finnCap Research Company Notes - 4 June 2019
Jun 04, 2019 / News
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Sector: Technology & Telecoms
eServGlobal (ESG) : Corp
Home Alone… all about HomeSend now
Key data
- Share price (p) 5.8
- Target price (p) 20.0
- Market cap (£m) 69.6
- Enterprise value (£m) 54.5
Investors will certainly welcome the much anticipated sale of the loss-making core business, PayMobile. A conditional sale agreement has been signed with Seamless, a publicly listed Swedish telecoms solutions provider, for €2m in cash, to leave a well-funded, low-cost listed entity whose only trading activity will be the management of its 35.68% stake in the HomeSend JV with Mastercard. It will be renamed Wameja Ltd (WJA.L) following approval at an EGM in July. The sale of the core business removes both distraction and risk, allowing investors to focus on the real value in the HS holding at a time when payment platforms are attracting increasing interest and higher prices. We adjust our forecasts to reflect the sale and reiterate our expectations for HomeSend’s growth and valuation.
Lorne Daniel ldaniel@finncap.com
Sector: Support Services
discoverIE (DSCV) : Corp
Record order book and a high level of design wins
Key data
- Share price (p) 420.0
- Target price (p) 535.0
- Market cap (£m) 338.9
- Enterprise value (£m) 393.2
discoverIE has reported an impressive set of FY19 results driven by strong sales growth (+13% in total and +8% organic), rising operating margins (7.0% up from 6.3%) and good cash conversion at 93% of underlying operating profit. Adj. EPS was up +22%. With a record order book and a high level of design wins the group is very well placed to further progress its growth track record despite more short term economic caution generally. We make no major changes to our P&L forecasts but improve our net debt forecast from £54m to £47m at March 2020 and reiterate our 535p target price.
Guy Hewett ghewett@finncap.com
Sector: Industrials
Gooch & Housego (GHH) : Corp
Poor interim results and lower H2 signalled
Key data
- Share price (p) 1 350.0
- Target price (p) 1 250.0
- Market cap (£m) 332.9
- Enterprise value (£m) 347.4
The interim results show the more challenging conditions in the microelectronics area previously identified, which are partly affected by US/Chinese trade wars. Robust trading in subsea telecoms still points to a ramp-up in H2, while A&D saw programme delays but Lifesciences traded well. While some recent uptick in microelectronics has been seen, trading in this area is now unlikely to return to normal levels in FY19, with guidance reduced by 3.5m to £4.0m at the adjusted PBT level. We therefore downgrade FY19 EPS by 22% to 45.3p and FY20 by 19% to 53.8p. As such we also peg-back our TP from 1475p to 1250p based on a 2020 P/E target of 23x. Today’s announcement is disappointing, with further share price weakness anticipated in the short term. Nevertheless, we remain strong long-term supporters with strong order book growth and a high quality earnings base.
David Buxton dbuxton@finncap.com