finnCap Research Company Notes - 2 June 2020

Jun 02, 2020 / News

Circassia Group (CIR): Corp

Life Sciences

£5m equity financing facility put in place

Key data

 

 

Share price (p)

 

25.0

Target price (p)

 

U/R

Market cap (£m)

 

93.8

Enterprise value (£m)

 

187.7

 

The announcement that Circassia has put in place a £5m equity facility ensures that the company has access to additional liquidity should it be required in the coming months, given the uncertainty over the timing and nature of the recovery in NIOX trading post-pandemic. As a result, our forecasts and target price remain under review, although the company confirmed that in recent weeks, sales figures suggest a gradual improvement as lockdown restrictions are lifted. If sustained and revenues return to pre-pandemic levels, the NIOX business can arguably support a valuation in the 25-60p range, based on comparable multiples. We look forward to upcoming preliminary results in June.

 

Mark Brewer

020 7220 0556

mbrewer@finncap.com

 

 

 

Quartix (QTX) : Corp

Technology & Telecoms

Installs recover; no material impact on subscriptions yet

Key data

 

 

Share price (p)

 

385.0

Target price (p)

 

U/R

Market cap (£m)

 

184.2

Enterprise value (£m)

 

174.7

 

Those looking for opportunities will be taking an even closer look at QTX on today’s RNS as it continues to navigate the COVID pandemic very ably. Despite the lockdown, trading in the first four months to 30 April was strong and ahead YoY. Although Fleet installations fell sharply in April, they have improved in May and COVID has yet to have a material impact on the subscription base. Customer vehicle usage is also recovering from April lows and customer attrition has held steady, slightly above usual levels. QTX has provided some payment relief and deferrals to support its SME base, but that hasn’t flowed into bad debt. Insurance installations have naturally been limited in the past two months but are now seeing an uptick, with further recovery expected in June. Management remains cautious for H2 – when government support wanes and customers’ cash reserves are depleted – and is not yet issuing guidance for FY 2020 and 2021, but the cash balance is still very healthy at £9.5m, up from £8.5m in March.

 

Lorne Daniel

020 7220 0545

ldaniel@finncap.com

 

 

 

Intercede (IGP) : Corp

Technology & Telecoms

Priming for strong growth

Key data

 

 

Share price (p)

 

69.0

Target price (p)

 

80.0

Market cap (£m)

 

34.8

Enterprise value (£m)

 

34.9

 

Final results for the year to March are in line with the April trading update, which had been well ahead of expectations in profit and cashflow: with some customer orders postponed beyond year end, revenue of £10.4m had been 6% behind expectations while adjusted PBT (£0.8m) and free cashflow (£1.0m) were respectively 499% and 227% ahead. Strong cost control still permitted £2.8m (FY19: £2.9m) of R&D, leading to the continuing development of the global large enterprise products, but also of MyID Professional, simplifying the solution and expanding the addressable market. With cost control clearly in hand, and even confidence in cost expansion after two years of restraint, the group is driving opportunities for high-margin revenue growth and the future continues to brighten. Target 80p reiterated, with the chance for TP review with greater COVID-19 clarity at interims in December.

 

Andrew Darley

020 7220 0547

adarley@finncap.com

 

 

 

Gooch & Housego (GHH) : Corp

Industrials

In-line interim results, looking for an uptick in H2

Key data

 

 

Share price (p)

 

1 010.0

Target price (p)

 

U/R

Market cap (£m)

 

252.9

Enterprise value (£m)

 

280.9

 

Interim results were in line with previously reduced expectations, illustrating lower levels of demand in the Industrial division and some effects of COVID-19 in Q2. Profitability was affected by reduced overhead recovery and a lower mix of high margin industrial lasers as well as R&D expensed in the A&D division. No change to 2020 forecasts, with an uptick expected in H2, backed by a solid order book. While the current year P/E looks high at 35x, we anticipate a good profit recovery will make the rating look more attractive in FY 2021.

 

David Buxton

020 7220 0542

dbuxton@finncap.com

 

 

 

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