finnCap Research Company Notes - 31 January 2019
Jan 31, 2019 / News
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Sector: Industrials
Aukett Swanke (AUK) : Corp
Final results
Key data
- Share price (p) 1.0
- Target price (p) U/R
- Market cap (£m) 1.7
- Enterprise value (£m) NM
The final results for the year to September 2018 confirm a difficult year in property markets and despite the expectation of a better outcome in 2019, our forecasts and target price remain under review.
Mark Paddon | mpaddon@finncap.com
Sector: Life Sciences
Cambridge Cognition (COG) : Corp
Pharma partnership/new product delivers £0.2m upfront
Key data
- Share price (p) 79.0
- Target price (p) 175.0
- Market cap (£m) 17.9
- Enterprise value (£m) 17.1
Cambridge Cognition announced a partnership with a major pharma company to deliver online neurological testing to patients in India using its cloud-based CANTAB Connect platform. The contract includes an upfront payment of £0.2m for the adaptation of CANTAB Connect for use by clinicians in the Indian healthcare market. Upon successful validation of the product, which is funded by the partner, and expected to complete within the year, Cambridge Cognition will receive an annual SaaS licence fee plus additional fees per clinical use. This is another example of the company’s platforms delivering a higher quality recurring revenue stream that is also leveraged with increasing increased utilisation rates. No change to FY 2019 forecasts and we reiterate target price of 175p.
Mark Brewer | mbrewer@finncap.com
Sector: Support Services
discoverIE (DSCV) : Corp
10% organic growth up from 7% in H1
Key data
- Share price (p) 400.0
- Target price (p) 488.0
- Market cap (£m) 283.2
- Enterprise value (£m) 348.8
discoverIE has confirmed that trading in Q3 remained strong. Group organic sales growth was +10% up from +7% in H1. Growth across the Group was widespread and led by the businesses in Germany and Asia. The outlook remains positive with the group order book up +21% CER year on year and up +12% organically. We make no changes to our forecasts and reiterate our view that discoverIE remains a strong play on technological change, a clear and long-term structural growth driver.
Guy Hewett | ghewett@finncap.com
Sector: Technology & Telecoms
eServGlobal (ESG) : Corp
PayMobile extends service in the Middle East
Key data
- Share price (p) 6.8
- Target price (p) 20.0
- Market cap (£m) 61.7
- Enterprise value (£m) 42.4
The digital transactions technology supplier has signed two new contracts with existing customers in the Middle East. Both are for the flagship PayMobile mobile money solution and have a combined total value of c. €1m over several years. They help to underpin current forecasts and demonstrated the continued demand for PayMobile in developing regions at a time when several potential buyers have shown interest. We make no change to forecasts or our TP which continues to be based on the exciting opportunity in its HomeSend international payments platform JV with Mastercard.
Lorne Daniel | ldaniel@finncap.com
Sector: Financial & Insurance
Frenkel Topping (FEN) : Corp
Niche player building good momentum
Key data
- Share price (p) 29.0
- Target price (p) 45.0
- Market cap (£m) 20.9
- Enterprise value (£m) 19.1
Recent investment across the operation has proved the company to be robust in a testing environment, with the springboard from which the company can scale up, now primed and ready. Frenkel Topping offer niche services to client that need expert help and the company has built a strong reputation that suggests optimism for the future.
Nik Lysiuk | nlysiuk@finncap.com
Sector: Financial & Insurance
Morses Club (MCL) : Corp
Market-leading Morses attracts consolidation prospects
Key data
- Share price (p) 150.0
- Target price (p) 175.0
- Market cap (£m) 195.1
- Enterprise value (£m) 200.9
This acquisition continues Morses Club’s proven acquisition strategy and they stand to benefit further as regulatory drivers force industry consolidation. This deal adds 1.3% to 2018A customer numbers and 1.9% to the net loan book.
Nik Lysiuk | nlysiuk@finncap.com
Sector: Support Services
NAHL (NAH) : Corp
Tick in the box
Key data
- Share price (p) 78.1
- Target price (p) 180.0
- Market cap (£m) 35.6
- Enterprise value (£m) 51.1
NAHL has been granted a licence from the Solicitors Regulation Authority to launch its own law firm to be named National Accident Law. This is as expected but an important step forward in the new strategy. National Accident Law will be NAH’s first wholly owned law firm enabling a full economic interest in the success of a whole claim. We reiterate our view that management is transitioning the business to a model that will generate very significant value post the regulatory changes and our target price remains focused on this prospect.
Guy Hewett | ghewett@finncap.com
Sector: Support Services
PPHE Hotel Group (PPH) : Corp
Significant investment supporting growth
Key data
- Share price (p) 1 710.0
- Target price (p) 2 141.0
- Market cap (£m) 724.0
- Enterprise value (£m) 1 384.0
In FY 2018 PPHE opened two repositioned properties and launched Croatia’s first all-glamping offer. This and other examples support continued strong growth potential in NAV and profits. Today’s positive year end statement confirms trading has been in line and the group enters 2019 confident of delivering strong shareholder value this year and beyond. We reiterate our view that the share price materially undervalues the assets PPHE owns
Guy Hewett | ghewett@finncap.com
Sector: Energy
President Energy (PPC) : Corp
2018 a transitional year – more to come in 2019
Key data
- Share price (p) 9.0
- Target price (p) 19.0
- Market cap (£m) 97.7
- Enterprise value (£m) 118.5
President’s management accounts confirm that 2018 was a transformational year for the group, with strong growth in production and cash flow, and sharply improved profits. We believe this is just a taster of what is to come and expect another year of impressive growth and improving profitability in 2019. These metrics also confirm that the Argentine financial crisis has not had a material impact on the business. With stability returning to Argentina, this issue should become less of a hindrance and allow investors to consider the company on its operational merits.
Jonathan Wright | jwright@finncap.com
Sector: Life Sciences
ANGLE (AGL) : Corp
Interims – FDA study 92% recruited
Key data
- Share price (p) 63.0
- Target price (p) 110.0
- Market cap (£m) 90.4
- Enterprise value (£m) 82.7
Interim results reflected increasing utilisation rates with revenues and grant income rising 97% as a Research Use Only offering. A net loss of £4.2m (vs £3.4m) was reported, driven mainly by the additional costs of the acquired Axela business and higher R&D costs. Net cash at 31 October was £14.9m. The two significant news items were (i) the confirmation that the FDA metastatic breast cancer study should complete in Q1 2019; and (ii) the confirmation that the ovarian cancer gene panel has been optimised and will be used in a verification study in the US, due to start in Q1 2019. Forecasts unchanged with year-end cash of £9.1m and target price of 110p.
Mark Brewer | mbrewer@finncap.com
Sector: Technology & Telecoms
Filtronic (FTC) : Corp
Initiation: Critical Coms provide base for 5G upside
Key data
- Share price (p) 6.5
- Target price (p) 10.5
- Market cap (£m) 13.6
- Enterprise value (£m) 11.4
Filtronic is a global leader in the design and manufacture of a range of customised RF, microwave and millimetre wave components and subsystems, notably antennas, filters and transceivers. These products are mainly used in wireless telecommunication networks and point-to-point communication systems but also in critical coms (the defence, public safety and aerospace sectors). H1 results met internal projections but were overshadowed by the reduced forecast for new Massive MIMO (mMIMO) antennas, likely leaving a small loss in FY 2019. However, FTC has a solid cash base, is well managed, has a leading-edge product range and most importantly has unrivalled expertise and reputation in the global wireless telecoms equipment industry. This industry is forecast to enjoy rapid growth over the next decade on the back of increasing data demand and the development of 5G to cater to high bandwidth requirements of the IoT. Furthermore, the company is increasingly winning business in the defence market, where its market leading expertise offers greater visibility and defensible higher margins.
Lorne Daniel | ldaniel@finncap.com
Sector: Industrials
Alumasc (ALU) : Corp
Interim results – continued subdued market conditions
Key data
- Share price (p) 109.5
- Target price (p) 139.0
- Market cap (£m) 39.1
- Enterprise value (£m) 54.5
Results reflect continuing difficulties in the underlying construction market, where Alumasc has seen some order and project deferrals but otherwise has gained from some new products and cross selling. The recent increase in the order book provides scope for a much better 2H profit. Nevertheless, the full-year is likely to generate a lower profit than previous expectations and we downgrade EPS by 18.5% for 2019 and 15% for 2020. As a result, we snip our price target by 165p to 139p, based on a P/E of 10x in 2019, with a 5.3% yield.
David Buxton | dbuxton@finncap.com
Sector: Industrials
Flowtech Fluidpower (FLO) : Corp
Q4 trading update
Key data
- Share price (p) 120.8
- Target price (p) 200.0
- Market cap (£m) 72.5
- Enterprise value (£m) 92.4
The year-end trading update highlighted that the board expects adjusted PBT in the range of £10.6m to £10.8m. The group has seen a strong finish to the year, delivering a 42% increase in sales, with 6% organic growth and stable gross margins. The acquired Balu operations are trading in line with expectations. Net debt is higher than expected due to stronger Q4 trading and some additional pre-Brexit stock. Accordingly, we raise our sales forecast and trim our profit forecast by £0.1m. With good prospects into 2019 and an attractive P/E of 8.0x and yield of 5.1%, we maintain our 200p price target, indicating plenty of upside potential.
David Buxton | dbuxton@finncap.com
Sector: Technology & Telecoms
SRT Marine Systems (SRT) : Corp
Full steam ahead
Key data
- Share price (p) 36.8
- Target price (p) 75.0
- Market cap (£m) 51.3
- Enterprise value (£m) 49.3
Following on from last month’s confirmation of its £31m fisheries monitoring and management system contract from the Philippines government, the market-leading Maritime Domain Awareness (MDA) specialist is experiencing an unprecedented surge of demand in its systems business. SRT is now raising £4m to accelerate systems development and provide contract delivery resources. This will support a number of expected new near-term contracts – in particular six identified contracts worth a total of £212m. With delivery completed on the first phases of the Philippines BFAR system, H2 will see a step change in revenue and a profit in Y/E March 2019. This finally validates both the MDA market potential and the company’s global leadership in it. The now evident scale of these opportunities means that additional resources are needed to ensure that the full potential is delivered – this presents remarkable upside potential for investors.
Lorne Daniel | ldaniel@finncap.com