRY OUTLOOK
US new-build growth has continued and rising housing transactions appear to be starting to feed into RMI spend now. A similar scenario is playing out in the UK, Tyman's Company description second-largest market. Tyman’s product portfolio now solely addresses the residential RMI & building markets. It manufactures and sources window and door hardware and seals, largely for the N. American (63%) and UK (26%) markets. (Percentages for FY14 revenue.)
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (4.7) 17.9 (9.2) 2014 350.9 54.6 41.6 18.4 15.4 11.9 Relative* (6.2) 10.6 (0.3) 2015 353.4 60.4 44.9 19.2 14.8 9.7 * % Relative to local index Analyst 2016e 415.5 70.0 51.1 21.1 13.4 9.2 Toby Thorrington 2017e 441.5 76.4 56.2 23.3 12.2 7.0
Edison Insight | 28 April 2016 86 Sector: Aerospace & defence Ultra Electronics (ULE) Price: 1784.0p Market cap: £1254m INVESTMENT SUMMARY Forecast net debt (£m) 270.3 Forecast gearing ratio (%) 78.0 In common with its peers, Ultra Electronics is benefiting from the improved outlook for Market LSE defence spending, enabling it to significantly outperform in the recent market downturn. Share price graph (p) FY15 results are a reminder of the deferred nature of budgetary decisions, with recent constraints still flowing into performance. These should now start to gradually release, allowing organic growth to accelerate modestly from FY17e augmented by M&A. We have rolled our valuation basis towards FY17e peer comparisons and our sum-of-the-parts now returns a value of 1,904p, up almost 6% from our previous FY16-based valuation of 1,799p in November.
INDUSTRY OUTLOOK
With defence drivers moving towards greater demand for electronic equipment and Company description information management, Ultra is well positioned to benefit from more frequent upgrade Ultra Electronics is a global aerospace cycles. In addition, it appears that defence spending may have turned a corner in the and defence electronics company, with operations across three divisions: Western world. Also, with civil airport infrastructure booming in emerging economies and an Aerospace & Infrastructure (27% of increasing civil aircraft build rate, Ultra stands to benefit from its diversified end-markets. 2015 sales); Communications & Security (33%); and Maritime & Land (40%).
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (0.1) (5.4) 4.3 2014 713.7 128.9 112.0 123.1 14.5 12.8 Relative* (1.6) (11.3) 14.5 2015 726.3 130.9 112.4 123.9 14.4 14.6 * % Relative to local index Analyst 2016e 781.8 141.1 116.6 127.7 14.0 11.2 Andy Chambers 2017e 807.2 145.4 122.4 138.3 12.9 8.5
Sector: Industrial support services Utilitywise (UTW) Price: 174.5p Market cap: £136m INVESTMENT SUMMARY Forecast net debt (£m) N/A Forecast gearing ratio (%) N/A UTW’s H116 results extended its record of growth, with revenue +36% and reported Market AIM adjusted EBITDA +15% to £9.7m. The DPS was increased by 29% to 2.2p. A number of the Share price graph (p) key business metrics also demonstrated positive y-o-y momentum with customer numbers of 29,288 (vs 22,048 at 31 January 2015). These underlying figures exclude a net positive exceptional credit of £4.1m, largely due to the release of deferred consideration that UTW had expected to pay to the vendors of t-mac of £5.7m, less a goodwill impairment charge of £1.3m, also relating to t-mac. Although t-mac (part of the Corporate division) grew revenue by £2.2m in H1 (EBITDA £0.3m), management now expects that the revenue streams and profits required to trigger the payment of the deferred consideration will lie beyond the earn-out period. Our forecasts are currently under review.
INDUSTRY OUTLOOK Company description Utilitywise is an independent cost We believe a fragmented UK TPI market provides an opportunity for Utilitywise to continue management consultancy offering energy procurement and management to grow. products to the business market in the UK.
Y/E Jul Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (2.5) 3.9 (16.9) 2014 48.9 14.5 13.4 14.6 12.0 10.9 Relative* (4.0) (2.6) (8.7) 2015 69.1 17.8 16.7 17.9 9.7 N/A * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Graeme Moyse 2017e N/A N/A N/A N/A N/A N/A
Edison Insight | 28 April 2016 87 Sector: General retailers Vertu Motors (VTU) Price: 59.8p Market cap: £237m INVESTMENT SUMMARY Forecast net debt (£m) 11.0 Forecast gearing ratio (%) 6.0 Having initially specialised in volume cars, Vertu is now building a strong position in the Market AIM premium segment. The strategy involving the development of a series of acquisitions, Share price graph (p) typically strengthening used car and aftermarket operations, has established the group as the fifth-largest UK motor dealer. The March trading statement reinforced market estimates, while short-term dilution from the recent £35m fund raising will be reversed following the deployment of the funds. Growth in economies of scale, especially used car marketing on the internet, are expected to lead to increasing numbers of quality acquisition opportunities.
INDUSTRY OUTLOOK
Market dynamics suggest that larger motor dealership groups will continue to gain share in each of the key market segments (new cars, used cars, aftermarket), largely at the expense Company description of the independents, which still command some 60% of the franchise market. Global Vertu is the fifth largest UK motor manufacturing overcapacity and current exchange rates indicate continued support from vehicle retailer. Established in 2006, it is expanding through the completion OEMs. Confidence was tempered by the VW scandal, but a 30% discount rating relative to and subsequent development of a the FTSE All-share General Retailers index makes the sector attractive. series of acquisitions, initially in volume cars, but now including the premium segment of the market.
Y/E Feb Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (10.2) (15.0) 9.1 2014 1684.5 23.6 17.5 4.64 12.9 3.8 Relative* (11.5) (20.2) 19.9 2015 2074.9 28.7 22.0 5.06 11.8 7.8 * % Relative to local index Analyst 2016e 2440.0 33.9 26.9 6.16 9.7 4.2 Nigel Harrison 2017e 2650.0 36.6 29.5 5.89 10.2 6.0
Sector: Mining Victoria Gold (VIT) Price: C$0.36 Market cap: C$130m INVESTMENT SUMMARY Forecast net cash (C$m) 12.9 Forecast gearing ratio (%) N/A Victoria Gold (VIT) has appointed consultants and project engineers to update its 2012 Market CV Eagle feasibility study (FS). The results are due to be included in a new FS, expected during Share price graph (C$) Q316. The update will also include drilling results being completed over the potential satellite ore feed deposits of Shamrock and Olive. Both the FS update and drill programmes are fully funded. VIT anticipates the main driver for value growth at Eagle will be through adding satellite pits at Shamrock and Olive. A second heap-leach pad is also envisaged, allowing for greater grade control with highest grades (likely from Eagle and Olive) treated on the Eagle pad, and lower grade run-of-mine material blended and treated on a second ‘low-grade’ pad. The FS announced in 2012 used C$/US$ forex rates with oil and equipment prices as of Q411, all much higher than today.
INDUSTRY OUTLOOK Company description Victoria Gold’s flagship project, Eagle Our current base case valuation is for Eagle only and is based solely on the 2012 Eagle FS. Gold, is located in the 100%-owned Dublin Gulch property in the Yukon On this basis, and using our in-house gold price deck, we value Victoria’s shares at C$1.39 Territory, Canada. Victoria Gold is (using a 10% discount rate). For illustration, assuming Victoria undertakes a 50/50 looking to monetise its Santa Fe project in Nevada, US. debt/equity financing strategy to raise the then projected C$430m in capex, at a share price of C$0.28, this yields a diluted valuation of C$0.71 per share (C$0.51 at US$1,220/oz Au). Y/E Feb Revenue EBITDA PBT EPS P/E P/CF Price performance (C$m) (C$m) (C$m) (c) (x) (x) % 1m 3m 12m Actual 67.4 132.3 166.7 2014 0.0 (2.5) (1.6) (0.9) N/A N/A Relative* 62.9 107.4 194.2 2015 0.0 (2.0) (1.7) (0.3) N/A N/A * % Relative to local index Analyst 2016e 0.0 (2.1) (2.1) (0.6) N/A N/A Tom Hayes 2017e 0.0 (2.1) (1.9) (0.5) N/A N/A
Edison Insight | 28 April 2016 88 Sector: Technology Vislink (VLK) Price: 36.8p Market cap: £45m INVESTMENT SUMMARY Forecast net debt (£m) 3.3 Forecast gearing ratio (%) 6.0 Vislink's FY15 results were adversely affected by the absence of a multi-million pound Market AIM surveillance contract from the Home Office that was successfully completed in H115 but Share price graph (p) primarily benefitted FY14. This masked 4% growth in broadcast hardware revenues as new IP-based products helped Vislink take market share and a 32% increase in software revenues. The absence of the major surveillance order also adversely impacted pre-exceptional profit.
INDUSTRY OUTLOOK
Management has taken action to rebalance the group towards software-related activities in response to structural changes in the global broadcast industry. The company has invested heavily in headcount in the software division. It has completed a major restructuring of the Company description hardware division to reduce fixed costs while giving flexibility to cope with swings in Vislink is a global technology business demand. Our FY16 estimates assume that growth will mainly be driven by software and that specialising in solutions for the collection and delivery of high-quality the hardware division's restructuring programme will generate a partial recovery in profit. video and associated data from the field to point of usage. These are used in the broadcast surveillance and public safety markets.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 36.7 38.0 (26.5) 2014 61.9 10.7 7.6 5.1 7.2 5.4 Relative* 34.6 29.5 (19.3) 2015 57.8 8.7 4.4 2.8 13.1 74.8 * % Relative to local index Analyst 2016e 59.1 10.8 6.9 4.1 9.0 4.9 Anne Margaret Crow 2017e 60.8 11.1 7.3 4.3 8.6 4.7
Sector: Pcare and household prd Walker Greenbank (WGB) Price: 202.0p Market cap: £122m INVESTMENT SUMMARY Forecast net cash (£m) 4.6 Forecast gearing ratio (%) N/A Management continues to invest across the group's brand network and broaden Market AIM manufacturing skills, notably in digital printing. The Scion and Sanderson Home brands Share price graph (p) extended the group's UK customer base in 2012, while the more recently introduced Anthology brand is becoming quickly established, especially in key overseas markets. Recent results confirmed the group's effective response to market conditions. Meanwhile costs and loss of profits associated with major flooding at its fabric printing facility have been covered by the group's insurers. Conditions remain challenging, but the underlying performance continues to be positive.
INDUSTRY OUTLOOK
The UK interior furnishings industry has experienced uncertainty for many years under the Company description influence of economic shifts and fashion changes. Many brands have failed to grow, while Walker Greenbank is a luxury interior significant manufacturing capacity has been closed down, with manufacture for the volume furnishings group, combining specialist design skills with high-quality upstream segment largely moved overseas. Success continues to be delivered by businesses able to manufacturing facilities. Leading differentiate themselves from competition by consistently offering innovative and brands include Harlequin, Sanderson, Morris & Co, Scion, Anthology and high-quality design and products. Zoffany.
Y/E Jan Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual (0.3) 2.8 2.3 2015 83.4 10.7 8.1 11.64 17.4 34.5 Relative* (1.8) (3.6) 12.3 2016 87.8 11.8 8.9 12.47 16.2 17.1 * % Relative to local index Analyst 2017e 90.0 10.4 7.5 10.38 19.5 13.3 Nigel Harrison 2018e 98.0 12.8 9.8 13.29 15.2 12.2
Edison Insight | 28 April 2016 89 Sector: Technology WANdisco (WAND) Price: 175.0p Market cap: £52m INVESTMENT SUMMARY Forecast net debt (US$m) 10.0 Forecast gearing ratio (%) 64.0 WANdisco’s FY15 results were as expected, with long decision cycles affecting the big data Market AIM business and ALM only picking up late in the year. Ultimately, deal flow and cash flow will Share price graph (p) be the key metrics on which to measure progress over the course of 2016. However, there are indications that a recovery is due. In particular, Fusion’s ability to accelerate data migrations to the cloud and partnerships with leading cloud players such as Amazon, Microsoft and IBM could provide the blend of compelling use case and strong channel partners to accelerate adoption.
INDUSTRY OUTLOOK
Enterprise adoption of Hadoop has been slower than anticipated, which has hampered WANdisco’s progress. While wary of hyperbole given the recent history of Hadoop and of Company description WANdisco, we believe that Fusion’s ability to facilitate the replication and migration of WANdisco is a distributed computing enterprise databases to and from the cloud could position the company very attractively company. It has applied its proprietary replication technology to open-source within a very significant structural growth trend. tools to claim a strong position in the software version control market and is now establishing a promising position in the big data infrastructure market.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 29.6 133.3 (23.9) 2014 11.2 (17.9) (25.9) (103.3) N/A N/A Relative* 27.6 118.9 (16.4) 2015 11.0 (16.0) (26.4) (87.7) N/A N/A * % Relative to local index Analyst 2016e 11.4 (10.3) (21.3) (69.0) N/A N/A Dan Ridsdale 2017e 13.3 (8.2) (19.5) (62.2) N/A 25.1
Sector: General industrials Wincanton (WIN) Price: 170.2p Market cap: £207m INVESTMENT SUMMARY Forecast net debt (£m) 44.7 Forecast gearing ratio (%) 26.0 Wincanton’s pre-close statement reaffirmed that trading results will be in line with Market LSE expectations. With the proceeds received from the disposal of Records Management used Share price graph (p) to pay down debt and £34m of US Private Placement notes repaid on maturity via the RCF, Wincanton is set to see an ongoing reduction in financing costs as forecast. This follows the thesis set out in our March 2016 initiation that the group is now a more focused logistics play with increasing financial flexibility.
INDUSTRY OUTLOOK
The UK logistics market is estimated at £36bn and while it is directly linked to economic health and business activity, it has resilience and has consistently grown faster than GDP, helped by the complexity of supply chains and the evolution of multi-channel retailing. A Company description specialist logistics company can deliver supply chain management and warehousing A leading provider of supply chain services to provide a flexible, cost-effective and efficient solution. solutions in the UK and Ireland. A comprehensive warehousing and transport network allows them to provide a flexible logistics solution across a range of industries. The Specialist division includes Containers and Pullman Fleet Services. Y/E Mar Revenue EBITDA PBT EPS P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 13.1 1.8 12.8 2014 1098.0 61.2 25.6 16.6 10.3 2.8 Relative* 11.4 (4.5) 23.8 2015 1107.4 62.0 31.4 21.1 8.1 4.2 * % Relative to local index Analyst 2016e 1146.7 61.0 33.1 22.3 7.6 118.5 Neil Basten 2017e 1138.1 59.8 33.3 22.4 7.6 4.0
Edison Insight | 28 April 2016 90 Sector: Alternative energy Windar Photonics (WPHO) Price: 115.0p Market cap: £44m INVESTMENT SUMMARY Forecast net cash (€m) 0.6 Forecast gearing ratio (%) N/A Product roll-out during FY15 was delayed due to problems with the distributor in China, Market AIM which is a key market. The recent order of 15 WindEYE LiDAR units from the Chinese Share price graph (p) market for delivery during April 2016 indicates that these issues have been resolved, underpinning our assumption that the ensuing ramp up in sales during Q216 will continue. The order is also a significant step towards a collaboration with Chinese wind turbine OEMs on integrating Windar's LiDAR units into the direct control systems of wind turbines during the design stage of turbine development.
INDUSTRY OUTLOOK
Windar’s products are used in the wind turbine market. This market is forecast to continue to grow as energy policies across the globe demand increased contributions from Company description renewables and wind power is an established and proven technology. Windar Photonics is a UK-registered, Copenhagen-based developer and manufacturer of an innovative low-cost light detection and ranging (LIDAR) system.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (€m) (€m) (€m) (c) (x) (x) % 1m 3m 12m Actual 43.8 35.3 (4.2) 2013 0.1 (1.0) (1.5) (3.49) N/A N/A Relative* 41.5 26.9 5.3 2014 1.0 (1.5) (2.0) (5.10) N/A N/A * % Relative to local index Analyst 2015e 1.0 (2.8) (3.0) (7.51) N/A N/A Anne Margaret Crow 2016e 6.4 0.1 (0.4) (1.18) N/A N/A
Sector: Industrial support services WYG (WYG) Price: 131.5p Market cap: £88m INVESTMENT SUMMARY Forecast net cash (£m) 4.4 Forecast gearing ratio (%) N/A WYG's FY16 end trading update pointed to a good performance in the second half of the Market AIM year and an outturn anticipated to be in line with existing market expectations. Share price graph (p) Encouragingly, all three reporting regions are experiencing increased activity levels and order intake resulting in a year end order book ‘in excess of £140m’. Consequently, management remains confident of achieving significant growth in FY17. FY16 results are scheduled to be announced on 7 June.
INDUSTRY OUTLOOK
Management is clearly focused on margin improvement predicated on the efficient delivery of high-quality consultancy services and rigorous operational and financial control. Extending the multi-discipline service offering, along seven identified sector lines, Company description particularly in international markets, is a key component of this process. Market diversity WYG is a multidiscipline, project offers both challenges and opportunities, requiring proactive and reactive approaches to management and management service consultancy. Over half of revenues are business development. generated in the UK, with the remainder in a spread of international markets.
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) (4.0) 21.2 2014 126.9 6.4 4.3 6.4 20.5 N/A Relative* (4.1) (10.0) 33.1 2015 130.5 7.2 5.7 8.6 15.3 36.1 * % Relative to local index Analyst 2016e 134.7 9.0 6.9 8.8 14.9 20.9 Toby Thorrington 2017e 155.5 11.2 8.9 11.3 11.6 12.5
Edison Insight | 28 April 2016 91 Sector: Oil & gas Xcite Energy (XEL) Price: 15.9p Market cap: £49m INVESTMENT SUMMARY Forecast net debt (US$m) N/A Forecast gearing ratio (%) N/A Xcite continues to focus on progressing funding options for the development of its Bentley Market AIM field. The company has committed considerable resources to a technical assessment of the Share price graph (p) Bentley field development concept with the UK regulator (the OGA) resulting in an extension of its P.1078 licence to end-June 2017. This should help the ongoing process to secure development funding and refinance XEL's $135m bonds due end June 2016. A reserves/resources report (updated on 21 March) confirms firming economics through lower full field costs. Many of the pieces are now in place and XEL is in active discussions with potential partners to secure development funding. However, all financing/farm-out discussions are likely to be affected by the continued low oil price environment further complicating progress. Our forecasts are under review.
INDUSTRY OUTLOOK Company description Xcite Energy is an oil appraisal and Tax reductions were the highlight of the recent UK budget, but changes to investment development company focused on heavy oil resources in the UK sector of allowances and ring-fences should benefit the Bentley development. the North Sea. It has one project, the Bentley field, in which it has 100% working interest.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (US$m) (US$m) (US$m) (c) (x) (x) % 1m 3m 12m Actual 16.5 17.6 (42.0) 2014 0.0 2.7 (8.0) (1.6) N/A 49.1 Relative* 14.7 10.3 (36.3) 2015 0.0 (1.7) (1.7) 0.3 75.6 N/A * % Relative to local index Analyst 2016e N/A N/A N/A N/A N/A N/A Ian McLelland 2017e N/A N/A N/A N/A N/A N/A
Sector: Electronics & elec. eqpt. XP Power (XPP) Price: 1615.0p Market cap: £307m INVESTMENT SUMMARY Forecast net cash (£m) 1.8 Forecast gearing ratio (%) N/A XP saw encouraging trading in Q116: revenues grew 10% y-o-y to £28.2m (+6% constant Market LSE currency) and 1% q-o-q. Order intake of £30.3m was marginally higher than the Q415 intake Share price graph (p) and +9% y-o-y (+4% constant currency). The integration of the recent EMCO acquisition continues on track. Trading continues to support management’s expectations for revenue growth in 2016 and, accordingly, we leave our estimates unchanged. We note that there is upside potential to revenues (with a more limited effect on net income) from the continued weakness of sterling versus the dollar.
INDUSTRY OUTLOOK
XP supplies three end-markets: Healthcare, Industrial and Technology, across Europe, North America and Asia. The Industrial segment is relatively fragmented, but the company Company description sees demand across various applications. The Healthcare business continues to gain XP Power is a developer and designer market share, with corporate approvals from the major suppliers in place. The Technology of power control solutions with production facilities in China and segment is the most cyclical, although semi fab suppliers have returned to growth. Vietnam, and design, service and sales teams across Europe, the US and Asia.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 2.2 5.6 11.4 2014 101.1 27.6 24.3 101.07 16.0 14.1 Relative* 0.6 (0.9) 22.3 2015 109.7 29.7 25.7 104.32 15.5 14.6 * % Relative to local index Analyst 2016e 122.2 31.2 27.0 105.34 15.3 12.9 Katherine Thompson 2017e 129.6 34.2 29.8 116.56 13.9 12.2
Edison Insight | 28 April 2016 92 Sector: Media & entertainment YouGov (YOU) Price: 145.5p Market cap: £152m INVESTMENT SUMMARY Forecast net cash (£m) 12.3 Forecast gearing ratio (%) N/A Half year results to January 2016 showed further strong progress in data products and Market AIM services, driving group revenue growth well above market levels. Key brands BrandIndex Share price graph (p) and Omnibus between them should account for over one-third of FY16 revenues. The US and UK markets provide the model for operations in other regions, for penetration of these key products and for growing profitable custom business. The group has the cash resource to continue to invest in its offer and in delivering it efficiently, underpinning projections for continuing premium growth, readily justifying the valuation.
INDUSTRY OUTLOOK
The latest Bellwether Survey (January) shows MR budgets remaining in negative territory for budget planning, although overall expectations for UK adspend remain positive. The Company description latest forecast from Zenith Optimedia shows strengthening growth into FY16 to 9.2%, YouGov is an international, full service although GroupM's expectations are lower at +7%. The increasing ability to manipulate 'big online market research agency offering custom research, omnibus, field and data' into a value-adding and granular form, and in real time, presents a substantial industry tab services, qualitative research, opportunity. syndicated products and market intelligence reports.
Y/E Jul Revenue EBITDA PBT EPS (fd) P/E P/CF Price performance (£m) (£m) (£m) (p) (x) (x) % 1m 3m 12m Actual 6.2 (1.7) 21.8 2014 67.4 8.0 7.6 5.8 25.1 16.6 Relative* 4.6 (7.8) 33.7 2015 76.1 9.3 9.1 6.7 21.7 14.6 * % Relative to local index Analyst 2016e 83.5 10.6 10.7 7.6 19.1 14.1 Fiona Orford-Williams 2017e 91.8 11.8 12.1 8.4 17.3 12.6
Sector: Industrial support services YPB Group (YPB) Price: A$0.28 Market cap: A$29m INVESTMENT SUMMARY Forecast net cash (A$m) 1.5 Forecast gearing ratio (%) N/A YPB Group (YPB) is in the early stages of commercialising its patented, non-destructible, Market ASX anti-counterfeiting technology used for brand protection and product authentication. In April, Share price graph (A$) the company secured its third contract in Latin America as a result of its joint venture with Affyrmx and it also won the right to deliver its proprietary VariSec technology to protect a large South-East Asian country’s ePassports. YPB now provides its VariSec technology to three countries with a collective population of 440m. Our DCF valuation is A$0.44/share, having incorporated the recently completed A$7.8m capital raise.
INDUSTRY OUTLOOK
The counterfeit solutions market is a crowded one, with several multinationals offering a range of anti-counterfeiting products alongside smaller listed and private technology Company description companies. Competitive advantage can be gained by being first to market either with YPB Group has developed a product or certification. three-pronged strategy designed to detect and protect brands from counterfeiters. The company owns two Chinese patents over invisible tracers and has secured three contracts for its technology.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF Price performance (A$m) (A$m) (A$m) (c) (x) (x) % 1m 3m 12m Actual 19.1 0.0 (5.1) 2014 0.1 (1.9) (2.3) (2.2) N/A N/A Relative* 17.6 (6.2) 4.1 2015 1.7 (4.4) (5.5) (4.5) N/A N/A * % Relative to local index Analyst 2016e 8.5 (2.5) (2.7) (1.6) N/A N/A Finola Burke 2017e 22.2 4.5 4.3 2.0 14.0 N/A
Edison Insight | 28 April 2016 93
Edison dividend list
Company name FY0 period end Currency DPSFY0 DPSFY1 DPSFY2
Acacia Mining PLC 2015/12 USD 4.2 4.2 4.2 Acal PLC 2015/03 GBP 7.6 8.0 8.3 Arbuthnot Banking Group PLC 2015/12 GBP 29.0 Augean PLC 2015/12 GBP 0.7 0.8 1.0 Avesco PLC 2015/09 GBP 7.0 8.0 9.0 Banca IFIS S.p.A. 2015/12 EUR 76.0 80.0 85.0 Borussia Dortmund PLC 2015/06 EUR 5.0 5.0 5.0 Brady PLC 2015/12 GBP 0.0 1.7 1.9 Braemar Shipping Services PLC 2015/02 GBP 26.0 26.0 26.0 British Polythene Industries PLC 2015/12 GBP 18.0 19.3 20.6 Caledonia Mining Corp 2015/12 USD 4.8 4.5 4.5 Carr's Group PLC 2015/08 GBP 3.7 3.8 3.9 Cenkos Securities PLC 2015/12 GBP 14.0 China Water Affairs Group Limited LTD 2015/03 HKD 7.0 8.1 Cohort PLC 2015/04 GBP 5.0 6.0 7.0 Comvita LTD 2015/06 NZD 13.0 18.0 23.0 Consort Medical PLC 2015/04 GBP 18.1 18.1 18.1 Creston PLC 2015/03 GBP 4.2 4.2 4.4 DeA Capital S.p.A. 2015/12 EUR 0.1 Ebiquity PLC 2015/12 GBP 0.4 0.5 0.6 Entertainment One PLC 2015/03 GBP 1.1 1.2 1.3 Epwin Group PLC 2014/12 GBP 4.2 6.4 6.6 EQS Group AG 2015/12 EUR 0.8 0.8 0.9 Euromoney Institutional Investor PLC 2015/09 GBP 23.4 23.4 23.4 GB Group PLC 2015/03 GBP 1.9 2.0 2.2 GFT Group AG 2015/12 EUR 25.0 27.0 31.0 Globalworth Real Estate Investments LTD 2014/12 EUR 0.0 1.5 10.0 Greggs plc PLC 2015/01 GBP 28.6 29.9 33.0 GVC Holdings PLC 2014/12 EUR 55.5 56.0 0.0 Hogg Robinson Group PLC 2015/03 GBP 2.3 2.5 2.7 ifa systems PLC 2014/12 EUR 12.0 IFG Group PLC 2015/12 GBP 4.4 4.9 5.4 Inspired Energy PLC 2015/12 GBP 0.4 International Greetings PLC 2015/03 GBP 1.0 2.0 3.0 Is Private Equity PLC 2013/12 TRY 50.2 IS Solutions PLC 2015/03 GBP 0.6 1.6 1.8 Is Yatirim Menkul Degerler PLC 2015/12 TRY 13.2 13.2 13.2 Jersey Electricity PLC 2015/09 GBP 12.8 13.4 14.4 K3 Business Technology Group PLC 2015/06 GBP 1.5 1.7 1.8 Keywords Studios PLC 2015/12 EUR 1.5 1.7 1.8 KTG Energie AG 2015/10 EUR 50.0 55.0 65.0 La Doria PLC 2015/12 EUR 25.0 26.0 27.0 London Stock Exchange Group PLC 2015/12 GBP 36.0 Lookers PLC 2015/12 GBP 3.1 3.3 3.4 Low & Bonar PLC 2015/11 GBP 2.8 3.0 3.2 LSL Property Services PLC 2015/12 GBP 12.6 13.8 15.0 M Winkworth PLC 2014/12 GBP 5.9 8.3 7.2 MedicX Fund Limited LTD 2015/09 GBP 5.9 6.0 6.0 National Grid LTD 2015/03 GBP 42.9 43.7 44.8
Edison Insight | 28 April 2016 94
NetDimensions LTD 2015/12 USD 0.9 1.0 1.1 Newmark Security PLC 2015/04 GBP 0.1 0.1 0.1 Norbert Dentressangle PLC 2014/12 EUR 180.0 195.0 210.0 Norcros PLC 2015/03 GBP 5.6 6.4 6.8 Numis Corporation PLC 2015/09 GBP 11.5 12.0 12.5 Ocean Wilsons Holdings PLC 2014/12 USD 63.0 65.0 67.0 OTC Markets Group INC 2015/12 USD 108.0 116.0 120.0 Pan African Resources PLC 2015/06 GBP 0.5 0.5 0.8 Powerflute LTD 2015/12 EUR 3.0 3.2 3.3 PPHE Hotel Group LTD 2015/12 GBP 20.0 21.0 21.0 Primary Health Properties PLC 2015/12 GBP 1.3 PSI AG 2015/12 EUR 21.0 25.0 30.0 QinetiQ Group PLC 2015/03 GBP 5.4 5.7 6.0 Quarto Group Inc. (The) INC 2015/12 USD 14.5 15.3 15.8 Rank Group PLC 2015/06 GBP 5.6 6.4 7.4 Raven Russia LTD 2015/12 USD 2.0 1.0 1.0 Rolls-Royce PLC 2015/12 GBP 16.4 11.7 15.0 SCISYS PLC 2015/12 GBP 1.8 1.9 2.1 Secure Trust Bank PLC 2015/12 GBP 165.0 0.0 0.0 Severfield PLC 2015/03 GBP 0.5 1.0 1.3 Shanks Group PLC 2015/03 GBP 3.5 3.5 3.5 Share plc PLC 2015/12 GBP 0.7 0.2 0.2 Silver Wheaton PLC 2015/12 USD 20.0 25.0 36.0 SinnerSchrader AG 2015/08 EUR 12.0 13.0 13.7 Slater & Gordon LTD 2015/06 AUD 9.0 Smiths City Group LTD 2014/04 NZD 3.5 SNP Schneider-Neureither & Partner AG 2015/12 EUR 34.0 40.0 50.0 Solid State PLC 2015/03 GBP 12.0 12.0 12.0 SpaceandPeople PLC 2015/12 GBP 2.2 2.4 3.0 StatPro Group PLC 2015/12 GBP 2.9 2.9 2.9 Stobart Group LTD 2015/02 GBP 6.0 6.0 6.0 STV Group PLC 2015/12 GBP 10.0 12.0 14.0 Tenon LTD 2015/06 USD 4.0 Treatt PLC 2015/09 GBP 4.6 4.7 5.0 Trifast PLC 2015/03 GBP 2.1 2.4 2.7 TXT e-solutions S.p.A. 2015/12 EUR 25.0 26.0 27.0 Tyman PLC 2015/12 GBP 8.8 9.3 10.3 Ultra Electronics Holdings PLC 2015/12 GBP 46.1 47.4 49.5 Utilitywise PLC 2015/07 GBP 5.0 Vertu Motors PLC 2015/02 GBP 1.1 1.4 1.5 Vislink PLC 2015/12 GBP 1.5 1.5 1.5 Walker Greenbank PLC 2016/01 GBP 2.9 3.0 3.2
Edison Insight | 28 April 2016 95
Results diary
Listed below are the expected dates of forthcoming results from Monday, 2 May 2016.
Wednesday 4 May Imperial Brands Interims 1Spatial Finals Beximco Pharmaceuticals Venture Life Group Avon Rubber
Thursday 5 May BT Group Finals
Friday 6 May Numis Corporation Interims
Monday 9 May ITE Group Interims Premier Veterinary Group
Tuesday 10 May Cambria Automobiles Interims easyJet Gear4music Finals Quantum Pharma
Wednesday 11 May Compass Group Interims TUI AG Reg Shs C&C Group Finals Experian
Thursday 12 May JZ Capital Partners Finals
Monday 16 May ICAP Finals Braemar Shipping Services British Land Company
Tuesday 17 May Enterprise Inns Interims Lakehouse DCC Finals Land Securities Group
Wednesday 18 May Countryside Properties Interims Patisserie Holdings SSE Finals Burberry Group SABMiller HICL Infrastructure Company
Thursday 19 May Grainger Interims Thomas Cook Group Britvic Euromoney Institutional Investor National Grid Finals Mothercare Booker Group
Friday 20 May Future Interims
Monday 23 May Mitie Group Finals Tissue Regenix Group
Edison Insight | 28 April 2016 96
Tuesday 24 May Topps Tiles Interims easyHotel Renew Holdings Marks & Spencer Group Finals Hogg Robinson Group UK Mail Group Big Yellow Group Helical Bar Severn Trent Scapa Group Fast Forward Innovations Cranswick
Wednesday 25 May Great Portland Estates Finals Babcock International Group Wizz Air Holdings Mediclinic International Pennon Group
Thursday 26 May QinetiQ Group Finals United Utilities Group Tate & Lyle
Monday 30 May Renold Finals
Tuesday 31 May Atlantis Resources Limited Finals
Edison Insight | 28 April 2016 97
Company Sector Most recent note Date published
4imprint Group Media Update 07/03/13 Aberdeen New Dawn Investment Trust Investment trusts Investment company review 23/07/15 88 Energy Oil & Gas Update 11/09/15 Aberdeen New Thai Investment Trust Investment companies Investment company review 16/09/15 Aberdeen Private Equity Fund Investment companies Investment company review 16/11/15 Aberdeen UK Tracker Trust Investment companies Investment company review 31/07/15 Abzena Healthcare services Flash 09/10/15 Acal Technology Update 18/04/16 Acorn Income Fund Investment companies Investment company review 10/12/15 Adler Real Estate Real estate Update 30/10/14 ADX Energy Oil & gas Outlook 20/03/15 AFH Financial Group Financials Update 26/01/16 African Petroleum Corporation Oil & Gas Update 18/03/16 Albioma Alternative Energy Update 05/03/15 Alkane Resources Metals & mining Update 14/04/16 Almonty Industries Metals & mining Update 11/03/16 Altamir Investment companies Initiation 10/03/16 Amur Minerals Metals & mining Update 25/01/16 Arbuthnot Banking Group Financials Update 31/07/15 Ariana Resources Metals & mining Update 02/03/16 Arian Silver Metals & mining Update 06/10/15 Arria NLG Software & comp services Update 31/03/15 artnet Media Update 18/04/16 Aspermont Media Update 11/04/14 Atlantis Japan Growth Fund Investment companies Initiation 21/07/15 Augean Industrial support services Update 08/04/16 Avalon Rare Metals Metals & mining Update 03/07/15 Avanti Communications Group Fixed satellite services Flash 29/02/16 Avesco Group Media Update 12/01/16 Avnel Gold Mining Metals & mining Update 27/10/14 Avon Rubber Aerospace & defence Update 27/01/16 Azonto Petroleum Oil & gas Initiation 23/01/15 Banca IFIS Financials Update 29/01/16 BB Biotech Investment companies Investment company review 09/02/16 Biotech Growth Trust (The) Investment companies Investment company review 15/12/15 BlackRock Greater Europe Inv. Trust Investment companies Initiation 21/03/16 BlackRock Hedge Selector Investment companies Initiation 19/03/14 BlackRock Latin American Inv. Trust Investment companies Investment company review 03/11/15 Blancco Technology Group Software & comp services Update 25/04/16 blur Group Technology Update 10/04/15 Borussia Dortmund Travel and leisure Update 11/03/16 Bowleven Oil & gas Update 06/04/16 Braemar Shipping Services Industrial support services Update 15/01/16 BrainJuicer Media Outlook 31/03/16 Brady Technology Outlook 08/04/16 British Polythene Industries Basic industrial Update 27/04/16 Brunner Investment Trust Investment companies Investment company review 18/12/15 Bushveld Minerals Metals & mining Update 04/02/16 Caledonia Mining Metals & mining Update 04/04/16 Canadian General Investments Investment companies Investment company review 03/12/15 Canadian Overseas Petroleum Limited Oil & gas Flash 02/10/15 Cap Energy Oil & gas Update 15/02/16 Carbios Alternative energy Update 11/04/16 Carbon Energy Oil & gas Update 01/10/14 Carclo Technology Update 23/11/15 Carr’s Group Food & drink Update 11/04/16 Cenkos Securities Financials Outlook 13/10/14
Edison Insight | 28 April 2016 98
Company Sector Most recent note Date published
Central Asia Metals Metals & mining Update 06/10/14 Ceres Power Holdings Alternative energy Update 25/02/16 Challenger Energy Oil & gas Update 28/04/15 Champion Iron Metals & mining Initiation 18/08/14 China Water Affairs group Utilities Initiation 26/04/16 Circle Holdings Financials Update 19/10/15 City Natural Resources Investment companies Investment company review 22/01/15 CloudTag Electronics & electrical Update 24/04/14 Coats Group General industrialsit Update 31/03/16 Cohort Aerospace & Defence Flash 31/03/16 Comptel Technology Update 07/08/15 Comvita Consumer Flash 02/03/16 Cooks Global Foods Food & drink Update 18/12/15 Corac Group Industrials Update 26/05/15 Creston Media Update 18/04/16 Cupid Media Update 26/05/15 Danakali Metals & mining Update 21/01/16 DEA Capital Investment companies Update 23/11/15 Deinove Alternative energy Update 30/03/16 Deutsche Beteiligungs Investment companies Investment company review 16/02/16 Diverse Income Trust (The) Investment companies Investment company review 11/02/16 Duluth Metals Metals & mining Update 11/11/14 Dunedin Enterprise Investment Trust Investment companies Investment company review 05/10/15 DX Group Industrials Initiation 28/02/14 Ebiquity Media Update 30/03/16 Eckoh Technology Flash 21/01/16 Edinburgh Worldwide Investment Trust Investment companies Initiation 13/10/14 Egdon Resources Oil & gas Flash 22/10/15 Ekso Bionics Holdings Technology Update 15/06/15 EMED Mining Metals & mining Update 16/09/15 Entertainment One Media Update 24/03/16 Entu Industrials Update 31/07/15 Epwin Group Industrials Update 08/01/16 EQS Group Media Update 21/04/16 eServGlobal Technology Flash 22/04/16 Esker Technology Update 27/01/16 Euromax Resources Metals & mining Update 18/04/16 Euromoney Institutional Investor Media Outlook 24/03/16 European Assets Trust Investment companies Investment company review 21/07/15 European Investment Trust (The) Investment companies Investment company review 26/06/15 Evolva Food & beverages Update 06/04/16 Expert System Technology Update 17/12/15 Fair Value REIT Property Update 11/09/15 Fidelity China Special Situations Investment companies Investment company review 20/04/16 Fidelity European Values Investment companies Investment company review 11/12/15 Findel Retail Flash 24/03/16 Finsbury Growth & Income Trust Investment companies Investment company review 29/03/16 Firstextile General retailers Update 02/09/15 Foreign & Colonial Investment Trust Investment companies Investment company review 15/03/16 Forterra Trust Property Update 06/11/14 Fusionex International Technology Update 19/05/15 G3 Group Industrial support services Update 06/08/15 Gable Holdings Financials Update 25/09/14 Gaming Realms Gaming Update 04/03/16 GB Group Technology Update 20/04/16 Genie Energy Oil & gas Initiation 17/11/14 GFT Group Technology Update 21/03/16
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Company Sector Most recent note Date published
GLI Finance Financials Outlook 28/04/16 Global Bioenergies Alternative energy Update 08/04/16 Global Resources Investment Trust Investment companies Initiation 06/05/14 Globalworth Real Estate Investments Property Update 23/09/15 Golden Prospect Precious Metals Investment companies Investment company review 07/11/14 Green Dragon Gas Oil & gas Update 21/11/14 GO internet Technology Update 24/03/16 Green Dragon Gas Oil & gas Outlook 06/01/16 Greggs Food & drink Initiation 25/04/16 Greka Drilling Oil & gas Update 24/11/14 Gulf Keystone Petroleum Oil & gas Flash 15/10/15 GVC Holdings Travel & leisure Outlook 04/02/16 Hansa Trust Investment companies Investment company review 24/11/15 HarbourVest Global Private Equity Investment companies Update 06/10/15 Hawkley Oil & gas Oil & gas Outlook 06/07/12 HBM Healthcare Investments Investment companies Initiation 26/02/16 Henderson Far East Income Limited Investment companies Investment company review 13/07/15 Henderson Global Trust Investment companies Investment company review 31/03/16 Henderson International Income Trust Investment trusts Investment company review 16/12/15 Henderson Value Trust Investment trusts Initiation 04/06/15 High Peak Royalties Oil & gas Update 20/05/15 Hogg Robinson Group Consumer support services Flash 18/02/16 HSBC Financials Update 13/08/15 Hurricane Energy Oil & gas Update 28/04/16 Hydrodec Group Oil & gas Update 27/10/15 HydroWorks Industrial engineering Pre-IPO 17/09/15 ifa systems Software & comp services Update 03/12/14 IFG Group Financials Update 22/04/16 Imperial Innovations Financials Update 11/03/16 Innovation Group Technology Flash 07/07/15 Inspired Energy Industrial support services Update 19/11/15 Intelligent Energy Holdings Alternative energy Flash 04/03/16 International Biotechnology Trust Investment companies Investment company review 11/12/15 International Greetings Consumer support services Update 18/04/16 Invesco Asia Trust Investment companies Investment company review 26/11/15 InVision Technology Outlook 04/11/15 IQE Electronics & electrical Update 22/03/16 Is Private Equity Investment companiesit Outlook 15/03/15 IS Solutions Technology Outlook 09/03/16 Is Yatirim Menkul Degerler General financial Update 18/02/16 Jersey Electricity Industrials Outlook 22/02/16 JPMorgan European Smaller Comps Investment trusts Investment company review 10/09/15 JPMorgan Global Convertibles Inc Fund Investment companies Investment company review 10/02/16 JPMorgan Private Equity Investment Companies Investment company review 28/04/15 Jupiter Primadona Growth Trust Investment companies Initiation 03/06/15 K3 Business Technology Group Technology Update 26/04/16 KEFI Minerals Mining Update 10/03/16 KTG Energie Industrials Update 26/04/16 Keywords Studios Software & comp services Update 15/04/16 Kongsberg Automotive Industrials Update 22/04/15 La Doria Food & drink Update 02/03/16 Leaf Resources Alternative energy Initiation 09/09/15 Liquefied Natural Gas Ltd Oil & gas Update 26/04/16 Lookers General retailers Update 15/03/16 London Stock Exchange Group Financials Update 19/10/15 Low & Bonar Basic industries Update 19/02/16 LSL Property Services Property Update 24/03/16 Martin Currie Asia Unconstrained Trust Investment companies Investment company review 17/02/16 Edison Insight | 28 April 2016 100
Company Sector Most recent note Date published
Martin Currie Global Portfolio Trust Investment companies Investment company review 10/02/16 MCB Finance Group Financials Flash 07/05/13 MedicX Fund Property Update 18/02/16 Merchants Trust (The) Investment companies Investment company review 17/12/15 migme Software & comp services Flash 27/04/16 Mineral Commodities Mining Update 05/02/16 Miton Income Opportunities Trust Investment companies Investment company review 10/07/13 Miton Global Opportunities Investment companies Review 09/03/16 Mitula Group Media Initiation 29/03/16 MMG Metals & mining Update 26/04/16 Monitise Technology Update 29/09/15 Mosman Oil & Gas Oil & gas Update 29/09/15 Mwana Africa Metals & mining Update 27/05/15 M Winkworth Financial services Update 03/12/15 NAHL Group Financial services Update 24/03/15 National Grid Industrials Update 18/11/15 Ncondezi Energy Metals & mining Update 29/04/13 Nektan Travel & Leisure Update 23/10/15 NetDimensions Technology Outlook 18/04/16 Newmark Security Support services Outlook 25/09/15 New Standard Energy Oil & gas Update 31/10/14 Next Fifteen Communications Media Update 28/04/15 Nexstim Healthcare equipment & Initiation 11/09/15 Nido Petroleum Oil & igas Update 28/01/14 Norbert Dentressangle Industrial support services Flash 30/04/15 Norcros Construction & building Update 22/04/16 Northern Petroleum Oil t& gas il Re-initiation 17/07/14 Norwest Energy Oil & gas Update 02/09/14 Numis Corporation Financial services Update 10/12/15 Ocean Wilsons Holdings Investment companies Outlook 26/06/15 Orosur Mining Metals & mining Update 15/04/16 OTC Markets Group Financial services Outlook 19/04/16 Otto Energy Oil & gas Update 18/12/15 Pacific Assets Trust Investment companies Investment company review 30/07/15 Pan African Resources Metals & mining Update 16/03/16 paragon General industrials Update 14/04/16 Parex Resources Oil & gas Update 07/05/15 Park Group Financial services Update 08/04/16 Paysafe Group Technology Update 21/04/16 Petrel Energy Oil & gas Update 26/08/15 Petroceltic Oil & gas Flash 19/01/16 Petromanas Energy Oil & gas Update 13/11/14 Po Valley Energy Oil & gas Update 25/04/14 Powerflute Basic industries Update 08/04/16 PowerHouse Energy Group Alternative energy Initiation 11/09/14 PPHE Hotel Group Travel & leisure Update 24/03/16 Primary Health Properties Property Update 23/02/16 Prodware Technology Outlook 12/11/15 PSI Technology Update 15/04/16 Pura Vida Energy Oil & gas Update 16/12/15 Qatar Investment Fund Investment companies Initiation 01/12/15 QinetiQ Group Aerospace & defence Update 18/04/16 Quadrise Fuels International Oil & gas Outlook 16/11/15 Quarto Group (The) Media Update 21/03/16 Ramba Energy Oil & gas Update 03/03/16 Rank Group Travel & leisure Update 11/03/16 Rare Earth Minerals Metals & mining Update 15/01/16
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Company Sector Most recent note Date published
Raven Russia Property Update 01/04/16 Real Estate Investar Technology Initiation 31/03/16 Record Financials Update 01/12/15 Regeneus Industrial support services Update 09/09/15 Rex Bionics Technology Update 06/01/16 RM2 International Industrial support services Flash 05/10/15 RNTS Media Media Update 07/03/16 Robust Resources Metals & mining Initiation 23/04/14 Rockhopper Exploration Oil & gas Update 21/04/16 Rolls-Royce Aerospace & defence Update 11/04/16 Rubicon Construction & building Update 09/04/15 Rurelec Alternative energyt il Update 17/09/14 Rutila Resources Metals & mining Flash 12/05/15 S&U Financials Outlook 01/10/15 Schroder AsiaPacific Fund Investment companies Investment company review 18/03/16 Schroder Global Real Estate Securities Investment trusts Initiation 22/06/15 SCISYS Technology Outlook 14/04/16 Scottish Oriental Smaller Cos Trust Investment companies Investment company review 14/04/16 SeaDragon Food & drink Update 01/12/15 SeaEnergy Alternative energy Update 16/04/15 Sealegs Corporation Engineering Update 25/11/15 Secure Trust Bank Financials Outlook 26/04/16 Securities Trust of Scotland Investment companies Investment company review 09/03/16 Seeing Machines Technology Update 13/11/15 Seneca Global Income & Growth Trust Investment companies Investment company review 08/03/16 Severfield Industrial engineering Update 18/02/16 Shanks Group Industrial support services Update 05/02/16 Share plc Financials Update 29/03/16 Sigma capital Group Real Estate Outlook 17/12/14 Silver Wheaton Metals & mining Update 18/04/16 SinnerSchrader Technology Update 18/04/16 SITO Technology Update 17/12/14 Slater & Gordon Financial services Update 23/09/15 SLI Systems Technology Update 21/03/16 Smiths City Group General retailers Initiation 26/08/14 Snakk Media Media Outlook 30/09/14 Snoozebox Travel & leisure Flash 27/11/14 SNP Schneider-Neureither & Partner Technology Update 07/04/16 Solera Technology Update 23/07/15 Solid State Industrial support services Flash 28/04/16 Sound Oil Oil & gas Update 12/05/15 SpaceandPeople Media Update 29/03/16 Standard Life Equity Income Trust Investment companies Initiation 01/10/15 Standard Life European Private Equity Trust Investment companies Initiation 24/02/16 Standard Life Inv. Property Income Trust Investment companies Initiation 19/10/15 Standard Life UK Smaller Cos Trust Investment companies Initiation 02/09/15 StatPro Group Technology Update 15/03/16 Stobart Group Support services Update 05/11/15 Store Electronic Systems Technology Update 17/11/15 Strategic Equity Capital Investment companies Investment company review 20/03/15 Stride Gaming Travel & leisure Update 09/02/16 STV Group Media Update 26/04/16 Taiwan Fund (The) Investment companies Investment company review 11/02/15 Tangiers Petroleum Oil & gas Update 16/01/15 Templeton Emerging Markets Investment Trust Investment companies Investment company review 03/06/15 Tenon Building materials Outlook 03/12/15 Tethys Petroleum Oil & gas Flash 02/07/15
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Company Sector Most recent note Date published
The Bankers Investment Trust Investment trusts Investment company review 14/03/16 The North American Income Trust Investment trusts Initiation 26/04/16 The World Trust Fund Investment companies Investment company review 25/09/15 Thin Film Electronics Technology Outlook 08/04/16 Thunderbird Resorts Travel & leisure Update 04/09/15 Tiso Blackstar Group Investment companies Update 20/04/16 Touchstone Exploration Oil & gas Update 23/01/15 Tourism Holdings Travel & leisure Update 25/02/16 TP Group Industrial engineering Update 21/04/16 TR European Growth Trust Investment trusts Initiation 29/10/15 Track Group Technology Update 16/02/16 TransGlobe Energy Oil & gas Flash 07/10/15 Treatt Basic industries Outlook 06/01/16 Trifast Engineering Update 17/02/16 True North Gems Metals and mining Update 01/02/16 Tungsten Corporation e-invoicer & invoice financier Update 24/02/16 TXT e-solutions Technology Update 11/03/16 Tyman Construction & materials Update 27/04/16 TZ Limited Tech hardware & equipment Update 19/05/15 Ultra Electronics Aerospace & defence Update 29/02/16 Utilico Emerging Markets Investment companies Investment company review 16/02/16 Utilitywise Industrial support services Update 19/02/16 VASCO Data Security Technology Update 26/02/15 Velocys Oil equipment & services Update 30/06/14 Vertu Motors Automotive retailers Update 19/10/15 Victoria Gold Metals & mining Update 07/04/16 VinaCapital Vietnam Opportunity Fund Investment companies Investment company review 01/10/14 Vislink Tech hardware & equipment Update 04/04/16 VinaLand Investment companies Investment company review 17/08/15 VMob Group Technology Initiation 03/12/14 Walker Greenbank General industrials Update 13/04/16 WANdisco Technology Flash 28/04/16 WestSide Corporation Oil & gas Initiation 05/06/14 Wincanton Industrial support services Flash 31/03/16 Windar Photonics Alternative Energy Outlook 23/03/16 Witan Investment Trust Investment companies Investment company review 07/12/15 Witan Pacific Investment Trust Investment companies Investment company review 20/10/15 Worldwide Healthcare Trust Investment companies Investment company review 23/07/15 W Resources Metals & mining Update 03/11/14 WYG Industrial support services Update 08/01/16 Xcite Energy Oil & gas Update 19/12/14 XP Power Electronic & electrical equipment Update 11/04/16 YPB Group Industrial support services Update 30/03/16 YouGov Media Update 22/03/16 YuuZoo Software & comp services Initiation 20/05/15 Zanaga Iron Ore Company Metals & mining Flash 02/10/14
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