finnCap Research Company Notes - 22 October 2019
Oct 22, 2019 / News
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Sector: Technology & Telecoms
K3 Business Technology (KBT) : Corp
Trading update reports challenging environment
Key data
Share price (p) 211.0
Target price (p) 245.0
Market cap (£m) 90.6
Enterprise value (£m) 92.9
K3’s trading update highlights that several of its contracts have been negatively affected by the difficult macro environment. We consequently reduce our revenue forecasts by 3-6%, and as the affected revenue is high-margin software, we reduce our adjusted EPS forecasts by -79% and -18% in FY19 and FY20. Despite the challenging environment, K3 has made good operational progress in FY19, including K3 | fashion becoming Microsoft’s recommended solution for the fashion vertical, and strong momentum for K3 | imagine. We reduce our TP to 245p from 290p based on 12x FY20 EV/EBITDA, and look for further detail at the FY19 results.
Andrew Darley
020 7220 0547
adarley@finncap.com
Sector: Life Sciences
Omega Diagnostics (ODX) : Corp
Six-month trading update
Key data
Share price (p) 11.5
Target price (p) 25.0
Market cap (£m) 17.3
Enterprise value (£m) 18.3
Omega Diagnostics provided a trading update for the six months to 30 September, which indicates revenue growth from continuing operations of 5%, driven by a 6% increase in Food Intolerance. Confirmation that ODX has submitted its evaluation report for VISITECT CD4 350 test to the Nigerian Ministry of Health and that it has had discussions with NGOs for the Advanced Disease test bode well for first VISITECT sales in FY 2020, estimated to be c.£0.5m (120k tests). Whilst the current valuation is largely underpinned by the value of Food Intolerance (c.£3.5m EBITDA in FY 2020), the upside is provided by VISITECT. We reiterate our target price of 25p, which assumes c.0.5m VISITECT tests in 2021 (c.£2.0m), implying significant additional upside given the potential addressable market for c.6m tests.
Mark Brewer
020 7220 0556
mbrewer@finncap.com
Flowtech Fluidpower (FLO) : Corp
Sector: Industrials
Q3 update – resilient performance in tough market
Key data
Share price (p) 108.8
Target price (p) 180.0
Market cap (£m) 66.3
Enterprise value (£m) 95.0
The nine-month YTD update shows a resilient performance in tough markets, with the decline in Q3 organic growth marginally better than management expected at the interim stage, with September not quite as weak as expected. Cash flow was in line with expectations and is expected to pick up in Q4. No changes to forecasts, with our 180p price target indicating plenty of upside to the current low valuation, offering an unwarranted 2020 P/E of 6.5x and very attractive 6.1% dividend yield.
David Buxton
020 7220 0542
dbuxton@finncap.com