finnCap Research Company Notes - 25 September 2018

Sep 25, 2018 / Research Notes

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Sector: Technology & Telecoms

Altitude Group (ALT): Interims

Key data                              

  • Share price (p): 93.0
  • Target price (p): 105.0
  • Market cap (£m): 50.8
  • Enterprise value (£m): 49.5         

Interims highlight substantial progress in development of the distributor and supplier base of the ChannlPro platform. Members processing orders increased to 164 (Feb: 24; May: 57), of which 120 had placed multiple orders. The development of gross transaction revenue on the platform ($9.9m in the last 16 weeks) has advanced in anticipation of the margin Altitude takes from those suppliers, with the current focus on growing the scale and making ChannlPro the go-to platform for leading industry participant, distributors and suppliers. We review forecasts to accommodate lower near-term revenue, albeit all the operational KPIs are progressing in line with expectations as the scale of the platform develops. Twelve-month target price remains 105p, equivalent to an unchallenging 9x FY19 EBITDA, 13x P/E and a 5.4% free cash flow yield, target parameters which can be easily lifted with demonstration of execution credibility.

Andrew Darley | adarley@finncap.com

Sector: Energy

Independent Oil & Gas (IOG): Thames pipeline integrity confirmed

Key data                              

  • Share price (p): 35.3
  • Target price (p): 64.0
  • Market cap (£m): 44.6
  • Enterprise value (£m): 68.5

IOG’s Southern North Sea hub development moves another big step closer, with inspection and pressure testing of the Thames pipeline demonstrating it is in excellent condition and more than fit for purpose, with an expected capacity approaching twice initial estimates. First gas for Phase 1 of the project has slipped slightly, to Q2 2020, but this is more than offset by the higher pipeline capacity, which offers material third-party tariff income potential. This drives an increase to our risked-NAV based price target, from 61p to 64p. Funding plans for Phase 1 are being finalised; conclusion will materially de-risk the project.

Jonathan Wright | jwright@finncap.com

Sector: Mining

Savannah Resources (SAV): Additional licence optioned at Mina do Barroso

Key data                              

  • Share price (p): 7.8
  • Target price (p): 20.0
  • Market cap (£m): 65.2
  • Enterprise value (£m): 52.2

Savannah Resources has announced that it has acquired an option to acquire the 2.94km2 Aldeia Mining Lease application adjacent to Savannah’s flagship 20Mt Mina do Barroso lithium project in Portugal. We retain our 20p price target.

Martin Potts | mpotts@finncap.com

Sector: Life Sciences

Scientific Digital Imaging (SDI): Acquisition – 7% accretive in first full year

Key data                              

  • Share price (p): 41.3
  • Target price (p): 44.0
  • Market cap (£m): 37.0
  • Enterprise value (£m): 35.2

SDI is acquiring Fistreem International, a manufacturer and supplier of water purification systems (stills, deionisers) and vacuum ovens for use in the life science and industrial sectors. Considered a bolt-on acquisition, it is complementary to other SDI businesses such as ATC and Sentek, with opportunities for cross-selling as well as organic growth. SDI is paying £756k for the business, representing prospective proforma FY 2019 EV/Sales and EV/EBIT of 1.2x and 4.4x, respectively. The acquisition is being funded from cash with net debt and cash at year end of c.£0.6m and £2.0m, respectively. We expect the acquisition to be 2% accretive to adjusted EPS in FY 2019 (neutral to statutory EPS, given c.£55k of acquisition costs) and c. 7% in FY 2020. We raise our target price by 5% to 44p to reflect the earnings accretion. Based on our 2020 forecasts, this would place SDI on CY 2019 EV/Sales of 2.3x, EV/EBITDA of 10.1x and adjusted P/E of 16.4x with a FCF yield of 5.0%, rising to 5.8% in FY 2020.

Mark Brewer | mbrewer@finncap.com

 

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