finnCap Research Company Notes - 3 April 2019

Apr 03, 2019 / News

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Sector: Support Services

Universe Group (UNG) : Corp

Acquisition of Celtech

Key data                               

  • Share price (p)                  4.9
  • Target price (p)                10.0
  • Market cap (£m)                              11.4
  • Enterprise value (£m)                    9.5

Universe has announced the £5.2m acquisition of Camden Technology, trading as Celtech, funded by existing resources and a £5m debt facility. Dublin-based Celtech delivers a cloud-based, real-time modular software platform called ab initio, providing retail and wholesale management solutions to well known retail names such as Bestway, One Stop (900 stores) and various Co-Ops, in the UK and Ireland. The acquisition represents an important technology grab and extension of the customer base, advancing Universe’s HTEC solution by 3-4 years, delivering a boost to recurring revenue, and enhancing prospects for growth. With a 9-month FY19 contribution (expected to be earnings enhancing in FY20, earnings neutral FY19), we look forward to prelims on 16 April. Pre-acquisition FY18 performance is confirmed as in line with unchanged expectations, and better than expected cash generation led to FY18 net cash £1.9m (vs £1.6mE). Target 10p reiterated.

Andrew Darley   


Sector: Support Services

Photo-Me (PHTM) : Corp

UK more challenging

Key data                               

  • Share price (p)                  84.4
  • Target price (p)                155.0
  • Market cap (£m)                              317.4
  • Enterprise value (£m)                    290.5

Photo-Me, in an update for the year ended April 2019, has detailed that the Group’s operations in Continental Europe and Asia are continuing to grow in line with expectations, and the strong performance in Japan has continued in H2 following the reorganisation, but that the UK has become more challenging than expected. As a result, PBT net of restructuring costs in Japan is expected to be at least £42m rather than the £44m in the previous guidance. We have adjusted our forecasts (new numbers below) and reduced our FCF-based target price from 183p to 155p. The group’s net cash balance (we now forecast £21m at April 2019) and our expectation of a maintained dividend (yielding 10%) should continue to provide good support for the shares until the UK returns to growth.

Guy Hewett


Sector: Energy

Chariot Oil & Gas (CHAR) : Corp

Changing the narrative

Key data                              

  • Share price (p)                  2.2
  • Target price (p)                37.0
  • Market cap (£m)                              8.2
  • Enterprise value (£m)                    -6.3

Chariot has been awarded new acreage in Morocco at minimal cost that contains a material existing gas discovery and significant low-risk follow-on drilling potential. This award diversifies and reduces the overall risk profile of Chariot’s high impact portfolio while maintaining its transformational potential. Chariot’s rating has been heavily depressed by the two dry holes last year in Morocco and Namibia and the need to secure funding for additional drilling. However, with data rooms open in three regions – Brazil, Morocco and Namibia – and now a range of risk/reward opportunities within Morocco, the prospects for a successful farm-out must have been improved by this latest licence award. With such low expectation in the price, today’s announcement should start to rekindle interest in this exciting exploration, and now appraisal/development, company.

Jonathan Wright


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