finnCap Research Company Notes - 17 April 2019
Apr 17, 2019 / News
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Sector: Industrials
Iofina (IOF) : Corp
Q1 2019 market update
Key data
- Share price (p) 14.9
- Target price (p) 34.0
- Market cap (£m) 19.0
- Enterprise value (£m) 36.7
Iofina’s new IO#7 plant is delivering strong performance, driving record Q1 production. However, weather related down time, a project delay, and lower efficiencies at IO#6 have resulted in a reduction to H1 2019 production guidance. Offsetting this, iodine prices continue to improve and Iofina Chemicals is performing ahead of expectations. While we are cutting our FY19 volume estimates our EBITDA and earnings forecasts rise slightly, demonstrating Iofina’s operational leverage and sensitivity to iodine prices. Moreover, the recently completed debt restructuring paves the way for Iofina to pursue additional expansion opportunities, with the strong performance of its new IO#7 unit raising confidence in the expected benefits of this expansion.
Jonathan Wright jwright@finncap.com
Sector: Life Sciences
LiDCO (LID) : Corp
South Korean approval
Key data
- Share price (p) 4.5
- Target price (p) 11.0
- Market cap (£m) 11.1
- Enterprise value (£m) 9.4
In line with the company’s expected newsflow, articulated at its full year results, LiDCO announced that it has received regulatory approval for LiDCOrapidv3, its latest cardiac output monitor with non-invasive technology, for sale in South Korea; the forth largest medical device market in the Asia Pacific region in which LiDCO currently does not have a presence. It will be sold through its distribution partner, Globaluck Ltd, a medical device sales group specialising in anaesthesia and patient monitoring. We make no change for forecasts and reiterate our target price of 11p. At this level, the stock would trade on FY 2020 EV/Sales of 3.3x falling to 2.7x in FY 2021.
Mark Brewer mbrewer@finncap.com
Sector: Life Sciences
Omega Diagnostics (ODX) : Corp
Trading update – in line implying H2 profitability
Key data
- Share price (p) 11.8
- Target price (p) U/R
- Market cap (£m) 14.9
- Enterprise value (£m) 15.9
A trading update, for the year ending 31 March 2019 indicates revenues to be c.£0.1m higher than expected at £9.8m, with an adjusted pre-tax loss of c.£0.3m in line with our forecasts. We expect year-end net debt to have been c.£0.9m having drawn on its overdraft facility of £2m. A return to growth for Food Intolerance in H2 (+23%) drove a strong recovery in the second half, with adjusted EBITDA estimated to have been c.£0.4m; comparing favourably with the £0.3m loss in H1 and pointing to a profitable FY 2020. VISTECT CD4 progress continues to be made, with ERPD submission for the Advanced disease test expected this month and evaluations of the 350 test ongoing in Nigeria. ERPD approval, which is expected during FY 2020, should enable first sales to NGOs. The timing of this and Nigeria’s evaluations, however is less clear, without which our target valuation remains under review. However, we believe the current valuation to be underpinned by the Food Intolerance business.
Mark Brewer mbrewer@finncap.com
Sector: Support Services
Universe Group (UNG) : Corp
Solid prelims show resilience
Key data
- Share price (p) 5.0
- Target price (p) 10.0
- Market cap (£m) 12.8
- Enterprise value (£m) 10.8
Universe has overcome the set back of the demise of Conviviality (and associated £2m order) to deliver a positive year, including successful deployment of a major Gempay3 roll out. Revenue of £19.9m (£19.6mE) and EBITDA of £2.7m (2.4mE) pleasantly exceeded expectations established at interims, leading to adjusted EBIT, PBT and EPS >20% ahead of forecasts. FY18 net cash of £1.9m (£1.6mE) gave balance sheet strength, deployed post-period end with the strategic acquisition of Dublin-based Celtech, adding a cloud-based, real-time modular software platform as well as a strong client list. We look to a mixture of organic and acquired growth, with the opportunity to deliver the financial momentum to confirm the operational development of a new CTO, a new head of sales, a broader product set, a wider customer base in convenience stores, and Gempay3 success. Target 10p reiterated, representing only 7.6x EV/EBITDA and 18.5x P/E and retaining room for positive review with execution proof.
Andrew Darley adarley@finncap.com
Sector: Technology & Telecoms
ZOO Digital (ZOO) : Corp
Year end trading update
Key data
- Share price (p) 55.0
- Target price (p) 180.0
- Market cap (£m) 40.9
- Enterprise value (£m) 42.1
ZOO has reported a full year end trading update indicating performance of $29m revenue (vs $30mE) and EBITDA of $0.5m ($1.0mE), implying 2H EBITDA breakeven after a $2m order unexpectedly fell away in the second half, as previously noted. Net debt at year end, including the $3.3m October 2020 convertible loan note, was $-1.5m (vs $-2.0mE), implying comfortable gross cash of $1.8m. The difference in performance versus forecasts established in January relates to the decline in higher margin legacy packaged media business (DVD and Blu-Ray digital packaging / “authoring”), which has continued to distract investor focus from the strong opportunity in localisation: despite a challenging 1H in subtitling due to the hiatus in orders from a major client, total localisation revenues grew 5% (or 20% after excluding a one off $2.5m project). Dubbing revenue grew 17%, engaged on projects for eight major TV and film production studios (FY18: four studios). Again winning an award at the prestigious NAB show (Product of the Year for the ZOOStudio - last year was ZOOdubs winning the Broadcast and Media Award), ZOO is in talks with a number of the most significant players regarding adoption of the ZOOstudio localisation platform. Target 180p, with results in the week commencing 24th June and the opportunity to look forward to the opportunities from cloud based localisation in FY20 – we strongly believe ZOO’s opportunity remains a case of “when” and not “if”, in an industry where even the modern OTT participants remain unexpectedly slow in adopting the opportunity from efficiencies in time and money from ZOO solutions in the cloud.
Andrew Darley adarley@finncap.com
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