finnCap Research Company Notes - 2 April 2019

Apr 02, 2019 / News

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Sector: Technology & Telecoms

Taptica (TAP) : Corp

Taptica and RhythmOne

Key data                              

  • Share price (p)                  198.0
  • Target price (p)                550.0
  • Market cap (£m)                              271.1
  • Enterprise value (£m)                    210.2

The two leading adtech businesses on the AIM market – Taptica and RhythmOne – have come together, combining their programmatic advertising platforms to create a major player in the global video advertising market. Following completion of the deal, we now release preliminary forecasts for the combined entity. Taptica’s management has only just received access to a very complex and disparate organisation in RhythmOne, and there will doubtless be an evolution of expectations as understanding and integration proceeds. RhythmOne trading for the YE March 2019 was below expectation, but under Taptica’s management the combination nevertheless represents an excellent opportunity going forward.

Lorne Daniel


Sector: Technology & Telecoms

Intercede (IGP) : Corp

Contract win and very strong year end update

Key data                              

  • Share price (p)                  16.5
  • Target price (p)                80.0
  • Market cap (£m)                              8.3
  • Enterprise value (£m)                    9.8

Despite concerns about the recent government shut down in the US, Intercede has announced that a $4.3m order from a US Federal Government agency was received on 29 March, $2.05m recognisable straight away. The group is now expected to deliver revenue of at least £10m (vs £8.5mE), which combined with significant cost reduction, leads to profitability in both reported EBIT (vs £-2.5mE) and post-tax profit. We upgrade forecasts, moving FY19 (March) EBITDA from £-1.8m to £+0.4m, compared with £-3.9m in FY18. While the period end nature of the order means corresponding cash will not yet have been received at year end, we also note the significant group cash performance even in absence of this order, with gross cash of £3.2m very pleasingly ahead of £2.3mE. Further deployments within the US Federal Government infrastructure demonstrate the product quality and highlight that the value of the IP should provide a base valuation of sunk investment (£30-40m) – while the influence of the CEO, Klaas van der Leest, appointed in April 2018, has evidently confronted issues of cost and direction, to encourage the operating model. Target 80p reiterated.

Andrew Darley


Sector: Financial & Insurance

Kingswood Holdings (KWG) : Corp

A period of great change

Key data                              

  • Share price (p)                  10.4
  • Target price (p)                26.0
  • Market cap (£m)                              16.1
  • Enterprise value (£m)                    14.9

Implementing significant change has brought down our 2018E revenue number by 5.4% to £8.8m from £9.3m, while our 2019E numbers very much remain in play as the initiatives successfully being executed by the company begin to play out.

Nik Lysiuk


Sector: Life Sciences

Evgen Pharma (EVG) : Corp

Initiation follows positive Phase II breast cancer data

Key data                              

  • Share price (p)                  18.5
  • Target price (p)                45.0
  • Market cap (£m)                              18.3
  • Enterprise value (£m)                    16.6

Evgen Pharma is a clinical stage drug development company whose lead compound, SFX-01, recently completed a Phase II clinical study in metastatic breast cancer (MBC), that showed the potential for it to be used in combination with current hormonal treatments to defer tumour resistance and delay the use of more toxic chemotherapeutic agents. A second Phase IIb study in subarachnoid haemorrhage (SAH) is due to readout in Q3 2019. SFX-01 targets two completely different biological pathways, thereby mitigating the risk of either trial failure, both of which are $1bn+ opportunities. This risk is reduced further by independent investigator-initiated studies planned in a range of indications such as NASH and autism. We initiate with a short-term target price of 45p (c.30p for MBC and 15p for SAH), with substantial upside (target of c.80-110p) on a positive SAH trial result, due in Q3 2019, and subsequent potential partnering activity.

Mark Brewer


Sector: Industrials

M.P. Evans (MPE) : Corp

Strategy bearing fruit: Excellent FY2018 results

Key data                              

  • Share price (p)                  686.0
  • Target price (p)                1 000.0
  • Market cap (£m)                              376.5
  • Enterprise value (£m)                    360.2

MPE has reported excellent results for the year ending December 2018. Operationally there was strong growth with total crop increasing 27% y-o-y to 829,100 tons (1% ahead of our expectations) while CPO-equivalent production increased 25% y-o-y to 192,500 tons (inline with our expectations). With costs of production lower than our expectations, EBIT and PBT were well ahead of our expectations. Going forward, the plantations seem to be well on track but unfortunately the CPO price remains weak. We are dropping our CPO price assumption for FY2019E by US$100/ton, which drives material earnings downgrades. Our sum of the parts-driven price target is unchanged at 1,000p.

Raymond Greaves


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