finnCap Research Company Notes - 16 May 2018

May 16, 2018 / Research Notes

Daily research notes on finnCap's clients from a leading research desk.

Sector: Consumer & Other

Best of the Best (BOTB): Highly encouraging pre-close FY18 trading statement

Key data                              

  • Share price (p): 218.0
  • Target price (p): 350.0
  • Market cap (£m): 22.0
  • Enterprise value (£m): 20.0

BotB has released a very encouraging pre-close FY18 trading statement, highlighting “profit before tax comfortably in line with management’s expectations”. BotB has positioned itself to make its shares a particularly attractive investment: leadership in a niche product area largely insulated from the well-documented ongoing pressures on UK discretionary spending; a consistent and well-executed strategy that aligns well with industry structural shifts (i.e. a move away from physical sites to online); a convincing growth agenda (e.g. an expanded selection of prizes) that management continues to deliver against in a measured fashion; and a strong track record of profit delivery against expectations. Today’s pre-close trading statement confirms every one of those points. Combining this with: (1) strong cash generation capabilities, (2) a cash-rich balance sheet, (3) an attractive running dividend yield alongside regular special dividends, and (4) an undemanding valuation, the softness in the shares represents excellent medium-term value for a niche market leader with positive growth, in our view.

Peter Smedley | psmedley@finncap.com

finnCap’s corporate finance experts help ambitious consumer brands access growth capital and promote their investment stories, find out more here.

Sector: Life Sciences

LiDCO (LID): HUPdate

Key data                              

  • Share price (p): 6.3
  • Target price (p): 14.0
  • Market cap (£m): 15.3
  • Enterprise value (£m): 12.0

Coinciding with its capital markets day, LiDCO announced that it has added two additional High Usage Programme (HUP) multi-year contracts. The initial contract is for eight monitors, although this is expected to grow significantly over the term of the contract. We make no changes to forecasts as already assume c.170 HUP monitors in our FY 2019 forecasts. This should provide increased comfort, however, that the pipeline of hospitals that have undertaken evaluations since the HUP launch in July 2017 are beginning to finalise their purchase decisions. Our target price of 14p remains unchanged. It would imply the stock trading on FY 2019 EV/Sales multiple of 3.2x, falling to 2.3x in FY 2020 and a FY 2020 EV/EBITDA of 15.2x.

OptiBiotix (OPTI): Building the foundations for global LP-LDL probiotics

Key data                              

  • Share price (p): 74.0
  • Target price (p): U/R
  • Market cap (£m): 57.5
  • Enterprise value (£m): 55.5

A 5-year exclusive manufacturing and supply agreement with Akums, the leading contract manufacturer of pharmaceutical and food supplements in India which includes leading healthcare companies such as Novartis, P&G and Sanofi, is further evidence of the foundations that OptiBiotix is building for its LP-LDL probiotic strain. This represents the ninth agreement for LP-LDL and continues to demonstrate the company’s ability to attract high calibre, global partners, eager to utilise the potential cardiovascular benefits inherent within LP-LDL. Full-year results are expected in May.

Mark Brewer | mbrewer@finncap.com

finnCap is a leading broker and financial advisor helping ambitious life sciences companies grow, discover how we can help your growth journey here.