finnCap Research Company Notes - 25 July 2018

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Sector: Technology and Telecoms

Quartix (QTX): Fleet growth in H1 driven by France & US

Key data                              

• Share price (p): 367.0
• Target price (p): 425.0
• Market cap (£m): 174.6
• Enterprise value (£m): 167.3

As revealed in the early July trading update, a solid H1 performance leaves Quartix in line with FY 2018 expectations. The £12.9m H1 revenue was up 7% YoY on a comparable restated for IFRS, while adj. PBT rose slightly from £3.9m to £4.0m as the company increased investment, notably in its overseas operations. Reduced working capital offset an increased tax and capex to see improved H1 FCF of £2.8m (2017: £2.6m). As previously flagged, this half was driven by Fleet revenue rising 10% YoY to £9.1m while Insurance revenue was £3.8m, flat on LY. Insurance installs were in line with H1 last year but down on H2 2017 and expected to fall again through H2 2018 as management refuses to chase the competitive pricing in the industry. Fleet sales were strong overseas, particularly in France. US saw excellent growth but churn rose as the ELD development was shelved. UK growth slowed somewhat but the experienced management has already acted to correct that. We make no changes to forecasts or target price.

Lorne Daniel | ldaniel@finncap.com

Sector:  Financial and Insurance

STM (STM): And back to growth

Key data                              

• Share price (p): 58.5
• Target price (p): 80.0
• Market cap (£m): 34.8
• Enterprise value (£m): 16.4

STM provides a reassuring update that growth in the SIPP business continues while the recurring revenues from QROP administration and other areas continues to generate cash profits and the acquisition is expect to start to enhance earnings after August. The governance function has also been strengthened, allowing management to focus on the strategic direction of the company. We will review our earnings forecasts, which currently have a short-term horizon, in more detail when results are published in September, as well as our 80p price target, which is currently 37% ahead of the share price.

Jeremy Grime | jgrime@finncap.com

Sector: Life Sciences

ANGLE (AGL): FY 2018 results – focus on upcoming FDA clinical study

Key data                              

• Share price (p): 55.0
• Target price (p): 110.0
• Market cap (£m): 78.4
• Enterprise value (£m): 70.7         

ANGLE reported full-year results to 30 April 2018, which were in line with its trading update at the time of its placing in June, which raised £12.7m (£12.0m net). Revenues rose 26% to £628k, with an adjusted net loss of £7.2m reflecting the additional costs associated with the Axela acquisition as well as incremental clinical study costs for Parsortix. Focus remains firmly on the outcome of the FDA clinical study for Parsortix. With four leading cancer centres enrolling subjects, we expect the study to complete in H2 2018. Positive results are expected to accelerate all forms of adoption and drive further partnerships in both research and clinical settings. We retain our target price of 110p, which is based on a risk-adjusted DCF valuation and implies an enterprise value of £157m. The clearer path to commercialisation, as evidenced by agreements with Abbott and QIAGEN, supports this valuation.

Mark Brewer | mbrewer@finncap.com